Polaris Industries (NYSE:PII) is warning that proposed new consumer safety regulations for recreational off-highway vehicles may endanger the companys' performance and could risk rider safety as unintended consequences are ignored.
Even if the design considerations are a well-meaning effort to reduce injury and death, the Consumer Products Safety Commission is applying standards that are fitting for cars driving on a paved highway rather than all-terrain vehicles. That could make ROVs, as they're called, an even riskier proposition for riders.
High performance, but high risk?
According to the regulatory agency, between 2003-2013, there were 335 deaths associated with ROVs and more than 11,000 injuries requiring medical treatment. Of particular concern is the ROV rolling over while turning with the riders being severely injured from getting ejected or having the vehicle land on top of them.
Among the design considerations the regulations would impose to prevent such injuries and deaths, the CPSC is considering:
- Changing how ROVs steer to make them more like cars
- Lowering the vehicle height and widening its base
- Requiring stiffer tires like those found on cars
- Limiting ROV speed to 15 mph if seatbelts aren't worn
- Installing passive restraint systems
Yet as Polaris and the industry have noted, such systems may work for highway cars but don't hold up to scrutiny when it comes to off-road vehicles.
The road less traveled
Because ROVs are traveling on terrain that's not smooth, requiring them to have car-like steering mechanisms would actually make it less predictable and responsive, possibly sending you careening off track. And imposing new stability requirements would make driving on uneven ground impossible while limiting access to width-restricted trails. Stiffer tires would give ROVs less traction, take longer to stop, and increase the risk of spinouts.
The seatbelt interlock system itself is a dangerous addition because the jarring terrain ROVs drive over could cause the seatbelt sensors to mistake a belt bump for the seatbelt being unlocked causing the vehicle to immediately slow to 15 mph regardless of how fast you were traveling before.
In all, the regulations could cause more problems than they solve, but the agency just closed out a period of public comment on them and plans to have them available for final consideration by the full commission in September.
A scientific experiment
The industry has produced its own set of voluntary design improvements that take into account the special needs of off-road and all-terrain vehicles, but it's also supporting legislation moving through both houses of Congress that would postpone their implementation of the regulations until the CPSC had the National Academy of Sciences evaluate their effectiveness and necessity.
The ROV In-Depth Examination, or RIDE Act, would have the Academy, in consultation with the National Highway Traffic Safety Administration and the Defense Department, complete a study of the mandates within two years, and only then could the CPSC move forward with regulations that were based on those conclusions.
Obviously it's a contentious issue, but manufacturers like Polaris have a lot riding on the outcome.
Power sports performance
Polaris is the leading manufacturer of off-road vehicles, generating $2.9 billion in revenues in 2014, 65% of its total and a 19% increase from the year ago period. In comparison, its motorcycle division, which has gotten a lot of press for the successful resurrection of the Indian Motorcycles nameplate, generated less than $350 million in revenue last year.
Although the industry continues growing -- Polaris estimates 419,000 ATVs were sold worldwide last year, up 7% from 2013 -- some manufacturers are struggling. Arctic Cat (NASDAQ:ACAT), for example, reported last month that ATV sales fell 15% in 2014 to $284 million, as it seeks to right-size dealer inventory, though its Wildcat side-by-sides, a relatively newly popular segment of the market, enjoyed strong sales.
Other manufacturers like Deere (NYSE:DE) realize on a very small percentage of their revenues from the utility vehicle market, vehicles that do double duty by also having a utilitarian purpose besides just recreation.
Polaris says the total off-road vehicle market increased 5% in 2014, to 832,000 units.
Some feel Polaris and the industry are trying to run out the clock on the Obama administration. By the time the NSA study is completed a new, more business friendly politician will have appointed commissioners that will kill the new rules. On the other side of the argument, the industry itself argues it wants common sense standards that account for the unique needs of the conditions its vehicles operate in and the performance their riders desire.
The two sides probably aren't going to find common ground, but the outcome could determine whether Polaris and the rest of the off-road vehicle industry are able to remain a fast-growing, popular diversion.
Editor's Note: Several references and quotes from fairwarning.org have been removed.
Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Polaris Industries. The Motley Fool owns shares of Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.