Accelerating RV Sales ‘Good Sign’ for Economy

by Wendy on July 8, 2013


The recent acceleration in car sales is impressive, but there’s an even better sign the U.S. economy is getting back on track: surging sales of recreational vehicles. The makers of RVs shipped 32,100 machines in the U.S. in April, a 19 percent increase from a year earlier, according to data compiled by the Recreational Vehicle Industry Association.

RVs are a notable niche because it takes no small amount of consumer confidence to buy a gas-guzzling home on wheels. Between 2007 and 2009, more than half of the RV market disappeared. Light-vehicle sales, by contrast, dropped by 36 percent. “No one needs an RV,” said Jeff Tryka, a spokesman for Thor Industries (THO), one of the biggest U.S. RV makers. “It’s a purely discretionary purchase, while there’s always going to be a base-level demand for cars.”

The motor home and towable camper business, a $14 billion market in the U.S., is on track for its best performance since 2007. For the year to date, shipments are up 13 percent and the RV association expects more than 307,000 vehicles to roll by January. The sales boost doesn’t matter much to Detroit, but it’s big news about 200 miles away in Indiana, where roughly half of the country’s RVs are made. It’s also great for companies like privately held Jayco, the Forest River unit of Warren Buffett’s Berkshire Hathaway (BRK.A), and Thor, which cranks out some of the most popular RV brands, including Airstream and Keystone.

When the RV market bottomed out in 2009, Thor’s payroll dropped to 5,400 workers; today it employs 8,800. And in anticipation of higher demand, it just bought a factory in Wakarusa, Ind., equipped with 35 booths for painting giant campers. The company will give a progress report when it announces earnings later today. Last quarter, Thor posted income of $19.9 million—a 45 percent increase from a year earlier.

Winnebago Industries (WGO), one of the only publicly traded companies in the RV business, is also cruising right along with $6.3 million profit in the latest quarter, swinging from a $910,000 loss.

Just like the auto market, relatively low interest rates and more efficient models are driving demand. “During the depths of the recession, you couldn’t get much financing at all,” Tryka said. “Then it came back to $30,000 or so per vehicle, then $60,000. Now you can get financing pretty easily up to about $150,000.”

Not surprisingly, Thor’s biggest gains of late have come from its opulent motorized coaches, not its towable pop-up campers. The recent sales boom is also a result of pent-up demand, according to Tryka, as consumers put off upgrades until the economy improved.

More than 9 million American households already own RVs, the highest level on record according to RVIA statistics. And the industry expects a wave of new buyers as baby boomers hit retirement. Right now, though, it’s summertime in America and the busiest month of the year for sales of homes on wheels.

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