Good morning, everyone. Welcome to our club at Dallas, Texas. This morning, we'll have presentation by Joseph Boisjoli, our CEO Sandis Collion, our Senior Vice President, Global Retail and Services and Joe De Perrault, Senior Vice President, Pfizer. Sebastien Martel will also be here to
answer your questions if you have any. We're also very happy to have 3 Board members with us this morning, Dan O'Neill, Louis Lapoff and Mike Inolica.
Before we move to the presentation, I just want to make sure that you're all aware there will be some forward looking statements, which are subject to certain risks and uncertainties. I invite you to read the RT's MD and A for listening, please. Also, there are there is a
slide deck available on our website to follow-up with that this morning.
So Jose will start the presentation,
Then it's going to be Sandy. And please
keep your question for Jose for Sandy
and Jose's section because they might
answer some of your questions
before you ask. So I'll let Josebo go. Good morning, everyone. Short life for many of us, but before the fun life, night. When you're going into those events and you don't have much product news, you're trying to find stuff to exactly our presentation.
And yesterday, we had the ticket page to pack all the product news in an hour and a half, but it was a very nice evening. Then again, very, very happy about the year, strong H1. We have a good momentum on H2. Good retail on all product lines, but particularly on side by side and the the last slide. I'm sure you will believe you will see some of them that momentum will continue.
Successful SIB, which is quite unusual in Canada, and we're very happy to have a successful EUR 250,000,000 SIB in Canada and the introduction of the dividend. And we are confident on the year end guidance with the $2.23 to $2.25 to 14% to 20% EBITDA growth. Then this morning, I will talk a bit about the product news of last night, the watercraft, what the product news on Spider, the product news on side by side. I will give you a bit more of the highlights of the future. Sandy will give you more detail about the potential in the business, the sales potential, positioning and showcase.
Obviously, the story behind the spider finding with her team in the last 10 months and also why we haven't done Project S last night. Then if we start with watercraft, you know it's funny, we've been designing watercraft for more than 20 years, and we always find ways to again learn the business. And I'm very, very happy with what the guy has done. Then if I just highlight the key feature of the product. First, everyone on the water likes music, but no system will waterproof and if you put something that is designed for a boat, you put it on a watercraft, it's glass, acidity, last half a day.
And we worked for a few years. Everything that you saw yesterday is custom made for us. And we're very happy and we believe it will take 3, 4 years before someone come with something similar on the watercraft as to what we have. And very happy about that feature. The price at $700 we believe a lot of consumer will go for the high end radio with the product.
In terms of storage, the fact that we are now drive by wire product, we could remove the handle from the top of the deck. And in the past, you always have to go over the handle part to access the turret, which is very difficult in the water. Try it, you will see how it goes. But now you open everything, and that gives you a huge access to the fast, the watercraft. And we believe that those two feature in the true home will be incredible appeal.
If you take a traditional watercraft, our people take a serve beside the new product, it will be an incredible atmosphere when you have this storage access and the radio. The other two things is the living room outboard. With our thinking about the link system and all the flexibility in the accessories that we have, we started that on the TV side by side, slower than now on watercraft. It gave a lot of flexibility to reorganize the back of the vehicle, make it a 1 up, 2 up, bringing accessories. And I'm telling you accessories on watercraft have never been big.
But now we're going aggressively about accessories and it's just the beginning. The last thing is the stability of the product. We found a way, if you count the driver weight to reduce the center of gravity by 3 inches And this is a huge difference. Again, this morning, you will see on the water, go both feet on the side of the watercraft, you won't be afraid. And in the past, we were not able to do that.
Then very, very happy about those key features that the customer will see and appreciate. Behind our key competitors, more niche, The haul, basically the learning that we've done from SparkSmart. When you're designing a watercraft with 60 horsepower, you need to find ways that better acceleration, better plan. And all the learning we've done on Spark, we have the vehicle last night, the new platform last night, improving the acceleration. For us, it would take 3 seconds to 2.5 is not a big deal, but for many customers, it's a big deal.
All the learning was done also on Spark on the IVR system and the reverse system to make it lower cost, we apply it to the new platform. And last but not least, on all the X packages, now you have a launch control. With the electronic to date, you put launch control, full throttle. Depending of the weight, depending of your weight, the system will adjust automatically for the perfect launch. Another thing here on the watercraft and that helped also the stability base.
We reduced the power, the weight of the vehicle by £86 and going £14 to £828, and that is making a big difference. We produced last 2 weeks ago 500 units in Queretaro and production full production model mix is starting in Queretaro next week. Then we are right now rolling out first unit will go counter season. This is the beginning of the season, and the first unit will go counter season for the beginning of the mother year 7 pink season over there and mother year d pink season over there, sorry. Last but not least, this is the capacity we increased in Queretaro.
And basically, we have some bottleneck on the assembly line, but the big bottleneck was on the capacity of the fiberglass production hall and deck. And basically, after the investment that we have announced in Q1, we'll have a capacity increase in Queretaro by 20% that will start in Q1 fiscal year 2019 then. Basically, we are on plan. The watercraft market is a very good market. And like I said to many of you many times, what is very nice about this industry, first, it's how it takes back.
2nd, there is not too many OEMs. Dealer make money. We make money. And on top of it, customers are happy because the product keep their value when they trade. Then a very good industry to be in and a very good industry to lead those rates.
Going to Spider. 1, the DRP Connect yesterday was obviously was not the biggest news of the evening, but I can tell you that this was one of the number one feature that customer were asking for. When you're buying a high end Spider for $25,000 you're expecting to get the connectivity and all the control that you have into a compatible car. And we were happy because we've developed the BRP Connect with Bosch in Germany. Basically, this is a system that is on high end car.
