There is more evidence of late that the shortage of new RVs is beginning to shift. That’s good news for consumers ready to buy but could spell trouble for RV dealers and manufacturers.
The Wall Street Journal recently published a story that said the meteoric rise in stock prices may be a memory for Thor Industries as well as Camping World Holdings. After Thor stock doubled in value and Camping World stock tripled in value in 2020 and 2021, shares in both companies have dropped an average of 30% in 2022.
Experts point to a plethora of reasons for the declines, including general economic malaise, rising interest rates, climbing fuel prices, and the recovery of the supply chains. Less attractive financing suddenly makes cruise vacations and trips to European destinations look like a bargain.
RV dealers, who suffered from low-to-no inventory for much of the early pandemic, now find themselves with overflowing lots at a very inconvenient time. A recent survey by the firm Truist found that nearly 70% of RV dealers claimed demand for new rigs has slowed “noticeably.” About 40% of the dealers surveyed said they expected sales volumes to decline, compared to 5% when they were surveyed in February.
The Wall Street Journal story quoted Raymond James analyst Joseph Altobello saying the RV industry would be “hard-pressed to complete a soft-landing.” Altobello went so far as to say that the oversupply on dealer lots will likely bring a high degree of discounting.
The Truist survey also said more than a quarter of RV dealers said they were “too heavy” on inventory at their stores—the highest reading in four years.
Dealers go negative on the future
When we take a closer look at the June RV Dealer Sentiment Index prepared by Baird Financial Services and published by the RV Dealers Association, we find that RV dealers now appear to be negative when they forecast for the next 3-5 years.
The index looks at dealer sentiment based on a score of 1-100. Scores over 50 indicate a positive outlook, while scores under 50 indicate a negative outlook toward the future.
The overall RV dealer sentiment score in June was 26 out of 100, down 54% from the score in April when dealers rated the current industry market condition at 57. The June score is the lowest level since 2009.
When dealers looked out 3 to 5 years, the score rose to 47. That was up 8 points from the 39 score in April, but still showed a negative outlook. It’s only the second time the 3- to 5-year outlook has been negative since the index began in 2006.
Average rig value dropping
Analytics firm J.D. Power is reporting that the average retail value across all RV classes dropped through April and continued to decline through June. But don’t feel too sorry for big manufacturers or big dealerships. Thor Industries, by its own worst-case scenario, still would generate $365 million in net income even if sales decrease by 35%. Camping World appears to be doing well in secondhand RV sales and has done a pretty good job of managing overhead. The company also continues to branch out into almost every aspect of RVing, including service, financing, insurance, and now a peer-to-peer rental business it owns called Rvrentals.com.
Events for the rest of this summer will likely define the future for RV builders, sellers, and buyers. It could be a bumpy ride.