With sales down, Polaris does major retooling of Slingshot

The Slingshot three-wheel motorcycle seemed like the coolest thing to fly out of a Polaris showroom when it was first introduced in 2014.

With headlight eyes and brow-like fenders, the street-legal beast frequently stopped traffic as crowds gathered to see a real life "Batmobile." Initial consumer response "significantly exceeded" Polaris' expectations, officials said.

But sales have since sunk — including in 13 of the last 14 quarters. In the fourth quarter, officials said sales were down more than 25%.

Industry onlookers wondered if the Slingshot would be retired as an eccentric try — but a dud nonetheless. Trade publications call it "hard to categorize" and a "niche" that baffles consumers.

Instead of retiring the Slingshot, however, Medina-based Polaris doubled down and reinvented the vehicle after a full review from customer feedback to engineering.

"We are confident and excited," said Chris Sergeant, Polaris vice president for the Slingshot. "This is not a gamble. It is a very educated move to serve our Slingshot customers."

Introduced in January and hitting the showrooms in the spring, Polaris said the Slingshot is 70% different. First and foremost is a switch from manual to automatic transmission after strong dealer and customer feedback; 80% of the population does not know how to use a stick shift.

Polaris also switched out a 2006-era General Motors engine for a newer, faster one made in-house, the first 4-cylinder engine made by Polaris.

Also, after much lobbying, the three-wheeled Slingshot has been reclassified as an automobile-like vehicle in every state but New York and Massachusetts. Before, customers had to have a motorcycle license.

The changes open up the Slingshot to many new customers, Sergeant said.

But it could still be an uphill battle for the Slingshot.

The vehicle still "perplexes" Car and Driver senior editor Ezra Dyer. "Updated with a new engine, optional automatic transmission and a host of other improvements, Polaris' latest Slingshot three-wheeler remains a bizarre novelty," he wrote last month.

Even with the recategorization, the Slingshot remains under Polaris' smaller motorcycle division. Motorcycles had fourth-quarter sales of $119 million, compared to the off-road vehicle division's $1.1 billion. Still, officials view the business as a potential growth area, especially since the Indian Motorcycle line has made gains against rival Harley-Davidson. Full-year motorcycle and Slingshot sales rose 7% to reach $584 million in 2019.

The Slingshot is estimated to represent less than 3% of Polaris' $6.8 billion in sales.

Wells Fargo analyst Tim Conder said in a January note to investors that Polaris' Indian Motorcycle line is poised to grow "in line with the heavyweight market. We are less optimistic for Slingshot and feel that should pending product updates not bear fruit over the next 2-3 years, Slingshot will likely be discontinued."

Polaris officials said they remain confident. New vehicle product sales often lag after the first three years, only to be rejuvenated by the launch of new features or models, Sergeant said. "That's how we view this."

The company has deeply researched the market for two years, including customer surveys.

"Customers have told us they love the 'Look at me' style of the Slingshot," Sergeant said. "They love driving into a Target store and finding their car surrounded or that people are sitting in their vehicle [gawking] when they come out because it's so unusual."

Next up is a national marketing campaign. Soon, Slingshot ads will hit Hulu and YouTube, social media sites and magazines such as Men's Journal, Car and Driver and Forbes.

"Our new AutoDrive transmission will open the door for more people to get in, stand out, and take their driving experience to a whole new level," said Mike Dougherty, president of the motorcycle division. "With roughly 70 percent all-new content, we left no stone unturned both inside and out."

The SL model comes with a no clutch, no stick shift AutoDrive transmission. It boasts 178 horsepower and 8,500 RPM and comes in "red pearl" or "blue steel." The R model comes in manual or automatic and packs a growl with 203 horsepower. It is available in "stealth black" and "Miami blue."

Prices start at $26,499.

CEO Scott Wine recently told analysts during the fourth-quarter conference call that with so many new features, including "significant interior enhancements and eye-catching LED lighting, the 2020 Slingshot's allure extends far beyond those who simply do not want to drive a stick."

Some stock watchers, such as Eric Brandt with Motley Fool, think Wine could have a point.

Brandt said in a recent note to investors that while the Slingshot has been "a drag on the bottom line," the new redesign could attract a "whole new kind of rider."

"If the new Slingshot does become a little more mainstream thanks to greater accessibility via an automatic transmission option, it could grow the motorcycle division to be a bigger part of Polaris' business," Brandt said.

That's what company officials are counting on.

Polaris has beaten the odds before by digging into engineering and quality issues.

The company's much larger off-road vehicle product line of four-wheeled ATVs and "side-by-sides" suffered significant problems a few years ago.

According to the Consumer Product Safety Commission and Polaris, hundreds of thousands of Polaris vehicles were recalled due to a fire risk between 2015 and 2018.

Polaris, which has been sued by customers and fined $27 million by a regulator for failing to report some fire incidents in a timely manner, has since invested heavily to identify and fix overheating problems and fire hazards.

Last month, Polaris reported that off-road vehicle sales rebounded, which helped boost all product sales 12% to a record $6.8 billion in 2019, while earnings slid 3% to $324 million.

Polaris' stock price is trading near $94.00 a share, up from $83 a year ago.

Dee DePass • 612-673-7725