I cannot name the brand, but high end car that we adapted on the Spider. Then it's the same thing in the Apple or Android carplay, very intuitive. That was a big challenge when you're writing a product that with the palm, you can access all the different screens. Same thing that you have in the car, but what is interesting with the Spider, you keep your both hands on the vehicle, and you can access all the different systems to the different displays. In cars, sometimes you have to remove your hands from the steering car.
I'm very happy about this. We believe it will be popular and it comes with all the high end F3 and RT starting production in November. Now Project S, obviously, I'm sure you understand the relationship or the parallel with the Spark. Basically, we believe it's the Spark story again that we'll rewrite for the Spider business. The vacation you like half, why did you announce it 1 year in advance?
And Jose Pero will tell you more about the call in only. I can't in the rest of the world in the last 10 months and why we have introduced the Rider S, the Project S 1 year in advance. But I'm sure you will understand the rationale after Joe's explanation. Last but not least, the introduction of the side by side lineup. I believe BRP And I can't I'm sorry, I had it financial do something new, I think, and I can't understand what it is.
Something on the line here. Okay. We're the first one to introduce, for example, the crossover snowmobile when we introduced the Renegade a few years ago. We're the first one to come out with the ATV XMR for the mod racing application, and this is basically a continuity. A lot of people are using Maverick XMR, but it was time to come out with a Defender XMR.
A lot of people prefer to use a 3 seat or a bench product for mud usage. And the other one was rock crawling. This is a trend and Sandy will talk about the trend in rock crawling. The OEM has done so far a dedicated product with key features for the rock climbing application, and we're very happy. And when you see the rock crawling extreme in the showroom, it's impressive.
It's just the stance of the vehicle, the size of the wheel, the width down, it's very, very impressive. And yesterday, I was talking in the showroom with many dealers that are not selling to those customers, but they didn't buy a few because it makes a difference in the showroom, and it's quite the statement. Then we're following our plan. This is our 5th introduction in 24 months. Then we're following our plan.
There is 3 more platform announcements to come in the next, I would say, 18 months, then we are right on plan delivering on our commitment to the dealers and to the market. Now as Sandy will present to you, the 50 inches Trail segment is not the biggest into the industry. But I'm confident we'll change this because our product, obviously, it's a new generation of products. And as you will try to think this morning, our product is standout versus the competition. We did work hard to come out with the same, again, reinventing the product category.
It's not obvious on stage. It's not obvious it's a showroom, but when you try it today, I'm sure you will be convinced of the difference. And here's the big thing. It's very, very difficult to pack 2 adults sitting side by side within 48 inches of space for the trail. Then the team has done an incredible job to come out with a very comfortable facility for 2 adults with a lot of place to put your stuff, a lot of compartments and extremely comfortable with adjustable seats.
You will see we'll have a vehicle from the competition at the demo site. You will not ride it, but you can sit with it. And before we go into our vehicle, we will sit on the vehicle competition
just to
see the cockpit size. You will be surprised how tight it is. And when you come in ours, it's very different. The other thing to improve stability and to give it comfort was the wheelbase. We're coming out with the longer vehicle in the industry for that product category with 90.6 inches wheelbase, very, very comfortable ride, giving more stability to the vehicle.
And it's the optimal weight distribution, sixty-forty, you're very, very close to the best in the industry. And despite the long wheelbase, the turning radius is very tight. And we'd like to say it's very predictable point and shoot. I mean, if you align the vehicle, you will see it behave perfectly. Then I believe those 2 features will be making a big difference when the customer will get used to it and try it and the word-of-mouth into the industry.
And last but not least, we came out with price is very important in that product category. Then we came out with a basic product that can be equipped with 125 accessories from the get go. And we're becoming better to develop accessories that goes on all our products. The Genicamp, for example, goes on snowmobile side by side this product, ETV, snowmobile, ETV side by side and also on watercraft. The cooler will go on different product lines, and the customer like that.
And the beauty of it is if they buy 1 unit with accessories, they have a tendency to buy the other product line with the same accessories because they fit everything. But for us, we work hard to have a good price point on the trail product, Mavic Trail product, but also you can equip it a lot with a lot of equipment to accommodate different riding styles. Again, same thing, 500 units were produced in Juarez 2 last week, and SOP is planned on October 12. Obviously, this morning, it's an allocation per dealer. We need to continue to produce X3 and the standard.
And for the next few months, it will be an allocation per dealer, but we'll be able to accelerate the pace of Mavic Trail production in the coming months and full open production at the beginning of last year. Sorry. Okay. That's the capacity increase. From fiscal year 2018, the new equipment that we're installing and for some of you who visited ULS-two, it's mainly put in the manufacturing side, welding, cutting, tube, welding, painting that we're having in URS 2.
Then when all of this is done, it's done at the end of 2018, beginning of 20 fiscal year 'nineteen. Basically, our capacity in Juarez 2 will have increased by 30% compared to this year. And you will say yes, but right now you have a trend of 50% retail growth. If the trend continue, we know what to do to continue the expansion or the additional capacity in Juarez 2 if things continue to progress as planned. Then overall, very, very happy about the momentum we're having this year, very happy about the product inflow.
And we believe that the momentum will continue in the coming years. Sandeep? Thank you, Jose
Perron will cover Spider. I will be covering watercraft side by side and give you a little bit more perspective on where we're going with the dealer development side. If we start with watercraft, obviously, as you can see here, the industry is very healthy, mostly driven by the Rec Life segment. We used to be completely alone with the Spark until season 2017. And the competitor actually helped increase the industry, but Spark also increased in that same segment.
