Thursday, March 24, 2011

Interview with on Gas Prices and Scooter Sales

This got picked up by Google, but some of my readers can't read it so I'm re-posting it in plain text.

Why Scooter Sales Rise with Gas Prices

From Click here for full pictures and article link.
Bart Madson
Managing Editor

Tuesday, March 22, 2011
Scooter sales rise with gas prices. Don’t believe it? Read the papers, my friend. Watch the news. The gas price/scooter sales news bit is pitched without mercy whenever the oil prices march upwards. It’s a now familiar media trope, and the hype plays into sales.

There is very little that can fixate the American public’s attention and dominate news cycles like rising gas prices (excepting maybe Charlie Sheen…). Scooters are heralded for their low costs and fuel savings and the "Rising Gas Price Fuel Scooter Sales" headline resides near the top of the newsroom go-to grab bag. Google alerts for the word “scooter” reveal one or two such cookie-cutter stories on a daily basis, often from small market TV stations or newspapers. Once the trend is set in motion, the momentum seems to feed itself.

The media fueling scooter sales is a phenomenon that’s not gone unnoticed by industry insiders such as Joel Martin. A former importer of brands like Malaguti Moto and SYM Taiwan, Martin is currently president of Martin Racing Performance – a scooter parts distributor for numerous brands including Asian imports (if you need a part for a Chinese-built scooter, Joel’s probably your best hope).

“I've been in the industry over 10 years. I have seen this trend happen every two to three years,” confirms Martin. “The media loves to grab rising gas prices and create this surge in scooter / motorcycle sales.” 


The argument for scooter as gas saver is based on sound logic. Buy a scooter, or fuel-efficient motorcycle, and save money in fuel costs. The higher the price of gas, the more alluring that fuel efficiency appears. Never mind the actual fuel-saving dividends will take years to pay off the principal investment, particularly if sourced only as supplemental transportation (read our real-world test of one scooter’s cost-saving claims in Scooting Thru Vespanomics 101).

On some level the fuel-saving sales hook plays on the general apprehension of oil as a finite resource. When a limited or unstable resource supply combines with increased demand, the average Joe doesn’t need an economics degree to figure the outcome. And while gas prices increase in the long-term, temporary or seasonal market spikes are met with foreboding. The gas hikes feel un-ending with fear that prices may never stop rising.

“The media hype made it seem like gasoline could go up forever so everyone started buying scooters,” agrees Martin when asked about the last great boom in the scooter market, during the summer of 2008 when prices tipped $4 per gallon. “As soon as gas went down the boom was over.”

A secondary scarcity issue made the 2008 boom a true scooter craze – a physical lack of units to sell. With some dealers unable keep up with the increased demand, the dearth of units, real or imagined, drove demand even higher as gas prices peaked. The constant media echo of pain at the pump only re-enforce the consumer’s worst fears, inspiring emotional reactions.

“The media hype played on that emotional set up. If you didn't buy one you were missing out, or worse there wouldn't be any next month,” says Martin, who notes a similar phenomenon in the current market. “The same is happening now with 2-strokes. Since its harder to get them dealers are getting a premium for 2-stroke 50cc units since all the distributors are out of them.”

The downside of the 2008 boom was, of course, the monumental bust that rattled the entire motorcycle industry (the US scooter industry plummetted 59% in 2009). Compounding the problem for scooter dealers, many had reacted to the 2008 frenzy by over-ordering, with the distributors and factories happy to play along. The result was a glut of unsold units once the economy turned south, with Martin noting: “That’s how some companies in Texas ended up with 20,000 scooters in a warehouse when the economy collapsed. Last I checked the same company still had 2000 units with 2008 VIN numbers which will likely finally sell this year.”


Queue up the present day situation, primed for at least a partial scooter revival. The unprecedented revolution sweeping the Middle East has generated uncertainty in the oil market. Once again the reality of $4 gas seems inevitable. The media chatter has been well underway for weeks now (it’s not unappreciated that this article will only contribute to the jabbering newsfeeds). Martin believes dealers must capitalize on the situation, brazenly encouraging dealers to fab up their own press releases to feed the hype. It’s a wag the dog scenario, but does it work?

“It does. Hype brings media, hype brings investors. Media brings foot traffic and customers,” says Martin. “One of the biggest problems facing the industry is the dramatic drop in sales and dealers closing. Nobody had access to capital, it's boom or bust. So my advice to dealers: go crazy with stunts like that. If I ran a dealer I would blow up a car for the local TV station, dress up like an oil baron taking candy from kids, go on the local news driving an E-Scooter – whatever it takes to get attention to your little shop.”

The latest media cycle started to peak with the revolution against Libyan leader Moammar Gadhafi. The effect was notable for Martin too, who saw an immediate spike in interest from dealers looking for parts.

“Media brings more media. Stories of dealers selling out, supply chain problems all help. After the uprisings in the Middle East our parts phone line blew up from stores that had zero foot traffic in the weeks prior to the uprisings. Now we couldn't beat them off with a stick – eight phone lines of stores looking for parts.”

The recent earthquake and tsunami in Japan may have taken the media’s eye off Libya temporarily, stealing some of the momentum, but now it’s ramping up once again with US and UN-backed military intervention. (The Japanese situation may only fuel demand, with fears over production shut downs and parts shortages.) The stage is set and hurting dealers would be wise to heed Martin’s advice – get some attention and ride out this latest media wave for all its worth. With any luck, a craze is in the works.


No comments: