We are surrounded by multiple international crises. From the potential death of democracy as we know it to a global financial system that doesn't know whether to go backwards, sideways, up or down in its efforts to bring inflation under control and head off pending global recession, we are surrounded by doubt and uncertainty.
Even though the well documented supply chain meltdown we have been enduring is showing signs of abating, the talk remains of recession.
Generally speaking, some combination of five things happens in a recession. First and most fundamentally of all, people stop being able to buy our products. Then the factories, vendors and service providers we depend on to get materials, components and finished products to where they are needed can't supply. This happens because they have had to lay off their people due to softening demand, or worse still, they have had to close down completely.
Either way, the collapse in the trade cycle creates a swollen labour pool as people are laid off. Without work, they can't then afford to buy our products. Which is why our vendors have to lay more people off or close down and which is why people can't afford to buy our products. Which is why businesses close and lay more people off, etc. etc. Round we go, down we go.
This self-perpetuating decline cycle results in price reductions because of reduced disposable income. Recession becomes weaponised as a primary tool with which to fight inflation. In the United States, the 'Fed' has openly talked about it needing to see (albeit short and shallow) recession in order to break that cycle that interest rates alone are no longer able to do.
round we go, down we go
Next, because businesses are not making enough (or any) money, they are not generating the investment capital they need. So, as debts mount, cutbacks to the two things that are closest to survival magic bullets that they have - new product R&D and brand building - get switched off. The problem with that is that an almost infinite amount of research (going back to the 'Long Depression' of the 1880s in the United States) shows conclusively that of all business spending cutbacks, and that along with lack of capital, they are the two cutbacks that are the most closely linked to business failures.
Here's the irony. While some businesses in some markets are for sure having a hard time already, closing down even, our problem isn't declining output, triggered by declining demand, but declining output despite the high level of demand. We can't make enough of our products - motorcycles and scooters - to meet the robust demand that exists.
And ours isn't the only market where this is happening. Certainly not the only specialty leisure market. Okay, we are a 'cross-over' in that some of our product lines are aimed at urban mobility - and that is less of a "discretionary" than pure leisure riding. But nonetheless, demand in the motorcycle industry is pretty strong, pretty consistent, robust and growing even - in most if not all segments of the broader PTW market.
There is demand out there. Regardless of what the registration statistics suggest, there is potential growth to be had, but the feet on our hosepipes, such as supply chain issues, are way above our pay grade. Although there are signs of those particularly complex issues abating, there are plenty of others ready, willing and able to take their place.
While war, pricing, labour shortages, pandemic lockdowns, energy, logistics, materials, capital availability and the other issues we are faced with are demand-side problems for vendors, demand for our finished goods is not yet diminished.
We appear (almost certainly) to be headed for a recession in 2023 (the UK and some other markets are already, effectively speaking, in worsening recessions), yet employment remains high (record highs in some countries), levels of available unemployed labour are low (record lows in some markets and for some skills), prices are still rising across the board and factories are pretty much selling everything they can ship.
Typically, high levels of employment and low levels of unemployment would be the hallmarks of robust, well performing markets and we'd all be enjoying 'the good times'. Instead, this time round, these appear to be the hallmarks of a fragile market that is eyeing uncertainty.
So, is this a crisis, yes or no? If it is, then what kind of crisis is it, when will it play out and how?
Nobody can answer these questions at this stage - all any of us can do is hope for the best, but prepare for the worst. Which of itself is a kind of crisis - a crisis of confidence. We all understand that if something can go wrong, it likely will, but there's a danger that preparing for it to happen can become a self-fulfilling prophecy.
The latest survey of new motorcycle and wider PTW (Powered Two-Wheeler) market registration statistics that we have been able to put together for this edition does not help to draw any conclusions. The reports present a mixed picture.
There definitely is somewhat of a downward trend, but it is growth that is softening as the year plays out. The reported sales levels in at least three of the "Big Five" markets are still close to record levels for the time of year (the first eight months).
The latest ACEM data (January to June 2022) puts the 'majors' (which account for over 80 percent of new model registrations) doing okay at mid-year, essentially flat at just -0.5% year-on-year.
In aftermarket terms, there continues to be market consolidation, with Mergers and Acquisitions (M&A) activity (on both sides of the Atlantic) running at record levels in the past 24 to 36 months.
Finally, and sad to report, there is continued atrophy on the industry expo landscape. As I write, the market is just a few days away from witnessing the dramatic contraction of the once all-conquering INTERMOT Expo at Cologne, Germany. Not something that augers well as the high mileage, large displacement riders of northern Europe are the true ringers of the market's cash registers.