The good news is that on the traditional segment, the watercraft, we actually gained 3 points of market share still. So we're really healthy in terms of profitable. As you can see here, in terms of the premium watercraft, it represents about onethree of the industry. But in terms of profitable, this is more than half of the industry. And this is where we've invested in the new platform with what we have in the GTX, the Way Pro and also the RXT.
So we should be having a positive mix going forward with watercraft. And also saying that in the Rec Light segment with the addition of the Trix 3 seater, that would also help on the mix going forward because the Trix, as you probably know, has been extremely popular this year. We were basically our products are really early for this season. A couple of words on side by side. This shows you the progression.
This is about less than 2 years going from Q4 of fiscal 'sixteen. The power of the 2nd generation of side by side that we've introduced, starting with the Defender, the 1st shipment, as we grew the lineup with the MAXs. Also need to realize that we only started shipping X3 2 seater in Q3. And actually, the MAX, which represents the lion's share of the market in Q1 of fiscal year 2018. And if you look at the last 12 months progression, the rolling last 12 months, we're talking about 50% increase.
So extremely healthy. This is probably one of the most interesting slides. This gives you the market share of the segments we're in with the Mavericks. So this is the 64 inches and the 72 inches turbo industry. This is again 10 months of retail for the X32 seater and 4 months only for the 4 seater, and we're actually at 60% market share in that segment.
That's the only segment we're in. Now as far as same story for the Defender, looking at Texas, Texas represents such a big opportunity for us with the special focus that we put the team on. We're actually 3x the volume of last year in Texas because there are obviously other regions like this in the world. We're doing extremely good at Mexico. Mexico representing the biggest country outside of North America in terms of side by side volumes.
The volume increased by 3% there. EMEA, despite softer markets in Russia and the Middle East, we're still able to grow the business by 3% on a side by side and Australia doing extremely good at 50% increase, mostly driven by the Defender segment. As we move forward in the product releases, now we're addressing the segment we're not in yet. That's the material segment, the 50 inches we saw yesterday. So this is certainly going to help to reduce mainly in the snow belt area, which is the most of the mass of the market is.
But also with the understanding that utility represents the biggest opportunity that the Fender XMR is continuing to fuel that segment and rock climbing as well in the sports segment. So if you combine this with what we believe one of the best leader value proposition, obviously, this puts us in a very good position going forward. A little bit about the new segments. You talked about it. The fact is specifically in that segment, we haven't seen a lot of breakthroughs in the last 5 to 10 years.
So I think the Maverick Trail is going to make a big difference, focusing on comfort, vehicle stability and handling. So very happy with the launch of this product. In terms of product expansion, this is interesting. You guys probably noticed the amount of dollars our customers are putting on building special builds and even specialized builds for side by side is just amazing. And this is like Julie said, this is the same story again from the XMR, which we introduced with the ATV at first and now building into a bigger market, we see very positive trends in terms of uses for rock climbing.
And as you saw yesterday, that unit is just amazing. We now we're lower body. We've got special pliers. We've got the Smart Lock in there. So we've got special equipment that makes it not only affordable but a hell of a package.
The new Defender high value offering. As I said a little bit earlier, we basically started the industry with the MUD or the XMR lineup with ATVs and you see the pedal side by side. But this has been growing as an industry significantly in the last 2 years. So obviously, this is only a natural for us with the Defender XMR. And hearing the dealers yesterday and I talking about it, looking at it on social media last night to see the reaction.
This is going to be great news.
We also know that onethree of our side by side customers are also riding on trails with the convenience of bringing a little bit more storage with the Defender XTB, better suspension, better comfort with the bolster seats. So this, again, is addressing more specifically from our market. We've talked a little bit about Texas. Actually, Texas represents for the side by side industry, this is twice as big as the 2nd state in volume in the U. S.
The specific focus we're putting on Texas, it's mostly driven by the Defender segment. So you can imagine that this is this represents for us a big opportunity only because we have a relatively lower market share in that space, but I believe that this is going to be changing really soon. The Defender Lone Star, another reason why we need to focus on that product is the Texas opportunity. So I don't know if you had a chance to see it in the showroom, but the trim on this, the accessories we put, the specialty arms we put on that unit, it just makes it big and makes it excellent. So this is really exciting as well.
Couple of words on the leader value proposition or network development strategy. You're going to be seeing a little bit less of adding dealers into the North American market, a little bit more of increasing the quality of our dealers. So we're going to be focusing on that going forward. I think you've seen the dealer value proposition model. This is a continuously improving model because we have certification in there.
We can address specific segment actions for Foamax. So this has been extremely successful. But on the right side, what you see there is that in multiline dealers, the lineup we have but also the engagement we get from the dealers, we're actually growing twice as fast in the multiline dealers as we are in the single line dealer. So this is taking advantage of the competitive traffic going into the dealers and converting them into the Canon product. And at the end of the day, as I said, softer despite the softer markets we have in Brazil, Argentina, the Middle East, Russia, we're above in all the regions that grow this year.
So this is extremely positive, and it's mainly driven by the side by side and the watercraft market. The question is the positioning of our pricing for the Mavic Trail, and we're basically head to
head with the competitive answers. With a better product.
With a better product. Yes. Okay. One specific question on PwC. So a lot of innovation, if we look at the manufacturing process and looking also at all the accessories and the options that we can put, what about the margin profile of the new vehicle as opposed to the traditional VWC?
