Trump’s tariffs were blamed for the RV industry’s slowdown in 2018 as well as the continued slump in sales.
While the tariffs are one factor in the equation, there are actually several interrelated reasons why the RV industry is slowing down right now. Here are 7 reasons why the RV industry sales are down, including Trump’s tariffs. We will also predict the impact of these trends on the RV industry in the future, including demand and costs.
Issue 1: Tariffs raise prices for the RV industry
Trump’s attempts to make international trade more fair for the United States caused serious headaches for the international supply chain that many American manufacturers rely on – including RV manufacturers. And these suppliers won’t absorb the cost of the price increases tariffs cause. They simply charge American companies more for these parts. Around three quarters of suppliers are increasing their costs in response to tariffs.
Furthermore, RV companies can’t absorb these costs, so the cost of assembled RVs is necessary. Luxury goods are something you can choose to put off buying, rent instead of buy or shift to a cheaper model. That’s caused sales of RVs to dip in 2018 by 4 percent and a larger percentage in 2019.
However, RV industries are going to face a variety of challenges due to Trump’s policies and other policy changes sweeping the country for years to come. This is but one reason why RV industries are challenged.
Issue 2: The ongoing impact of trade wars
Trade wars affect trade in a variety of ways. Tariffs simply raise costs. Other responses include import restrictions or caps on what can be imported, while some international suppliers choose to export to other countries instead of sending them to the U.S. Interruptions in imports of key parts hurt their ability to meet production schedules.
A different impact of the ongoing trade wars is that international RV dealers like those in Canada are shifting to domestic suppliers out of fear of another interruption in their supply chain. That will hurt international demand for RVs.
Issue 3: The attempt to talk to the US into a recession
Democrats have said that Trump has an excellent chance for re-election as long as the economy is doing well. This has led to accusations that Democrats are trying to talk the country into a recession, generating fear and uncertainty that crimps consumer spending and investing to the point it becomes reality.
You see this in the record low unemployment reports portrayed as unsustainable or really a hint of doom ahead. The constant doom and gloom you hear on everything from the environment to the economy takes a toll, given a quarter of kids are literally afraid for the future according to various surveys.
Given that sentiment, is it surprising a lot of people put off a big ticket purchase like a new RV on hold until things seem better? That nearly guarantees slower RV sales until after the 2020 election.
Issue 4: The Canadian recession
Canada has a very export-dependent economy. The fall in oil prices has hurt their economy, while environmentalists preventing pipeline construction that would let them earn more money through greater exports compounds the problem.
How does this affect the United States RV industry? The United States is a world-leader in RV manufacturing, and a large number of these get sold to Canadians. The value of these exports is equal to a billion dollars a year.
That’s about two percent of the RV industry’s sales, but Canadian demand dropping off by half due to tariffs and their own economic slowdown compounds the U.S. RV industry’s problems. It also drives many Canadians to buy local, Canadian vehicles.
Issue 5: The over-supply problem
The RV industry caused a number of problems by building too many factories as demand soared from 200,000 to 500,000 units. Now they’re stuck with expensive over-capacity they can’t use in another way, though they’re laying off people due to reduced demand. This will raise the cost of future RVs, because the RV manufacturers have to pay for the sunk costs to maintain factories and compete with a booming job market for the experienced talent they let go to work elsewhere.
Issue 6: Rising material costs
Material costs are increasing across the board for a variety of reasons. Trump’s steel tariffs caused steel prices to go up. China and other developing countries shutting down its importation of trash that they recycled made the cost of importing material more expensive, since ships often sail empty now as they travel to Asia. And a combination of environmental regulations imposed under Democrats and increasing labor costs in the US increase the costs of domestically sourced materials for RV companies.
In online like https://rvside.com/, RV campers and bloggers updated current RV products and their costs. They are also worried for it as RV sellers and dealers.
Issue 7: Rising labor costs
One of the downsides of a booming economy is that demand for labor goes up. Unemployment hit a 50 year low in the fall of 2019. And this leads to increased wages. The good news is that wages for the poorest 20 percent of Americans are rising fastest. The problem is that this increases the cost for unskilled and semiskilled labor, such as that utilized in RV manufacturing facilities.
States raising the minimum wage raises the cost of manufacturing goods in the United States, as well. It is justified by inflation and considered reasonable because of assumptions that continued wage increases will continue indefinitely.
Then you see increased demands for various social programs being implemented by employers. For example, increased employer mandates like paid vacation, paid sick leave and paid maternity benefits raises labor costs. And Trump’s massive crackdown on illegal immigration and tightening of legal immigration means that new labor can’t be brought in to keep wages down.
This means labor costs will continue to rise for employers even if the economy slows down. And it guarantees that labor costs will remain high in the future, since no one ever eliminates these additional costs shifted to employers.
The permanent shortage of semiskilled and blue collar labor is ongoing, too. While Trump’s Education Department is trying to encourage millions of kids to go to trade school instead of college, it will take years to have an effect on the overall job market. That means RV manufacturers will have to pay a premium for the few electricians and welders available.
All of this will increase the cost of manufacturing future RVs and the cost of any materials and components made in the USA.
Summary
The RV industry is dealing with a combination of bad policies, a good economy, political turmoil and good policies that hurt their particular industry. The RV industry’s slowdown will then continue through at least the end of 2020, though demographic and cultural shifts suggest it will boom again eventually.
