Bus Exchange Magazine
-9-
Spring 2011
year low of course has caused considerable stress to motorcoach
manufacturers and distributors.
The lack of capital funding for new vehicles continues to be a
major reason why sales are down this year. Lenders continue to
follow rather strict lending criteria, requiring higher down pay-
ments, healthier profit and loss statements, higher credit ratings
and shortened repayment plans. In the current economic climate
significantly fewer operators are able to qualify for such funding.
Unfortunately, charter and tour revenue rates have remained rela-
tively flat over the last number of years, in spite of rising costs
such as insurance, maintenance, and fuel charges which over time
have led to rather narrow profit margins. And of course due to the
recession charter and tour sales volumes have seen declines in
most regions. On the positive side, scheduled intercity passenger
volumes have increased significantly over the last three years. And
this trend in intercity passenger service should continue over the
next several years.
Given the mandated emission standards and safety regulations of
recent years, the sticker price of a new full-size motorcoach has
continued to climb. With well-equipped coaches now reaching the
$500,000 mark in the USA, and more in Canada, operators are
finding it increasingly difficult to justify the purchase price of a
new coach. This has sparked a greater interest by operators to con-
sider updating and refurbishing existing coach units. Typically an
8-10 year old coach, with a book value of $100,000 to $150,000
can be fully refurbished for about $150,000. The total investment
in a refurbished unit is $250-300K, which is nearly half the cost
of a new unit.
In an average year the replacement factor for full-size motorcoaches
in North America is about 2,000 units. Given the sales figures over
the last two years of 1,276 (in 2010) and 1,654 (2009), this indicates
an aging fleet situation that should require a higher replacement de-
mand in future. Refurbishing units may offset some of this demand
in the shorter term, however eventually all units must be replaced at
some point in time. The downturn in charter and tour business also
has the effect of delaying the need for replacement, but as the market
picks up so must the need to replace older fleet units. Until the econ-
omy begins to show some meaningful growth and business people
and consumers become more confident, it is likely that sales of new
coach units will remain somewhat flat over the coming 12-months.
Should the lending institutions decide to ease up on their lending
criteria, then we will likely see a modest up tick in new coach sales.
An educated guess might put full-size coach sales at 1,500 in the
2011 calendar year. More likely 2012 will prove to be a more normal
sales year for motorcoach manufacturers.
*Motorcoach annual sales numbers are provided through the cour-
tesy of Larry Plachno, publisher of the National Bus Trader.
Mid-Size Bus Segment
For three straight years, 2007 through 2009, through the worst of the
recession, sales of mid-size bus models has increased. However, in
2010 the sales curve finally flattened out and nominally showed little
or no increase over 2009 sales. Most will agree that this has been quite
a run, given the recessionary effects that most other industries have
had to face. The question is whether this healthy pace can continue.
Unlike most transit bus and motorcoach sales, mid-size buses are
sold across all segments of the bus industry, and throughout the vast
array of vocational applications. As such the industry is insulated to
some degree by the vagaries of any one particular segment. If one
segment is down another may be expanding. Overall, the market
demand for mid-size bus models appears to be increasing.
The Mid-Size Bus Manufacturers Association (MSBMA) reported
sales of 13,130 new bus units in 2010, which approximates 2009
figures. Not all mid-size bus manufacturers are members of the
MSBMA, and so non-member sales figures are not included in the
above report. A guesstimate of non-member bus builders may ac-
count for perhaps additional 1500-2000 units nationally, which may
bring the overall North American total to 15,000 units, about the
same as in 2009.
However, limited funding sources for new bus purchases in the pri-
vate sector have likely put somewhat of a lid on market demand. p