You want to answer that, Jose?
We've been able to improve the margin on the new platform compared to the older one. If you remember, we took removed fiberglass. We insourced fiberglass from a supplier to Quilintaro when we started getting it at Quilintaro. That was one of the reasons why we moved production and building it ourselves. But it was like our first attempt to this process.
And now we have evolved this process to a better process. And that's how we've been able to reduce the weight of the vehicle, 56 tons and weight And you've enabled to see the margin there. And on top of it, when you have feature like the radio, dollars 700 for radio, there's a very good margin there. And I don't know how would be the mix for the customer, but that's why we're offering the radio on all products, all models.
The question is with the capacity increase by when we'll be able to really supply the demand. By beginning of
next year, we'll be in
a better position to really ramp up and supply the plant. As obviously, Jose mentioned, this is a little bit of the limitation, but data inventories in our network is still very healthy. So we don't think we're losing retail, but we'll be able to push forward
Those equipment takes about a year to order and to install. Right now, we believe we're changing the 30% if the retail trend continue above 30%, maybe in a quarter or 2, we'll announce another expansion to keep up
Our teams are basically focused on the sales team used to be more focused on the wholesale. Now this is transitioning into more of being a better business consultant, knowing where their margins are within their own department. So as we coach the leaders in being better businessmen and better retailers, obviously, we gain a lot of credibility as a brand because we're helping the dealers make more money. So that's all about the dealer engagement. So we believe that our recipe will create that better engagement versus the competitive environment.
So this should help the volume be directed more for us in the future. One question on the S and P. So when you look at the whole market, you do see it's now over well over 50%. So what is the percentage of this segment that you cover with the dispenser right now?
1st, our market share are quite low still with the Defender as well. And we're having right now with the product in a few months, we're having recovering most of the area. You need to understand that personally buying the utility side by side is a different customer. It's a farmer. You don't have to find the terms of the dealership, right, product.
Then we train our dealer right now to have dimmable that the put on the farm for a weekend, basically the farmer keep it, but that's the type of thing we're working on. The association that we announced last night with Lou Brian is another sign, how will you enter the farmer world. This is before our focus for the coming months. We'll continue obviously to expand the defender, but the base is there, very solid base. And what in turn is different customs, which is new process.
Do you think is allocated to X3? Flexibility, I mean, obviously, it's for the 1st of the XLA line, we're doing model mix in And we could not produce 100% H3 from the mine, but we reached ratio this fall of 75%, 80%. We had a lot of capacity at the end of the season for Defender, X3 or down epic trail, but quite a lot flexible system.
Tom and Spider, return you're getting on retail and potential marginal revenue
you should get? And are there costs due to the interest spend?
So the Perro will give you more detail and more color on all of this right now, and that's a challenge here. Definitely, this year We invested a lot of money with the Canadian Steel. We had some initiatives that were too costly, and we know we cannot do this and take this thing. That's why we started with 7 states. And now this is part of the climate, what can we do?
What's in the legal, and that's what's cost? And this year was not too bad because it was 25 people instead of space. But how do we find that to more space in the coming years? Is that what you'll do with that?
One more. Have you been able to tackle
the return on your investment in that platform? Boy, I wish.
Well, obviously, that's certainly a 3 year progress
set of first year into the second year and then out of here next year.
We've always talked about the underlying on the investment,
I can add one thing. Brand awareness, I mean, through significant things the last 2 years. Maybe Phil can come back to you with the right number, but we're one of the lowest in the off road key brands, one of the lowest in the last 2 years. The brand awareness has increased significantly. And if my recall is right, right now, it's close to 85%.
And while you have C dual heating, that's our well known brand over 90, then we're getting there quickly. And we come in there and payback there, and we calculate the payback. But there is something there. 1st, There's so many available to what could happen. Very difficult to have a blend or a blend feedback on plan.
Obviously, when the administration took over, we're a bit concerned because they were very, very raspy about potential action. Now I think the process, please, will be fine. There is like of negotiation, a period that will happen before Christmas between the two countries. On top of it, right now, it's only closed the color of the negotiation of each round ultimately. After that, I think you had another 6 months before the Congress and all the system in U.
S. Approved the new NAFTA. And we believe we could have something if everything goes right, we believe we have there will be something out next summer at the earliest. After that, with the collaboration between Canada, U. S.
And Mexico, I would be very surprised if it will be a drastic change. We believe that if there is a thing that will change, they will give to all the OEMs. It's not only us, it's a car company, it's ag. This is the oil company, the energy company. It will give us the appropriate time to give us a chance to implement the change or to save this change.
And again, we said that a few times. We between the time we've done the groundbreaking ceremony in New Alex. And when we started the extended production, it was 12 months. And build the building and sell equipment, hire new employees, start the production within the platform in 12 months. And if something that drastic would happen, we believe We'll find ways to turn it for us.
Thank you.
You mentioned the product improvements you're making
in watercraft and work on the
market profile. On the side by side
Is there any opportunity for margins? I'm sure mix might help, but is there anything to do from the manufacturing
For sure, when you're setting up the factory, I mean, the last few thousand units, however, profitable business is very good. All those new niche platforms, the RC and the ASMR, it's a win win. Our customer will spend $16,000 $20,000 to take an extreme and let it buy it to our economy. We're offering from factory with R and D product for $2,500 roughly in U. S.
That roughly we can come back then. It's better margin for us, and it's a great value for us. And that's why those specialized segments have been very popular. Same thing for the XLR. Yesterday, I'm in the middle of the show.
