There is a little known fact about the RV sector that the rest of America should pay heed to. The RV industry has long been an economic barometer of sorts, providing a leading indicator of the direction of the economy as a whole. “R.V.’s have always preceded the rest of the economy in a downturn and in an upturn,” said Richard Curtin, an economist at the University of Michigan. Many members of this industry are currently watching this trend as they see RV sales starting to level off.
RV industry shipments aim to hit 539,900 through the end of 2018, in what would mark 9 straight years of growth. This is a 7% increase over 2017 which tallied 504,600, and still less than the 550,000 forecasted for 2019. Shipments year over year through Q1 saw a 13.4% lift. These figures were provided by Frank Hugelmeyer, President of the RV Industry Association, to the association back in June.
Mr. Hugelmeyer has a lot to be optimistic about with the aging population, which tend to be the bread and butter of the RV industry, as well as outsized interest from the millennial age group, who are entering their generational period of extra discretionary income. This all seems to align with the fact that since 2010, when the sector was emerging from the financial crisis, the RV industry has grown at an annual average of 12.6%.
Not everyone, however, shares Mr. Hugelmeyer’s glass half-full interpretation. The city of Elkhart, Indiana, self-dubbed the “RV Capital of the World” is responsible for the production of more than 80 percent of Recreational vehicles sold in the U.S. Many in the industry here are getting a different sense of the headwinds that propel this little corner of the economy.
While overall RV shipments were up for July, motor home shipments were down 6.5% in the same month. Richard Curtin sees this as a “yellow light”. Mr. Curtin acknowledges this could be a temporary condition such as excess inventory due to overproduction involving a nearly 10 year boom. While not a significant cause for concern yet, there are other future looking indicators to be considered as opposed to historic sales.
Elkhart enjoys some of the lowest unemployment rates in the country, at just over 2%. Despite this, recently some companies there have been cutting their production workers to four day work weeks instead of five to alleviate some of the excess inventory.
Others point not to the temporary labor glut, but the larger factors that could be contributing to these headwinds. The RV industry, like many other manufacturing and farming communities are hit first and hardest by the impacts of the trade tariffs. Cost of goods for many in the industry are seeing increases of up to 50%. These costs ultimately pass through to the consumer, and many blame the rising prices for the levelling off in shipments.
Senator Joe Donelly, A Democrat whose home is near Elkhart says, “I think there’s serious concern about the effects of tariffs on the R.V. industry. So many of the components that go into R.V.s are directly affected by these tariffs. Echoing these sentiments is Mark Dobson, the head of the Economic Development Corporation in Elkhart County, “Nobody’s in a panic, they are just concerned.”
Still, where some fear a downturn, others are thriving. LCI industries, a large manufacturer of components for RV’s are experiencing growth in growing sectors. CEO Jason Lippert is optimistic. His company saw aftermarket component sales rise by more than half in the second quarter, signaling a move to RV maintenance as opposed to new purchases. Dan Holtz, a small business owner in the industry welcomes a perceived slowdown, as he has said he is having trouble finding enough workers and sees it as nothing more than an expected correction.
While no one in the industry has hit the brakes just yet, some are starting to take their foot off the accelerator. While Mr. Curtin believes conditions metaphorically display a yellow light, he concludes that, “Depending on how things evolve in six months, it could be a red light, getting to the end of the expansion.” Every business owner in the RV industry concerned about the slowdown being experienced within the sector should retain qualified counsel to represent their interests.
Thrift & McLemore’s attorneys have over 12 years’ experience in representing clients in the RV space. Contact Thrift & McLemore by email at [email protected] or by phone at 678-671-4031 to discuss how we can assist you with protecting your RV business today.