RV Industry at New Baseline, Baird Reports

A photograph of about six KZ RV travel trailers lined up side-by-side in a manufacturing warehouse. There are a couple of employees working on the backs of different RVs.

Baird Global Investment Banking’s Recreation Team saw no slowdown in the RV market as fall began.

In its September Recreation Sector Update, analysts said outdoor recreation – including RVing – showed continued strength through the late summer, and many participants expect the sales season to extend into fall.

Looking at its monthly RV data, Baird found that RV demand remained elevated in September. The current conditions in its dealer survey fell from an all-time high of 91 last month but remained strong at 77. That would be the second-best mark since mid-2017.

Eric Stetler, Director – Investment Banking for Baird, said the growth since the start of the pandemic should continue well in 2021 and likely beyond.

“I think we’re reaching a new base level for the industry,” Stetler said. “This year the industry was clearly underproduced with the significant increase in retail activity. Next year at 500,000-plus units based on the RVIA’s latest estimates, could set a new baseline for the industry based on the dramatic number of new industry entrants.

“Given the increase in demand over the summer, we feel there’s a fundamental step change in outdoor recreation,” he said. “You see it in RV, marine and powersports, with people new to the industry. Once they begin to experience the outdoor lifestyle they tend to stick over time and typically upgrade their vehicles over time. Of course there will be some new buyers that purchased RVs this summer that will choose to sell as the pandemic concerns are mitigated with a vaccine, but I think there’s a significant percent of those who will stay in the industry.”

An aerial photograph of an RV dealership lot with dozens of RVs lined up neatlyThe beginning of summer saw strong retail demand and left dealer inventory very lean, the report stated. That creates a healthy replenishment and shipment expectations for 2021, with most subsectors, including RVs, expecting strong growth.

Stetler said that has made for a busy start to the fall season based his industry conversations with OEMs, suppliers and dealers.

“We’re seeing an extension of the more typical selling season, even as we’re going into the fall,” he said.

The backbone of the retail strength appears to be from new participants in the market.

“OEMs and suppliers are trying to keep pace with the retail demand environment,” he said. “Everyone is extremely busy.”

The report cited data from an RVIA forecast that 2021 shipments could top levels set in 2017. Stetler said new orders, added to current backlogs, support a strong wholesale shipment forecast.

Unlike 2017, where product got ahead of retail, Stetler said that Baird expects the strong activity in the RV industry to continue through next year and beyond.

“It’s very different this time – retail growth has been a tremendous driver. Many sector participants have significant backlogs, approaching the majority of a year’s revenue in some cases.

“We very much see the growth that has taken place as sustainable,” Stetler said.

How the overall economy fares could affect future growth, he said.

“Factors such as the general economy will always be a consideration for the RV sector,” he said. “However, the industry could not be better positioned today for a period of long-term growth – we’re very bullish.”

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