We're a bit upset and happy at the same time. They were making a ton of money, modifying regular defenders to make them if tomorrow. But now they had it from the OEM, but the trains, they will be able to sell 5 instead of 1 per month. And that's the type of thing we do to improve the margin. That being said, and we see internally sometime this year, we're a bit unpriced with margin because we're sending a ton of 372 and 64 fully aggressive.
Now we are entering the trail segment, which is a price point segment, lower price point segment, then margins are good, but not as good as the 100 and higher than it's growing the volume and continuing to expand the platform and trying to come more and more with specialized product, which is good deal for the consumer in us. And the new side by side, we're introduced in our build on the modularity system that we've talked about Good morning.
Okay. If we go back to the history of spiders, those of you who weren't there last night, we said that this year marked the 10th anniversary of spiders. So just want to remind ourselves that 10 years ago, this category did not exist or created this category and there's an important milestone that we went through over the last 10 years. One of them producing over 125,000 spiders. And if we look at the web business we're getting on, on spider and the interest level we're getting on Spider is around $10,000,000 site visits.
So I want to go back quickly on what we've been doing in the last 2 years. The project started 2 years ago in spring of 2016, where we had 2 dedicated teams do what we call a do it. And the 2 territories where they were experimenting to do it was California and Florida. What we did when I came on board last October is we extended that test and learn strategy, and we added 5 other states, which were Texas, the Carolinas, Georgia and Virginia. Why did we choose these states?
It's because, first of all, they're in the Sun Belt, so the season is extended, gave us more time to test. And secondly, if you look at Texas, California and Florida, they're quite big states, so better volume potential. So what we did different in terms of these states is that we put dedicated people in these states to be to push retail, to be in our dealer space, to help them drive the consumer down the funnel, help them demo, help them build relationship with schools. So that was our main approach over the last 6 months, if I could say. Also, we chose these states because they have different license requirements.
And that's really critical because what we've learned in terms of license is probably a key to unlock Cyre's potential. So what did we learn? So license is a big thing. And I just want to refresh our mind that when I came on board, everybody was telling me Quebec, Quebec, Quebec is the deal. This is the benchmark.
We need to be at the level of Quebec. So we just go back to why Quebec is so strong on sales. We know that our dealers are exclusive to BRP, okay? We know also that the BRP awareness is probably higher than everywhere else in North America. But mostly, our dealers are engaged because they are exclusive to BRP.
And we have a very organized three wheel rider education system in Quebec as well as because our dealers are engaged, they're exclusive, they are giving a lot of demos. Please remind yourself that to purchase a $20,000 or $30,000 unit and if you can't demo it, that's a barrier to entry, and we need to overcome that barrier. So what we try to do based on the Quebec experience is see what's going on in the other states. So when we arrived in Florida, what we discovered is there were only one school in all the state of Florida giving 3 real rider education classes. So what we did, what the DoIT mandate did at that particular time is open schools and try to bring consumers down the following to get their license.
Why is that important? Because at the end of the day, there's only 3 states in the U. S. Where you need a car license with that with a car license,
you can
drive an fighter. All the rest, you either need a 2 wheel license or a 3 wheel license. So what we also found out is as we grew to other states that none of the states were organized to offer 3 wheel license, okay? And this is also very critical. At the end of the day, we say that we are we want to democratize Open Road.
So we need to attract these new entrants into the market. And these new entrants do not have a 2 wheel license. So they need to figure out how to get a license to be able to drive a spider. And if they can't get a 2 wheel license, then we have a problem. So that's been the biggest finding, I believe, that we've discovered throughout the last 6 months.
Also, demos. Again, high purchase, high price points need a demo. What we realized is that 100% of our dealers in Quebec did offer demos. When we went into the key states, 60% of our dealers did not offer demos, okay? So that was an issue.
So we needed to figure out how to incentivize our dealers to do offer demos and have a great experience about it to try to push the consumers down the purchasing funnel. Nurturing our clients. As you know, our TNF3 clients are quite older, average around 60 years old. It takes more time for them to purchase. We are evaluated that the purchase funnel is about 12 months.
So there's a lot of handholding that needs to be required for them to convert. And lastly, oil pricing, obviously, is an issue. So this is a few that I covered last night, a few results that we had. Obviously, we're really happy with the results of our key states compared to the U. S.
Industry trending down. We know that our tactics in terms of rider education and demos are working. We have good conversion there. Our hot leads, which is very important in the 7 key states, we did an approach digitally and we the interest level where people went into our site, left their name because they wanted it quoted and wanted more information drove 60%. So that's very encouraging as well.
And obviously, cleanup, Julien said it well yesterday, it was a year where we needed to correct the spider and reducing the inventory level, and we're accomplishing that as well. So what's replying for spring of season 2018? Basically, our goal is to have at least one school for every dealer, okay? This is the ratio that's working in Florida right now. So our goal in the next 6 to 12 months is to increase that level in about 21 states.
If we
can go faster, perhaps we will, but actually 2021 state is the key to next year's plan, okay? Also, demo. We need to make sure that more demos are given throughout the state. If I look at the 7 key states where 60% of the people weren't the dealers weren't offering demos, if we look at it today, it's only 20% of the dealers that are not offering demos. So we're working that barrier right now.
So we're going to announce in an hour to our dealers that we're going to have a more aggressive demo program to help them do that demo basically. Also nurture. Nurture is really, really important. This year, our campaign was 80% digital. And what we found out is through the funnel, we needed to handhold our consumer to bring them to conversion.
