The Canadian maker of Ski-Doos and Sea-Doos has joined the list of businesses hit by the global semiconductor chip shortage, but the company is still on track to fulfil its deliveries by the end of the year.
BRP (DOO.TO) chief executive Jose Boisjoli said in an interview that the company received warnings last month that several of its suppliers would be hit by the semiconductor shortage. The chip shortage – which has so far impacted everything from auto manufacturing to home appliance production – threatens BRP's ability to deliver vehicles that are on order and currently in production.
Boisjoli says BRP has decided to continue manufacturing its vehicle line-up despite the chip shortage, and the company will retrofit the products once the semiconductor parts finally come in.
For example, BRP is producing Ski-Doos at its assembly plant in Valcourt, Que. Boisjoli says that on some days, snowmobiles are being assembled without a part or two, and then put in the yard to await a retrofit that he expects will happen in the fall.
"This case is more complicated than say a plastic part, because we would need to do a technical change that takes a lot of time and requires testing," he said.
"So we decided to build everything that we know we have an order for and try to deliver the vehicles on time for the riding season... We're targeting to honour every order that we have from consumers and dealers, but making our life a little bit more complicated with the retrofits."
BRP operates its assembly plants on a just-in-time manufacturing model, meaning it does not typically hold onto a stockpile of parts through production. Throughout the COVID-19 pandemic, companies around the world that use this model have been challenged amid supply chain strains and part shortages. Boisjoli says the company will evaluate its manufacturing approach when operations return to normal.
"Maybe we'll accept having a bit more inventory in some more difficult type of parts. Maybe we'll decide to do a bit more internally, because you always have better control when you do things yourself," Boisjoli said.
"These are the ideas that are floating around now with manufacturing. When we are back in perfect control, we'll take the time to reflect on this."
The semiconductor challenge comes as BRP experiences surging demand for its recreational vehicles. The company reported a profit of $244.4 million in its most recent quarter, compared to a loss of $226.1 million last year. The results prompted the company to boost its full-year guidance, with earnings per share expected to grow between 44 per cent and 58 per cent.
Boisjoli credits the increase in demand to the company's ability to attract new customers. Typically, new customers represent about 20 per cent of BRP's overall sales. In the first quarter of the year, 37 per cent of BRP's sales were from new buyers.
"What is interesting is the number of younger people, females and families (that are buying BRP products) is growing," Boisjoli said. "We see this as an incredible opportunity to attract more people to our industry and make them lifetime customers."
In order to keep the customers coming back, BRP has made investments in improving its website, which has seen traffic increase by 60 per cent compared to last year. The company has also launched a site called Women of On-road, to encourage women's interest in riding. BRP is also investing $300 million over five years to create electric versions of its recreational vehicle line-up by the end of 2026.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.