News From Terre Haute, Indiana

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June 2, 2013

RV industry making a comeback; some Vigo businesses hopeful of strengthening economy

Midwest RV owner: ‘Selling new ones faster than we can get them’

TERRE HAUTE — After a disastrous industry recession, recreational vehicles are making a comeback, one that leaves some Vigo County RV businesses hopeful of a strengthening economy this year.

Jay Smith, owner of Midwest RV in southern Vigo County, said his business last year sold 60 trailers “and we have sold half of that just in the month of April. We have sold more so far this year than we did last year.

“It seems like the banks are loaning again. I don’t know if everyone was tired of cutting back and now are going hog wild, or what. People are spending money, there is no question about it,” Smith said.

The RV industry in 2009 was barely afloat. Unemployment in Elkhart, where 83 percent of all North American RVs are manufactured, soared to more than 20 percent in 2009 as RV shipments dropped just more than 30 percent from 2008. Shipments previously had dropped nearly 32 percent in 2008 from 2007.

Several RV manufacturers closed or disappeared through consolidation. In addition, gasoline prices topped $3.50 a gallon to more than $4 per gallon in many sections of the nation.

“For used motorhomes, we couldn’t give one away for five years; nobody wanted them,” Smith said of the large bus-size RVs. “Now, they are buying them up right and left,” Smith said. “Same with heavy-duty fifth-wheel trailers.

Americans, it seems, like their luxuries, according to Smith.

“I don’t know if people got used to the gas prices or what,” he said. “I think people got sick of it. Americans are spoiled. They will have their recreation. They will cut back in other areas, they will buy less groceries, but will not stop their recreation.”

Smith attributed some of his business growth to a new location on East Harlan Drive, where a nearby stoplight gives motorists the chance to check out his inventory. Signage for Midwest RV, which has been at the new location across from the Vigo County Industrial Park for a year, adds increased visibility to passers-by who may be considering such a purchase.

Now, Smith said, “we are selling new ones faster than we can get them in. I am begging for trailers. I am literally buying trailers from our manufacturer that other dealers have not picked up. I have three to pick up this weekend that we have cabbaged off another dealer.”

Smith said he has 18 trailers on order, but each trailer is now about six weeks overdue. That, Smith said, is a national problem with transporting the trailers from manufacturing plants to dealer lots.

The uptick in business has prompted Smith to increase his workforce. He has added three full-time workers this year, bringing his total to seven employees, including himself.

“I think this year will have record sales, unless something drastic would happen,” he said.

RVs span a wide variety of types and prices. Small units that fit in the back of pickup truck and pop-up trailers start at about $4,500. The price then jumps from an average of $20,000 to $85,000 for various fifth-wheel and tow-trailer models, and an average of $50,000 to well over $200,000 on tour-bus size mobile homes, depending on specialty packages/interiors.

In February, RV manufacturers shipped 26,210 units, a 6-percent increase over the same month last year, according to the Recreation Vehicle Industry Association (RVIA). It marked the best February total since 2008. February’s shipments helped bolster the total numbers of units shipped in 2013 to 50,499 units — up 16.6 from the same period in 2012, according to the RVIA.

Wholesale RV shipments are expected to increase 7.5 percent this year, over 2012, reaching 307,300 units, the RVIA reports. The motorhome segment of the RV market is forecast to see a 13.1-percent gain this year, to 31,900 units, up from 28,200 last year. Towable RV shipments are expected to climb 7 percent this year to 275,400, up from 257,600 units in 2012, the RVIA reports.

The industry saw a 13.3-percent increase in RV shipments in 2012 over 2011 transports.

Another likely factor in RV sales is consumer confidence, which strengthened in May to the highest level in more than five years, according to the Conference Board’s consumer confidence index. The Conference Board is a New York-based non-profit business membership and research group.

The index now stands at 76.2 (out of 100) percent, up from 69.0 percent in April, and is the highest since February 2008. Consumers’ confidence in the economy is tracked closely, as spending accounts for about 70 percent of the U.S. economic activity. Also, higher home prices and stock gains are making Americans feel wealthier, despite concerns earlier in the year of higher taxes and federal spending cuts.

Yet, Robert Guell, professor of economics at Indiana State University, said the increased RV sales is more a reflection of demographics in the U.S. population than of the economy.

“I don’t think it is about overall economic health. I think it is about more retirees, and more retirees feeling that they have more freedom to spend on luxuries, given an increase in their portfolio wealth,” with the doubling of the Dow since 2009, Guell said.

“Retirees would probably walk onto an RV lot and write a check out of their retirement portfolio. Whereas, someone wanting an RV for the weekend would likely be making payments,” Guell said.

“The consumer confidence will lead people with portfolios to purchase RVs, but I think it is more likely to be driven by the number of retirees. The number of retirees is rising really fast and has for about the last three years,” Guell said.

“I think it is a direct effect of retirees rather than a positive sign for the overall economy. RVs sales is not a good measure of [the overall economy]. Ten years ago, it was a good sign, but this upward bias in RV sales is being overwhelmed by demographics,” Guell said.

Guell said the U.S. economy is now “in a modest jog. We are no longer in a slow slog. The first and second quarter were a little lower, but we will see 2.5 to 3 percent real growth for the rest of the year. That is pretty good. There is no saying we are still part of any kind of recession and there is not any particular fear that there is one on the immediate horizon,” Guell said.

The RVIA states the nation’s demographics are in the industry’s favor, with a record 9 million RV-owning households, and that number is expected to grow as baby boomers retire.

Don Hickman, sales representative for Wetnight RV on U.S. 41 north of Terre Haute, said he agrees that most recent buyers are paying cash, rather than getting financing for RVs.

“They are people who have not spent money for a while, for several years, and are paying for [RVs]. I see a lot more money come in instead of financing,” Hickman said.

Hickman said financing is not a problem as long as buyers have good credit scores. Still, he said, “there are not as many banks as there was that provide loans. I had four different banks that quit loaning on RVs and marine vehicles,” such as speed boats, Hickman said.

“We have three banks right now” that provide loans, Hickman said. “When the economy was bad, some of the banks quit loaning for toys and pleasure” vehicles, he said. “At the time, there were manufactures of RVs going out of business like killing flies.”

“Also, suppliers to manufacturers, some of them went out of business and made parts harder to find,” Hickman said.

Still, Hickman said he thinks sales this year will “be better, but not stellar.”

“It is definitely not like it was before 2008, but I think it will be better than last year,” he said.

One wild card when it comes to RV sales is the weather. Hickman wet springs and cooler temperatures keep many people at home.

“If it rains every day, people are not going to look for an RV,” he said. “And when there are good days for a few days, they are at home mowing their lawns.

“We have been fairly busy, and it is slightly better [than last year], but the first holiday of the season was not very nice, it was chilly and rainy,” Hickman said. “We just have to hope for better weather.”

Reporter Howard Greninger can be reached at 812-231-4204 or howard.greninger@tribstar.com.

 

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