Recreation Vehicle Industry Association Chairman Bruce Hertzke says Professor Richard Curtin’s forecast that shipments will reach a new 25-year high this year is too conservative.
“Increases in interest rates will have a greater impact on RV shipments in 2005,” he said, “but even then the size of the impact will be relatively small due to the offsetting impact of strong job gains as well as increases in wages” said Hertzke, chairman, president and CEO of Winnebago Industries Inc.
University of Michigan Professor Curtin, director of the Survey of Consumers at the university and economic consultant to the Recreation Vehicle Industry Association, is forecasting that 347,800 motorhomes and towable RVs will be shipped from manufacturers to dealers in 2004, which would represent an 8.4% increase over last year’s total of 320,800.
In 2005, however, the RV wholesale market will pull back almost 8% to around 320,300 units shipped, an amount approximating the delivery totals for 1999 and 2003, Curtin said.
He projects that Class A shipments will increase 9.6% to 45,500 units this year, compared with 41,500 last year, and then decline 9.2% to 41,300 units in 2005.
Curtin says shipments of Class C’s will increase 20.2% this year to 22,000 units, compared with 18,300 last year, before declining 10.5% next year to 19,700 units.
Asked on June 17, about Curtin’s forecast for 2005, Hertzke replied, “We definitely believe the outlook remains very positive for our industry. I guess it’s fair to say that we’re just more optimistic than they are.”
Hertzke said he is not looking for a downturn in RV shipments in 2005 because “the Baby Boomers will continue to get out and spend money.”
Officials at Winnebago “believe in at least 5% to 8% (annual) growth for the industry” as a result of the industry picking up a reasonable share of the Baby Boomers entering their prime RV-buying years,” Hertze said during a conference call last week with investment analynsts.
Industry growth won’t be smooth, he noted. “When the economy’s good, it’ll grow considerably faster than that (5% to 8% annual rate). When the economy’s in a tougher position, it probably will grow slower. But we feel the (RV) market will be bigger five years from now because we’ll just have a lot more people and because people are using RVs for more than just camping and retirement. They’re using them for tailgating and motorsports and a lot of other hobbies.”
Winnebago is the leading producer of Class A and Class C motorhomes, when the two product categories are combined.
Concerning Curtin’s statement that higher interest rates will pull down RV sales next year, Hertzke explained that the average interest rate today on RV loans for 10 to 12 years, the typical financing period, probably is around 5.5%. Comparatively, the 10-year average interest rate on RV loans is closer to the 7.5% to 8% range, he said.
“We started seeing real pressure on our industry in 2000 and 2001 when the Fed raised interest rates into the 9.5% to 10% area,” Hertzke said. “When you get into double-digit financing rates, that definitely impacts our industry, but we have quite a ways to go before we get to that level again.”