At the Half-Year is the Glass Half Full or Half Empty?

Looking at things at the halfway point of 2024, what have been the key trends and takeaways? Here SVR puts together what appear to be the most outstanding aspects of 2924, so far.

Market slows and mark-up drop—where is the silver lining?

There does appear to be a tapering off of the explosive demand increase experienced in 2021 and 2022. In addition, as the many new entrants to the market pushed the supply curve rightward, meaning increasing supplies at all price points, mark-ups that dealers had previously enjoyed dropped significantly.

At the same time the has been expanding , albeit a slow pace. Further the increased price competition has opened the market to more likely consumers. Prospects over the long term remain positive, based on demographic changes, including the on-going shift of populations our of dense urban centers to adjacent suburbs and beyond, and toward warmer southern climates. This latter trend has also led to the expansion of gated communities which are inducive golf car-type (GCT) vehicle usage.

Insofar as the urban exodus is concerned, while there are a variety of trends and countertrends (e.g., converting office space to residential space), the overall pattern seems to be a net outflow. And, this is sustained by the work-form-home technology that continues to grow apace—AI the latest avatar in the trend. The decreased need for long-distance communing and the economy afforded by short distance driving afforded by GCT vehicles are likely to combine to grow the market. More about this below.

Supply-side changes—the evolution of industry structure

It is hardly a secret that the structure of the GCT vehicle industry has changed quite substantially over the past two years. Low cost partially assembled vehicles have poured in from Chana. Despite slowing market growth, partially-assembled imports continues to increase. The table below shows the figures for 2022, 2023, and 2024 y-t-d.
The gain in units from China from 2022 to 2023 was just over 11%, while the increase from Japan was over 50%. The current year, 2024, may marked a change in strategy for Japanese manufacturers, as so far through April, no units have been recorded.

China set to import another record level?

With regard to the figures for China, however, the year-to-dare through April, compared to the same time period in 2023 shows a40%+ increase. Whether this is the result of a rush to fill orders early in the year from aggressive start-ups, or whether the pace is sustained throughout 2024 remains to be seen. SVR’s best guess and prediction is that the pace of increase will decline substantially past the summer buying season, but still set a new record—perhaps 10-15% above 2923.

Dynamics of the longer term supply/demand adjustment

The supply chain innovation of partially-assembled GCT vehicles opened up the potential for new industry entrants, a classic prediction in economic modeling: Lower costs mean greater profits and increased profitability for existing firms leads to new start-up companies seeking their share of the potential gains. In the GCT vehicle industry this has resulted in a shift from a three company oligopoly to something resembling a monopolistically competitive industry with many more sellers offering differentiated products.

What is not so obvious from economics, which gravitates to a new equilibrium in the market, is what is observed so often empirically, and that is the overbuilding of new capacity, which, in turn, leads to a weeding out of industry participants—this the downside of the path to a new supply demand balance. As of mid-year, SVR is not aware of any announced closures, although if the pace of imports does not taper off or decline in the next six months,

Product development—Quo Vadis?

Product development for GCT vehicles appears caught between two model concepts and identities. One is the golf cart and thither the neighborhood electric vehicle (nev). The former has been upgraded to what is generally referred to as a personal transportation vehicle (PTV), which if certified by NHTSA and local standards for on-road use becomes a low-speed vehicle (LSV).

The latter, the nev is less anchored in its image and attributes, considering top automakers, such as Toyota and Reneault have developed versions, as has GEM in the U.S. And there are other versions on might squeeze into the category, such as the Arcimoto and the Eli Zero. NHTSA regulations play a role in making the market unnecessarily complex. For example, if you fit an electric motor onto a three-wheel body frame and install handlebars rather than a steering wheel, the vehicle becomes a motorcycle and can go 70-80 m.p.h. on public roads. But if you replace the handlebars with a steering wheel, and add another wheel, you are limited to 25 m.p.h. and only permitted on public roads with speed limits of 35 m.p.h. or less.

As to the GCT vehicle, aside from its lack of styling, is not fully enclosed with hard doors and windows, which tends to limit it to fair weather driving. Paradoxically, as compared to its more stylish, enclosed cousins, the GCT vehicle better accommodates pass enters provides more space for storage.

Short distance driving, a lifestyle gaining popularity

Certain manufacturers, such as the Eli Zero, are specifically targeting the short distance driving market. Short trips to the supermarket, the convenience store, and local restaurants are examples of such jaunts. There is little doubt that such trips are numerous, occurring multiple times during a typical week. LSVs in any of its versions could easily accommodate these forays and do so at less cost than a conventional vehicle.

If it is such a logical, cost effective alternative to the conventional automobile, why has it not fully caught on, as yet. SVR would cite three factors:

• Design gaps: Lack of a robust hard enclosure in GCTG vehicles and a stylish appearance;
• Local area demonstrations and promotions are needed in the context of systematic use of social media and television ads;
• Grass roots dealers and manufacturers to lobby NHTSA for regulation and guideline changes to increase allowable speeds in particular;
• Finally, an upgraded and stylish GCT needs to be promoted as a key component of the evolution to clean energy, and qualify GCT vehicles for electric vehicle subsidies.

In future articles SVR will elaborate on these needs, focusing particularly on the need for create a new trade show, specifically oriented to emobility solutions and the benefits of a dealer-based trade association. Stay tuned!

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Contact the Author: Steve Metzger at smetzger@smallvehicleresource.com.  Or check out our website at www.smallvehicleresource.com, where you will find an extensive database of vehicle models and can make side-by-side comparisons of vehicles based on a full set of specifications.