So this is a great learning, and we've done a lot of tests with concierge service, which is a call center, calling our clients to confirm the appointment at school once they've done their license to confirm maybe they could have a demo at the dealer, really following the client through the funnel to make sure that Yandex converts better. One other big finding is that when we start when I started this program, there was a stigma about our clients basically who were driving the RTNS Street. Our client is on average 62 years old, and we have to embrace the fact that they're baby boomers and they're above 50, and that's okay. But we have to start talking to them and not pretend they're 30 years younger. And that's what we're starting to do, okay?
So if I go back to the announcement of yesterday, which was the Project SS. So I said it a bit. We've been when the vision of Spider when it was first introduced 10 years ago was to democratize the open road. Democratizing means making it more accessible. I believe, newbie coming in, that we've been really good at extending the careers of motorcyclists.
The fact that new entrants coming into the funnel can't get their license is a big deal because they can't drive a fire. So this is why the license requirement is super important in the plan going forward. So if you look at the industry trends, basically all everything in a 2 wheel and a 3 wheel environment points to the fact that lower price is an option that's tracking right now. If you look at the 2 wheel industry, the segment below 12 ks is tracking more than the segments above. And if you look at the pre owned and our 3 wheel industry, it's also increasing at a bigger level.
So Project S, below $10,000 Not that I'm going to show you much more. So the video that was shown yesterday was very, very short lived. It will only be shown yesterday. We are not going to communicate it on social media or to our consumer. The video that was shown yesterday was really to engage our dealer and tell them that we're in, we're investing in BRP and Inspire.
So again, nobody is going to show that video anymore. So this is the picture you're stuck with, okay? So just to give you a few more hints. If we look at the design DNA of how the Project S was built, this was the brief, fun to ride, affordable, versatile, easy to use. So we gave you a hint on the affordable part.
Not that I will give you more hints on the rest, but that was the brief. So you can imagine that this will drive different specs in terms of material, in terms of looks, design DNA, in terms of rides and in terms of target clients, okay? And the analogy we drove with Julien on the stage with me yesterday was the T2Spark analogy. And this is the one I want to drive home today, okay? When you look at these two units, very different, like I said, material, design, look, ride, etcetera.
I am a new entrant into the Spider market as well as into the C2 market. So I had the chance this summer to ride these 2 units all summer. I can tell you from a new entrant perspective, the ride is very different, okay? I have also the chance to have ridden Project S, and obviously, I have ridden S3 and RC. I can tell you that the ride of Project S compared to the other models in the lineup is the same thing as riding a Spark versus a GTX.
So this is what we're going to drive to our dealers later this morning. The drive is different, okay? So we feel that the cannibalization into the lineup will be minimal because a Nike consumer above 60 who likes to drive 300 ks a weekend will not want to drive a Spark or a Project S, okay? So this is the biggest analogy we can bring to the table today is the Sea Doo Spark story versus what we're going to introduce with Project X. So I'm not going to another big thing, new entrants.
We said yesterday that Spark brought a lot of new entrants into the market. We believe it's going to be the same thing with Project S. All the research shows that it's mostly new entrants coming into market. And these new entrants are younger, okay? More female.
Right now, our current status in terms of profile is 20% of our consumer base is women. We believe that's going to increase considerably with the new Project S and also more diverse. So this is really important for our dealers later this morning because new entrants bring new types of business, they need gloves, helmets, jackets, they need this, the first time they ride a motorcycle, it's free wheel. So they need more accessories. So this is a big value proposition for our dealers, okay?
And lastly, why did we announce now is because we really want our consumer engaged in spider. We need to show them that we're investing. So obviously, when I said that we were dedicating our business plan in the last year to the 7 key states, we injected most of our dollars and our resources in the 7 key states. So people outside the key states might have felt abandoned or less paid attention to. So right now, we really need to tell them, Mr.
Dylos, we're with you. We're investing in Spider. It's going to come. So this is the main reason. 2nd big reason is we need to develop the school system.
And 2, the best model of school system is an ecosystem of the dealer, okay? Basically, dealer talks to misters, so the school schools the dealer and they talk about the consumer coming to us and getting the course done. Once they get the course, they call the dealer. He's ready to demo. He's ready to convert.
So this ecosystem between the dealership and the school is critical, and we need the participation of our dealers to get this going. And that's it. Yes?
Can I ask a question about the infrastructure that's required? I'm try to like think about it from a dealer's perspective about what you're asking you in terms of the
client investment and investment in money?
It's not much, honestly. At the end of the day, we what works in Florida is that we are doing most of the leg work in terms of seeing going to see the school. We've developed a value proposition for our schools because one of the main reasons the schools didn't want to offer 3 wheel rider education is, first of all, they didn't know how. And secondly, it was not profitable for them for different reasons. So we work with the Motorcycle Safety Foundation, and we work with a few schools to test what could make them attractive to offer TreeWilt education, and Florida was our test base.
We found what the best value proposition was for the school, okay? And exactly tomorrow, the MSF is doing a mega conference where all the schools will be attending, and we have an hour and a half to pick our value. So hopefully, this will get the demand pending in terms of the interest of these schools offering street wheel. So for the dealer, there's no investment. It's on our part the efforts to develop the structure.
Also one part of the success of the Florida test is that we did subsidize part of the course, meaning that a consumer who's going to need to take his 3 wheel license will pay on average $2.50 So to make sure that we take that barrier away, we subsidize in the range of $150 to $200 for them to take the course. So that's the investment on our part. What we're only asking the dealers is to develop that relationship with the school.
So I'm assuming that getting a 3 wheel license in states is easier to get than a 2 wheel license.
