Volatile gasoline prices could hamper the recreational vehicle industry's attempts to recover from a deep downturn caused by the recession because sales of the big ticket items are so dependent on consumer confidence, industry executives and analysts say.
"High fuel prices and rapid fluctuation of fuel prices are not good for consumer confidence," said Mark Bowersox, Recreation Vehicle Indiana Council executive director. "When you see fuel go up 10 or 15 cents a week or 50 cents in six weeks, that's a concern."
At the pump, gas prices averaged $3.54 on Friday, according to AAA. That's up nearly 41 cents in a month and 74 cents in a year. Analysts have predicted oil prices likely will continue to be erratic as perceptions shift about demand in the global economy.
"The RV industry has to be sweating," said Jerry Conover, director of the Indiana Business Research Center at Indiana University's Kelley School of Business.
The RV industry hit its peak in 2006, when it shipped a record 390,500 RVs. Things began to slow in 2007 when shipments fell 9.5 percent. They plunged 33 percent in 2008, with RV manufacturers blaming the drop on high gas prices, the recession and credit being difficult to obtain for many. The drop continued in 2009, when
shipments hit a 19-year low.
The downturn hit especially hard in Elkhart County, which bills itself as the RV capital of the world. The county saw unemployment jump to 18.9 percent in March 2009 as RV factories shut down and thousands of jobs were lost.
Sales began to improve last year when shipments were up 46 percent to 242,300. Kevin Broom, a Recreation Vehicle Industry Association spokesman, said the association was predicting sales to increase 8.6 percent this year to about 263,000. He concedes, though, gas prices could change that.
"Our expectation is that we'll still see some growth. The one caveat to that is the industry is affected heavily by consumer confidence," he said. "If consumers are feeling less confident, that could have an effect on RV sales."
Morningstar analyst David Whiston, who focuses on Winnebago, said uncertainty in fuel costs, not the actual cost, is the biggest concern.
"I think it's more the volatility that would cause consumers to stay out of the showroom than the level itself," he said.
He points to the fact that high gas prices don't keep people from buying RVs in Europe, where gas prices are higher.
Baird analysts wrote in a note Tuesday to investors that they like the big picture backdrop for RVs, including consumer confidence, saying it supported stronger demand in 2011. The analysts said conversations with industry participants support that outlook, with gas prices and dealer inventory among their key concerns.
Phil Ingrassia, vice president for communications for the RV Dealers Association, said it's too early to say whether gas prices will have an impact on RV sales because it's impossible to predict how long gas prices will stay erratic. He said he isn't aware of any change in the forecast in RV sales, but said stability would help.
"When people feel secure about their jobs that bodes well. As the economy improves, so do RV sales," he said.
Bowersox said because recreational vehicles are a discretionary purchase, people look for stability before making such a large purchase. He said gas prices are more likely to change how people use their RVs.
"People might take fewer trips or stay closer to home, but the demand is still there for the product and they will adjust," he said. "If gas prices stabilize, the market should look real good into April, May and June. If they bounce around like a yo-yo, then that's a cause for concern going forward."
