RV industry steers through post-pandemic US slump

RV industry steers through post-pandemic US slump

The U.S. economy has been experiencing a recession-like situation for months, particularly in the retail sales of recreational vehicles (RVs). Jon Ferrando, the CEO and president of Blue Compass RV, which operates 103 RV dealerships in 33 U.S. states, stated that there is definitely a recession in the RV industry. This decline can be attributed to the coronavirus pandemic, which has caused a significant shift in U.S. spending habits.

During the pandemic, consumers reduced spending on services due to closures of restaurants and airports, and instead started splurging on goods that made quarantine conditions more tolerable, such as RVs, bicycles, and swimming pools. This led to a surge in demand for these items. Winnebago Industries CEO and President Michael Happe referred to this phenomenon as the “COVID retail frenzy.”

However, as pandemic restrictions were eased and U.S. interest rates began to rise, trouble emerged. The Federal Reserve has increased borrowing costs 10 times since last March to combat high inflation. The benchmark overnight interest rate has reached its highest level in about 15 years, causing the interest rate on RV loans to rise as well. This has dampened buyers’ appetites, especially since 80% of Blue Compass RV’s customers finance their purchases.

The decline in demand has resulted in manufacturers reducing production. Shipments of new motorhomes and trailers in North America, which are mostly produced in the United States, are expected to decrease to 300,000 this year, half the number shipped in 2021. This sharp decline in shipments has only been seen during the 2007-2009 financial crisis and recession.

While Winnebago and Thor Industries, the largest U.S. RV manufacturer, have not disclosed how they are adjusting to the slump, investors seem to believe that the worst is over. Shares of Thor and Winnebago have seen significant increases this year. However, forecasting demand in the RV industry has always been challenging, and the pandemic has magnified this difficulty.

The RV industry is facing a dual challenge of higher sticker prices due to inflation and higher interest rates, making it more expensive to finance RV purchases. The RV Industry Association expects shipments to start increasing again in the second half of this year as consumers become more comfortable with inflation and interest rates stabilizing.

Dealers are now dealing with an excess of unsold RVs on their lots. The inventory of 2022 models is much higher than usual, with some dealers having 50% of their new inventory as 2022 models. This poses a challenge for dealers as they prepare to bring in newer 2024 models that are priced lower than the older models.

Other sectors that experienced pandemic-related booms have also seen declines, although not as severe as the RV industry. For example, the backlog of orders for new pools at Pools of Fun, a pool builder in Indiana, has decreased to about three months compared to year-long waits during the height of the pandemic.

Despite the challenges, there is still optimism in the RV industry. Blue Compass RV has taken steps to sell off older RVs and has seen a strong demand for its service business as existing customers require repairs and upgrades. However, customers are currently more cautious in their purchasing decisions.

In conclusion, the RV industry has been heavily impacted by the pandemic, leading to a recession-like situation. The decline in demand, higher interest rates, and excess inventory pose challenges for manufacturers and dealers. However, there is hope for a rebound in the industry as consumers become more comfortable with inflation and interest rates stabilize.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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