The U.S. economy may ultimately skirt a recession, but it’s felt like one for months at Jon Ferrando’s 103 RV dealerships. He said retail sales of recreational vehicles are on track to be the lowest since 2015. There’s “definitely a recession in RVs,” said Ferrando, CEO, and president of Fort Lauderdale, Florida-based Blue Compass RV, which operates in 33 U.S. states.
The industry faces a dual challenge of rising sticker prices due to inflation and higher interest rates that make it harder to borrow, which has curbed buyers’ appetites. In addition, many dealers piled up pricey inventory from the boom times and now have to pay off those loans as sales slump, which can lead to financial troubles for some.
RV sales fell in every month of the year thus far, and analysts worry the decline could be a precursor for more damning economic data. The gloomy outlook has weighed on stocks and boosted short- and long-term government bonds yields, pushing the bond market’s “yield curve” into negative territory, typically preempting recessions.
Despite the gloomy prospects, RV manufacturers remain optimistic, and some say they’re still expecting growth next year. The RV Industry Association expects North American shipments of new motorhomes and trailers to rebound to about 350,000 units next year, up from 302,094 in 2021, when they reached their highest level ever.
However, the recovery is expected to be a slow one. The summer spike in gas prices and supply chain issues have slowed the market, and some orders of RVs are delayed until 2023. Also, some consumers are worried about President Trump’s trade skirmish with China, which could add to costs for imported parts and components into RVs.
Recreational vehicle sales exploded during the first few years of the coronavirus pandemic, as consumers found themselves all dressed up with nowhere to go. Disruptions to daily life, like restaurant closures and work-from-home options, cut into consumer spending. At the same time, international travel restrictions and concerns over how the disease spreads on airplanes turned off travelers’ wanderlust.
But that’s changing now, with the end of peak season in sight and a winter chill in the air, and more consumers are putting off plans to spend their hard-earned dollars on RVs. As a result, the inventory of RVs at some dealer lots is nearing record highs. And that’s causing some dealers to run out of money, leading them to borrow more against their assets or stop financing customers altogether. In some cases, that can lead to a company’s collapse. That happened during the Recession, and some dealers have been wary of repeating that history. “If you’re not watching your inventory and the lenders begin to require curtailment payments, that can put you in a very shaky position,” says Sutton, who warns that his company has had to pull back on credit for some of its RV clients. “That’s a recipe for disaster.” For now, Sutton is keeping his fingers crossed for the best.
