Are High Gas Prices Really Good for Scooters? Part Two.

Vespa LXs on the assembly line

In Part Two of this ScooterFile series, we look at the double-edged sword facing the scooter industry in 2012 as gas prices continue to climb. Part One looked at the recent history of the industry and the aftereffects of the 2008 spike in gas prices. Our next installment will have advice for gas-conscious prospective scooter buyers.

When gas prices suddenly skyrocketed in early 2008, sales of fuel-efficient scooters flourished. Demand surpassed supply, leaving the industry in the precarious position of trying to catch up. The ballyhooed boom turned into a bubble, though, which burst when gas prices plunged that fall. The results were devastating: plummeting sales and revenues, massive overstocks, and dealers shuttering across the country.

We’re confident the scooter industry won’t soon forget the lessons of 2008. When gas prices rise steeply, as they have in recent months, the industry is faced with a massive dilemma: ramp up supply and risk overextension, or hold back supply levels and risk losing sales and falling behind more optimistic competitors should the trend hold and gas prices remain high. However, gas prices alone don’t dictate consumer behavior.

Scooter sales have improved (over 2009 lows) for many companies, but not in direct proportion to gas prices. While the cost of gas has steadily increased since its low in early 2009, scooter sales didn’t show signs of recovering until 2011. Buyers reflexively react to rapid rises in gas prices rather than long-term increases. This happened to an extent in early 2011, when scooter sales once again jumped in response to a spike in fuel costs. Gas prices fell in the second quarter and new scooter sales dropped with them. What some predicted as a full rebound for the scooter industry in 2011 turned out to be a brief anomaly.

Bottom line: Boom and bust cycles are an unsustainable business model for any industry interested in long-term growth and expansion. Americans still perceive scooters as recreational runabouts or luxury items, making scooter sales particularly vulnerable to capricious trends. This will remain true until our culture and attitudes about transportation change. Here at ScooterFile, we would like to see these periods of high gasoline prices and heightened attention for scooters used as an opportunity to educate consumers rather than just an opportunity for fast sales. Could a concerted effort to change the image of scooters in the overall transportation culture help create a more sustainable market for smaller two-wheelers? We’re optimistic that it could. Imagine if the entire industry banded together and ran a targeted awareness campaign for scooters as a segment — something akin to campaigns we’ve seen for cotton or milk. “Got scooters?”

If such a shift in attitudes seems unrealistic, consider how radically our attitudes and behaviors changed in a less than 10 years due to the Internet. While the scooter industry alone can’t effect a change on that scale, it can become a significant voice in an existing movement that’s rethinking transportation in the US (particularly “urban mobility”) and offering a variety of alternatives to the status quo. It’s a long-term approach to growing the market that has the benefit of helping short-term sales by making a stronger case for the product.

Obviously, dealers and scooter companies are smart to take advantage of high gas prices to help drive sales. Revenue is revenue, after all. Even brief growth periods such as the one in early 2011 are a welcome relief after three years of slow sales. Making the most of the situation, however, isn’t the same as betting on another boom. Placing such an emphasis on the fuel-efficiency of scooters undersells other features and benefits of riding a scooter. Focusing entirely on economic appeal is a risky gambit. For most Americans, a scooter won’t actually solve their fuel budget problems. It might take several years to recoup the purchase price of the scooter and other initial costs, at which point actual savings begin.

For many, the financial benefits won’t be significant unless they actually replace a current vehicle with a scooter and gas prices remain high. With so many more affordable, high-MPG small cars now available, making the case for scooters on gas dollars alone probably won’t be enough. Additionally, going from car to scooter is a lifestyle choice as much as an economic decision. Many are hesitant to make such a drastic change in their daily lives based on something as unpredictable as fuel costs — especially if they live in less urban areas or less temperate climates.

A 2012 scooter boom isn’t a certainty no matter how high gas prices go. This isn’t 2008. Consumers are still smarting from the effects of the recession. They’ve also learned that gas prices are highly volatile, the result of a myriad of influences beyond basic supply and demand. Pump prices, dire predictions and another round of “scooters save gas!” local news stories may not be enough to motivate buyers to overcome anxieties from ongoing economic uncertainty, even if they do have good access to credit or the cash on hand to make the purchase.

If scooter sales do skyrocket in response to predicted rises in gas prices this year, the industry will have to gauge that demand very carefully. A 2008-like boom in 2012 could lead to a 2009-like glut in 2013 if their predictions are off the mark. Current economic conditions, being described by some economists as “the new baseline,” could mean that each renewed scooter sales bubble will be short-lived and followed by increasingly harmful busts. That’s the monkey’s paw proposition scooter dealers, distributors and OEMs will face as long as they rely on sales jumps in reaction to gas prices to carry them through periods of low demand. We want them all to succeed long into the future. It’s our hope that the industry will keep focused on sustainable growth and changing the American transportation culture. In a strong and stable market, spikes in demand for scooters will be a welcome surge in sales, not a make-or-break survival situation.

In Part Three of our series, we’ll offer some shopping and buying advice for those hoping to save money by buying a scooter this season.

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