New tariffs stand to increase the price U.S. consumers pay for BRP vehicles at dealerships, hurting demand and potentially putting BRP at a disadvantage against competitors that have big manufacturing footprints in the United States. Workers place the decal on their ski-doo on the assembly line making snowmobiles at BRP Inc., in Valcourt, Que., on Oct. 8, 2020.Christinne Muschi/The Globe and Mail
When Canadian Ski-Doo and Sea-Doo maker BRP Inc. DOO-T began shifting manufacturing to Mexico nearly 20 years ago, it looked like a good move.
The Spanish-speaking country has a large pool of young, reliable and low-cost workers and provides easy proximity to the U.S. market, where 60 per cent of BRP’s powersports vehicle output is sold. And bonus: It’s on the same continent. The company has since expanded capacity in Mexico several times.
Now however, U.S. President Donald Trump has hammered the import of goods from Mexico and Canada with a 25-per-cent tariff. The White House said in a document Saturday that the levies are necessary to stop “the extraordinary threat posed by illegal aliens and drugs” from the those countries into the United States.
This puts BRP chief executive officer José Boisjoli in a bind: His biggest production hub is suddenly a liability.
“I don’t think we’ve ever seen a scenario like this before,” National Bank analyst Cameron Doerksen said in an interview, highlighting the challenge ahead. Essentially all of BRP’s manufacturing is outside the United States, with about 75 per cent of units produced in Mexico and the rest in Canada and Europe.
The tariffs have exposed the hazards of concentrating production in one country and laid bare the fragility of a North American trade pact now at the mercy of a president’s political impulses. Mr. Doerksen said Valcourt, Que.-based BRP is the corporation “most at risk” from tariffs among the transportation and industrial companies he researches.
New tariffs stand to increase the price U.S. consumers pay for BRP vehicles at dealerships, hurting demand and potentially putting BRP at a disadvantage against competitors that have big manufacturing footprints in the United States. BRP’s top rival, Polaris Inc. is headquartered in Medina, Minn., and has a large U.S. production base while Japan’s Yamaha, Suzuki and Kawasaki also have U.S. assembly plants.
“If it costs me more and there’s going to be tariffs and taxes on it, then yeah, the price of the vehicles is going to go up,” said Gilbert Gurrola, general manager of Cowtown Power Sports in Fort Worth, Tex., which sells BRP and Polaris models. “As a dealer, I’m not going to eat it.”
Tariffs could also provoke a recession in Canada and other markets if the economy slows. That in turn would reduce sales of BRP vehicles, which are typically seen as a discretionary purchase that people cut during tough times. To put it bluntly: No job, no new Sea-Doo.
Citi analyst James Hardiman sees BRP in an “untenable situation,” with its cost of goods sold coming into the United States via Mexico equating to more than US$1-billion in tariff impacts. The levies would put the company firmly into the red, to the tune of a $6.65 loss per share in fiscal 2026 and a $4.63 loss per share in fiscal 2027, he said in a note.
BRP spokeswoman Emilie Proulx stressed the company’s experience battling through adversity, noting the manufacturer has been in business for 80 years and sells its vehicles in 130 countries. She said Mr. Boisjoli would not comment at this time.
“We have a long history of managing through trade requirements in many countries,” Ms. Proulx said via e-mail. “We believe that we have the team and know-how to adapt and work through the potential changes that may be in front of us.”
Mr. Boisjoli, who was born on a farm in Wickham, Que., and grew up riding snowmobiles and motocross bikes, has led BRP since its split from Bombardier Inc. in 2003. Under his watch, the company has diversified its product lineup by pushing hard into non-seasonal side-by-side vehicles, hired thousands more employees and boosted annual profit above $700-million.
BRP opened its first Mexican plant in Juárez, in 2007, and now has three there as well as one in Querétaro. In all, about 14,000 of the company’s 20,000 employees work in Mexico, according to the latest available figures. The numbers are now lower given adjustments the company has made over the past year but a large proportion of its global work force is based in Mexico, Ms. Proulx said.
The foreign manufacturing strategy has helped drive earnings as well as the company’s stock price, which roughly quadrupled in value from 2013 to July, 2023. Over the past five trading sessions, however, BRP shares have dropped 8 per cent as uncertainty grows over its near-term prospects.
The company saw a major sales boost during the COVID-19 pandemic but has since been reeling from softer demand. In October, it put its boat business up for sale in order to focus its resources on its snowmobile and off-road vehicles.
“It’s a difficult time for the powersports industry in general right now,” said Martin Landry, an analyst with Stifel Financial Corp. in Montreal. “Dealers are hesitant to carry a lot of inventory and there is a lot of promotional activity out there to stimulate sales.”
There are several variables that could come into play to influence how much BRP gets clobbered by tariffs.
First, the competitive dynamics might be more nuanced. Polaris also has a big plant in Mexico and has non-U.S. suppliers, which could increase its production costs. That in turn means the gap with BRP on retail pricing might not be as big as expected. Japanese competitors also rely on supply chains outside the United States.
Interest rates are another key wild card, according to Mr. Doerksen. The current trend of lower interest rates would be positive for consumers as well as dealers. But inflationary pro-growth policies might slow the pace of rate cuts in the United States, which could also slow the pace of demand recovery for big-ticket discretionary products such as powersports vehicles, the analyst said in a note.
Maybe the most intriguing unknown is the people dimension. By far the biggest buyers of off-road vehicles in the United States are rural consumers, who skew as supporters of Mr. Trump, Mr. Doerksen points out.
His take? If tariffs meaningfully increase the cost of powersports products, no matter who the manufacturer, it “may not be a politically popular move” for the Trump administration.