The Stability of the Scooter Industry
By Tom Lynott
CEO of CMSI, Inc.

It is not uncommon in any industry to see a shakeout of manufacturers in difficult economic times. The scooter industry is no exception. There have been a number of companies in this “survival of the fittest” market that are gone or seriously restricted financially. Why? Two primary reasons; 1) companies have put “all their eggs in one basket” by having a centralized warehousing and distribution system and 2) regulations that have been on the books for years are now being enforced, forcing some manufacturer/distributors out of business. I will explain how TNG insured itself against such problems.

The first companies to go are those that are undercapitalized and have narrow margins. But in addition to that, if you have a single, centralized warehouse and distribution system, as do most manufacturers in the scooter industry, when retail sales slow and credit is tight you are caught in an even more vulnerable position. A severe financial burden is placed on the centralized manufacturer/distributor due to the now difficult-to-obtain bank credit line that most companies have to carry. In a way it means they put “all their eggs in one basket” so to speak. When retail sales slow as they have recently and dealers do not have a flooring line of credit, the inventory burden then falls on the manufacturer/distributor who cannot finance the required inventory.

Another reason for a major shakeout in our industry is the regulatory enforcement that is now shutting down the “Gray Market” manufacturers. These are companies that have been selling illegally, usually over the Internet, unsafe and environmentally hazardous bikes. The government has put into place a severe penalty for any dealer who sells these bikes. One company that sells over the Internet and “drop ships” to customers has been shut down by the federal government. Some of the larger states are clamping down on drop shipping and requiring drop ship distributors to register as manufactures. The Motorcycle Industry Council (MIC) is reviewing plans to assist in self-regulating the industry.

CMSI’s unique de-centralized distribution and acquisition model and our clean compliance record over the past 16 years place the TNG brand in a great position for continued stability and growth.  Our financing for inventory is spread among 8 Regional warehouse centers. When dealers’ flooring credit lines get tight we are in a position to provide “Just in Time” delivery for the consumer at the dealer’s lot. Much like the Sears model, many people want to buy over the Internet but pick up and receive service at a “brick and mortar” store. Along with providing consumer information and qualified leads to dealers, our website gets up to 1,200 consumer hits a day that we are now converting to sales for our dealers. As the industry continues its shakeout, be confident that our company is here to help our dealers take advantage of the short-term vacuum in the market of nearly 100,000 units that were sold last year by companies who are no longer viable or gone completely. In the long term, you will see CMSI producing product in the U.S. and adding electric as well as high performance state-of-the-art scooters and motorcycles. Our two-year warranty, famed Tech Training and Support and on-line parts ordering and distribution system, plus website conversion to sales all give our dealers the resources to capture more sales and profitably provide quality products and services to the ever demanding consumer.