My question
is, how many states have 3 wheel licenses that are different from 2
wheel license license that are separate?
I don't have the details right now, but what I can tell you, there's only 3 states in the U. S. That you need a car license. That's California, Nevada and South Carolina. All the rest, you either need a 2 wheel and a 3 wheel.
The problem is the complexity of getting a 2 and a 3 wheel defers by state.
Yes. And with respect to the project, Angel Jose, what is your expectation down there over the next 3 years? Where would you be happy to that point to the kind of
the objective you'd be forced to do with the project then?
Well, I said it yesterday. I believe it's going to restart the industry. We need in Saigon Sous, we need to make it we need more interest. We need more buttons on the seas. The minute you're going to see more fires on the road, it's going to take off For the lineup for this project, yes, as well.
So our goal is really to put more people on their own, and I think that's going to bring that.
Okay. Maybe if I can add to this. Before Spark in the autograph industry, it was flattish. And what was frustrating is to see in this summer months, in the 3 months prime cycle, we see the EPV, the motorcycle EPV side by side in front of the store and it's part of the watercraft in the back. When you're generating volume, you get data attraction, attention and we put it now you go in the watercraft year, the watercraft in the summer market.
And we believe that the project is when we introduce it, it will be an exciting product, well priced, attracting new customer and bringing the activity around Spider and bringing the engagement of the business.
And have you decided if the product will be manufactured in BioGlobe or you could be thinking about moving the pipeline to Mexico?
It will be manufactured in the last one.
Yes.
What percentage of new spider riders are forward we don't know expect?
I don't have the stats on top of my head, but it's quite a lot because right now, it's because of the 3 wheel license requirement, we're and it's a big barrier. It's mostly people converting to extending their career. That's what we say.
Just quickly on customer growth. Do you expect any impact given you already
Look, maybe there's a risk, but we feel that the risk is less in the fact that it is a different client for sure. We know that through Focus Group and research, the 55, 60 year old clients is still gravitating around the Air T and the X3. And this is something that we'll drive later this morning and we'll drive throughout the next few days.
That was part of the debate on the business that we announced about. We believe that it's probably an impact for They said they should be peers here. All of them have a list of customer waiting for new shoes. Basically, they have 20, 30 customers in the list that are waiting in a scheme in RF or different model.
It's a program that we offer our dealers. Basically, it's a discount program that they have. They have 10% on the unit. They have to put so many miles on it, and then they put it back into the inventory. And it's considered a used unit after 6 months, so the dealers are quite happy too.
Okay. And I guess that's helpful because you guys have a kind of plan for use.
Yes, exactly.
So this licensing requirement issue has been in the shop and here about
since before I departed the company.
It was an issue for players too with
their slim shots, and they're able to get
a new classification just better than what they call auto cycle. And they were very, very good in being able to exclude you guys from the auto cycle.
So could you just talk about your government affairs team, what you have working on this? And how close we get into getting maybe
fighter into auto cycle or I mean I'm just going to confuse
I don't know how many states require or have a free pool license requirement. Again, between pricing and licensing, that's the minimum.
We know we have a team dedicated to the development of the 3 wheel license curriculum at BRP in my team. So we have people running around all these states and talking to the governing bodies and the Senate and the college communities, everything because each state is very different. On the top of my head, I can't tell you the details right now, but trust me, I have a dedicated team doing that. Why is it not like screenshot? I think this is 2 different units, honestly.
It's not I can't consider a spider like a car. It's more a motorcycle. So it is that fact. And also, I think having the 3 wheel license requirement, once we have a system in place, it's a good hook to get the new entrants in because at the end of the day, when you take your license, you're spending about 4 hours on units and it's a great demo at the same time. So you're gaining confidence in driving the units, which when in states where you don't have that requirement, you have a 20 minute demo at the dealership.
So sometimes that's more a barrier.
But maybe a different way, you have an estimated time line where you can get the expired deal licensable without a 2 wheel license.
Yes. Well, our goal this year is to go from 7 states to 21 states. And then the following year, hopefully, we can maximize that coverage to both of the U. S. If
we look at the auto industry, there were a lot of things announced on the electric side. I know Power Sport is not a big fan of electric so far. But when you talk to the dealers, the customers, you see a change on the electric side. And also, if we look at automatic braking system, this will be mandatory by 2022. So is there an opportunity to offer such a system for the older people that
No, I just didn't answer that question.
Obviously, we've done Commander Electric, and we're selling our cars and sold in estimating because off road vehicle in Victory don't match because in finance flight, Spider would be probably the best product in our portfolio to do electric. But we have a Spider Electric, but we end up packing up batteries to have a reasonable range. The spider electric we have developed in the city and Sherbrooke. We have a range of 125 kilometer, which is not enough for recreational electricity. And we're following what's happening in the electric world, And we believe it will come, but it's not the right side and it's too expensive.
So that's the first thing. In term of the all the features that autonomous car is applying to their vehicle, Obviously, in many situation, car is a utility product, recreational product is required. And I don't believe we will see soon an autonomous ATV or an autonomous aircraft, which defeats the purpose while you're buying it. That being said, there is many features, safety features that we will develop that we will implement for our product. When it costs our result of all and we see the customer demand, We understand that margin on the entry level is comparable, but overall
Could you give any kind of range, order of magnitude in terms of the dollar that you expect this next season?
Call it, guerilla, marketing of guerilla sales taxes and both the reallocation of funds towards those taxes. So it's not a material increment to our overall debt.
Thank you.
