brian melka president, kohler engines€¦ · kohler hybrid electric platform •ice (internal...
TRANSCRIPT
Brian Melka – President, Kohler EnginesPresentation to OPEESA • Monday, March 4, 2019
Agenda
• Kohler Company overview
• Trends and issues affecting the Outdoor Power
Equipment industry
Strong Legacy
KOHLER has
manufactured
engines for nearly
100 years.
KOHLERPOWER.IT- 6
Commercial Focus
Committed to commercial
applications
Highest investment in new product
development
Technology Leadership
KOHLER pioneered the use of EFI
technology in commercial lawn
mowers and no-DPF solutions for
Tier IV equipment.
Today, we power a wide variety of
equipment from lawn mowers to skid
steers.
Diesel Expertise
KDI line launched in 2011
Tier 4 Final without a DPF
Enhanced power and torque
in a compact footprint.
Committed to
Independent Distribution
Distributors and dealers play a vital
role in our success.
We are dedicated to providing the
tools and technology needed for
everyone to win in the market.
#1 Commercial focus is on
improving distribution and dealer
relationships
KOHLER Engines Today
• #1 producer of 20-40hp commercial gasoline engines in the world
• #1 producer of commercial twin engines for commercial turf markets
• #2 producer of premium consumer ride mower engines
• #1 brand among NA service dealers
• #3 volume producer of Diesel engines in the world
• Market leader in gasoline Electronic Fuel Injection (EFI) and no-DPF Diesel technology
• Broadest offering of engines from 3.5hp to 40hp air and liquid cooled gasoline and 3hp to 133hp air and liquid cooled Diesel
• Vitality is >30%
*sources: OPEI, OPE Magazine, Kohler research
Leading Global Brands
OPEI 10-year Shipment History – Gasoline Powered
Source: The Stevenson Company for OPEI
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(F)
Consum
er
& C
om
merc
ial R
iders
/ZT
Rs (
thousands u
nits)
Tota
l, H
and-H
eld
& W
alk
(th
ousands u
nits)
Hand-Held (Gas) Walk-Behind Rotary (Gas) Total (Gas) Consumer Riders & ZTRs Commercial Riders & ZTRs
US Residential Housing Starts
0
500
1,000
1,500
2,000
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Industry Macro Trends
Regulatory Compliance
Alternate Technologies
Channel Influence
Trade & Tariffs
Industry Macro Trends
Regulatory Compliance
Industry Trends - Regulatory Compliance
Emissions Compliance – US Diesel
Significant reduction in off-road diesel emissions requiring new technologies
Emissions Compliance – US Gasoline
• California implementing stricter testing & reporting methods for small off-road engines
• New evaporative emissions testing requirements
• Moving from design-based certification to testing-based certification
• Exhaust - potential 80% NOx & 40% HC reductions in CA, as soon as 2023
Emissions Compliance - Europe
• European Stage V significantly tightening emissions beginning in 2019
• No provisions AB&T credits
Diesel Emissions Comparison
0
2
4
6
8
10
12
14
16
18
Class I - <225cc Class 2 - ≥225cc
Spark Ignited Non-Hand-Held Emissions Changes –HC+NOx
Stage II Stage V
Emissions Compliance - China
Implementation of China Emissions Standards
• Diesel Tier IV proposal is equivalent to Europe Stage V
• Adds engines with net power >560kW and <37kW
• Stage II for spark ignited engines added NOx limits for non-hand-held engines
Material Compliance
REACH & RoHS 2
• European directives to reduce harmful
chemicals/substances in products
• REACH
– Registration/notification procedures for
hundreds of harmful chemicals
– Full implementation in 2018
• RoHS 2
– Applies to electrical and electronic equipment
– Restricts 10 specific substances
• e.g. lead, cadmium, mercury
– Fully through channel by July 2019
California Prop 65
• Passed in 1986 as the Safe Drinking Water &
Toxic Enforcement Act of 1986
• New label requirements August 30, 2018
– Any product containing any of nearly 900
specified chemicals
– Must be visible at point of purchase
All steps of the distribution channel carry responsibility!
Industry Macro Trends
Alternate Technologies
Electric vs. Gasoline Trends
Source: The Stevenson Company for OPEI (includes corded & battery)
• Growth in electric continues to outpace gasoline in smaller applications, driven primarily by battery
• Electric has now surpassed gasoline in hand-held equipment
• Increasing investment in robotic technology. Expected to be $2B globally by 2022, with 20% CAGR
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2013 2014 2015 2016 2017 2018 2019(F)
Th
ou
san
ds U
nits
Walk-Behind Rotary (Gas) Electric Walk-Behind Electric Hand-Held Hand-Held (Gas)
Electric vs. Gasoline Trends
• While battery-powered equipment is trending up quickly, the majority of consumers are still not strongly
considering battery over gas
• Consideration of battery-powered OPE is not increasing
• Approximately two-thirds of consumers have concerns about the length of an OPE’s battery charge and
power
*Source: The Farnsworth Group
Electric vs. Gasoline Trends
• Mass commercial acceptance of battery will require a step-change in cost/technology for
larger equipment
• In the short-term, automotive battery usage will outpace much of the supply chain
*Source: Bloomberg New Energy Finance, Techno Systems Research Co.
Kohler hybrid electric platform
• ICE (Internal Combustion Engine)
downsizing with e-boost
• Noise and gas emission reduction
• Improvement of transient response
• Lower Total Cost of Ownership:
– Better fuel economy
– Better power management for traction and for
the auxiliaries
– Higher electrical power availability for engine
auxiliaries and machine implements (e-PTO)
Industry Macro Trends
Channel Influence
Independent dealers continue to increase market share
Data Source: OPEI, Traqline, Kohler Marketing
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Home Depot/Lowe's Sears Independent Dealer Others
Ride Mower Sales by Channel (Units)
2013 2018-1.4% Combined CAGR
3.4% CAGR
-12.5% CAGR
4.5% CAGR
4.3% CAGR
• Home Depot & Lowe’s
gaining some of Sears’
loss, but not all
• Independent dealer
growth outpacing other
channels
• Growth in “Others’ led
by TSC, Walmart & e-
commerce channels
4.5%
30.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2001 2017
% of Dealers >$2m Rev
Dealer Trends Percent of Total Dealer Sales
• Dealer are getting bigger and their mix is shifting
• >15% increase in reliance on whole good sales
• 14% reduction in parts/service as a percent of total sales
Data Source: OPEI, Rural Lifecycle Dealer, Kohler Marketing
Dealer Trends
Source: Rural Lifestyle Dealer
• Dealers challenged to find good labor
Industry Macro Trends
Trade & Tariffs
US tariff landscape presenting cost pressures
• United States Trade Representative tariffs on China imports
– Section 232 – effective May, 2018• 25% tariff on steel & 10% on aluminum – effective May, 2018
– Section 301 Lists 1 & 2 – effective July 6, 2018
• ~$50B in imports affected
• 25% on items including small spark-ignited engines
– Section 301 List 3 – effective September 24, 2018
• ~$200B in imports affected
• Currently 10% with threat to go to 25%
Q&A
KOHLERPOWER.COM / 36