REGIONAL— Jeff Carlson hears it all the time. As the owner and operator of Harold’s Arctic Cat south of Tower, he said nearly every customer who walks in the door has a question or comment about the future of the company that Carlson’s business depends upon.
Since his father Harold opened the small sales and service operation back in 1967, Arctic Cat has been central to Carlson’s livelihood, so such questions are more than academic.
The concerns on customers’ minds center around last November’s announcement that Arctic Cat’s owner, Textron Industries, was halting production of the storied sleds and permanently laying off 65 workers at the company’s Thief River Falls assembly plant. The story, which was big news across northern Minnesota where Arctic Cat has a deep and loyal following, raised uncertainty about the future of the brand in the minds of even some long-time devotees of the green and black. Those fears weren’t helped by the oft-times gloomy speculations that made the rounds on social media.
Yet, as was the case with Mark Twain, who once had the opportunity to read his own obituary in a local newspaper, it appears reports of Arctic Cat’s death have been greatly exaggerated.
Indeed, it appears far more likely that the recent layoffs— some permanent, others temporary— were part of a painful adjustment within the entire powersports sector, which has seen falling sales almost across the board the past two years.
Derek Lossing, who owns and operates Lossing Power Sports in Babbitt, said it’s affected more than snowmobiles. He notes that sales of off-road vehicles of all kinds are down. “I think there’s a combination of several things happening,” said Lossing. “Everyone in this sector did very well during the pandemic so I think we’re now just getting back to a new normal.”
Carlson agrees and notes that dealer inventories on both “the dirt side” (ATVs) and “the snow side” have been building the past couple years and that it’s only good business for the manufacturers to adjust their production. In fact, he said many dealers have been urging production slowdowns as inventories rose and as the cost of holding all that inventory rose right along with interest rates.
When it comes to layoffs, Arctic Cat is hardly alone. both Polaris and Quebec-based Bombardier, which manufactures Ski-Doos, all instituted even larger layoffs than Arctic Cat, even though they experienced less media coverage, at least in Minnesota. Bombardier’s layoffs across North America have topped 1,200, according to media reports from Canada.
While Arctic Cat announced a production halt in November, a letter sent shortly afterward to dealers promised that production would ramp up again beginning in March as the company begins production of its 2026 lineup of sleds.
End of post-pandemic boom
If there’s one thing that everyone who follows the power sports industry agrees on, it’s that the pandemic years proved to be an historic boom. Rather than sit at home during the COVID shutdown, many Americans opted to get outside and, with COVID checks in hand, outdoor toys like snowmobiles, motorcycles, and UTVs practically flew out of showrooms.
Manufacturers ramped up production to meet the seemingly insatiable demand and dealers ordered more units than they were used to selling as they tried to keep some of their suddenly red-hot inventory in stock.
But as with so many industries, boom times almost always lead to busts. All that buying eventually saturated the market. Showrooms that were finally filled with inventory suddenly attracted fewer buyers. As interest rates rose, the cost of borrowing jumped for consumers and the bite was even worse for dealers who had to pay interest on all their unsold product.
Some dealers couldn’t survive. Just before Christmas, the 73-year-old Harley-Davidson Sports Center in Hermantown announced it was closing its doors for good due to what the owners described as “challenging economic times.”
Still other factors seemed to pile on the misery. Last year’s record mild and nearly snowless winter affected most of North America and added further hurt for snowmobile dealers, in particular, who saw little service work as sleds sat unused. Sales beyond the pre-season orders were nearly non-existent last winter, which left many dealers holding excess inventory this spring. And pre-season sales ahead of this winter were generally disappointing as most riders opted to get another year or two out of their existing sleds, particularly after they sat idle an entire season last winter.
As dealers adjusted to lingering inventory and sluggish sales, they ordered fewer units from manufacturers, which eventually forced the production slowdown across the industry.
Long-term purchases
There’s almost certainly at least one other factor at play in the current slowdown. As with any product, manufacturers are constantly looking to add bells and whistles, the kind of accessories or features that can attract the interest of the buying public. Snow machines have come a long way from the loud and sometimes unreliable beasts that roamed Minnesota lakes and woods in the 1960s and 70s. The side-by-sides that now fill powersports showrooms are night and day from the “three-wheelers” that dominated the industry’s early days. Along with those changes have come significant price increases, with many side-by-sides now setting a buyer back more than $20,000, or even $30,000 for some top-of-the-line vehicles. New snow machines start at $10,000 and go up quickly from there.
Lossing agrees that with current new prices, buying sleds for the whole family, as used to be common, just isn’t in the cards for most people these days— which may be one reason more people are renting now than in the past. Indeed, Lossing is among those dealers now renting sleds.
In the boom times of the pandemic, dealers and manufacturers worried less about the rising price tag as units flew out the door regardless. But with most pandemic cash long since spent, Lossing said consumers seem more reluctant to shell out big bucks for new toys. “People are doing other things with their disposable income,” he said. “In many cases, they’re opting to travel.”
In either case, said Lossing, it helps to have perspective. While demand for power sports equipment isn’t what it was during the height of the pandemic, “we’re still up over 2018 and 19,” he said.