And maybe just a quick one. You mentioned that the purchase funnel for 16 to your old people is about a year, 12 months for the spider. What about the purchase funnel for younger people? Is it much quicker?
Yes. What we found out through research is below $10,000 investment, you don't need to ask permission and mostly permission from the wife. Note to self. So that's a big criteria. So it is faster.
And we have the bowl of mugs rather than 12, I assume.
Pardon me? It's material because it's in a lot of cases, it's a cash purchase. And in the cases where they it is financed, the monthly payments, everybody says that it's lower than a cell phone bill payment. So it's much easier to swallow. So it is much faster.
If you want to highlight, when we have the 10th anniversary event, we have 3,000 customers riding But people have done all the demo right, all the visits. There is a few things. 1, Jean Leves, who's been in the motorcycle industry for years, that the rich business. 2 companies who are able to do this and we're the 3rd one, Harley, CTSC and other brands can attract so many loyal customers like this from all over the world. And that's one of the interesting comments.
The other thing is about the 62 years old. And in those cases, we don't have a mistake. We would always try to attract younger customers to Spider. And when you think about it, today, our customer average a seafood. They have disposable insurance, they have time, they want to look they're looking for social activities together with friends, and it will be a change to talking to them.
We always try to talk to the younger. And now we show the leadership and we said that we will continue to talk, but the younger, but the main focus will be the 62 years old customer, which is a perfect target. We've been searching for too long to attract new comers, and I'm looking into that, I will give you the expectation that is the marketing of the board, that was a big thing. How do you attract? The reset?
From now, we're talking to both people.
Is there any more questions?
Yes. I
have a general question for Jean Betty, Can you just talk about in general your view on the macro, both U. S. Canada worldwide, where we are right now and what you're out with you.
When you look at the unique picture like you see, it's an uptick of the I mean, the economy is not great, but it's ongoing. And there is always that geopolitical risk that you know what will happen with North Korea and those things that we need to be careful. But we are very confident that if the situation stay like this, the momentum will continue and deliver our numbers. Why? I said it a few times.
I believe that the most important thing for our household is to have a job. The unemployment rate is very low in most of the industrial countries where we study our product. The other thing is the second important thing for families is that a house. In the housing market is very good right now. And because of those global trends, our policy, we believe that globally, our industry will continue to do quite well.
And we cannot say that our industry are booming right now, but we are very good in market share in every product. And when we look at the big picture, the geopolitical situation feel like it's quite stable. We believe we can continue to grow through the 6,000,000,000. And I guess just following on that, when you look across your dealer network, both at the point of dealer and fully dealer customer, How would you say the credit environment is for both those groups and how does it differ from different points of the cycle? There's a better offering for the consumers.
I look at the acceptance rate stable over time penetration rates,
Yes. At your last investor day in Mexico, you were talking about potential look at the new growth sector. But given what you introduced, given that you still have more models to introduce, there's still a lot of market share gain. Is that decision can be postponed or pushed to the right or
No, because today, if you look at the 6 percent line, we know where there is wide space. We have a plan to increase market share in terms of product lines. And we know that, that's what we need to reach the $6,000,000,000 But what's next? The end of the road is not $6,000,000,000 dollars to continue to grow the business. And we need those additional either 7 products that we do ourselves, acquisition or partnership, to continue to grow the business beyond $6,000,000,000
How important is it to drive growth in the propulsion business, Trevor, as you think about additional growth that you've
been looking at? I think it's we're just scratching the surface of the propulsion. And don't forget, it's staying as long equity transition move was more complicated than typical than what we had anticipated. And if I just review the story, we acquired the bankruptcy of 1st in 2001. When you do a part of bankruptcy, you believe what's inside, but we'll discover a few things.
What we'll discover is the e text, the fixed technology, what they love by 1 sales of buying was a very good technology, but not well executed. And that's what we've done in the 1st 3 years to develop we've taken the fixed, but better because of the fixed. And after we have done the Ytech, we've developed the Ytech technology or industrialized the Ytech technology. We apply it to all the engines. But it was the rate because we had the frequency to be efficient and be getting stronger every year than to beat the average, to be able to beat the average requirement.
We have to raise to put a modern technology in 20 year old block, which is ridiculous. But we've done that. And at the end, their product was very good. The G1 family was very good family of product. But what we're doing with the G2, we're bringing it into the next level.
And I think you're now just starting just to see the benefits of the G2. We have the G2 now from 150 to 200. Because we introduced this summer the AIDA that we're selling for $6,000 If you take a competitive product for either you will pay anywhere between $16,000 to $25,000 with not the subject to steel in the system. I drilled a shock, warring iron that's everywhere and stuff well done. For us, everything is included into the G2 structure and the G2 design with the high drop for $6,000 and we just scratching the surface.
I want to let you know that yesterday, we won 2 days ago, we'll be innovating our innovation of the year with high value. Obviously, we'll promote that. And I won last night with the Etech team, because those team was in control room. And there is a lot of interest right now from both builders that now are ready to talk to us because they see the value proposition of the fluid engine application will hide up and what we can do with the technology. On the CapEx side, yes.
We have a pre tax effect for the last few years, and we can expect this to remain. Like I said to many investors, by 2020, we mix by €160,000,000 The top line will deliver €60,000,000 Nobody to upset if this scenario would happen. We're not counting much on the M and A side to part of the €6,000,000,000 but you can see some I mean, if we do a move shortly, we'll do some move shortly, You will see that it will be a store ramp up. It is a new product line. It's an association of partnership with something, but we're not counting on that.
If we do a major acquisition, we'll restate this.