By Katherine Hamilton

Polaris has shifted production and is considering a surcharge as tariffs threaten another challenging year of weak consumer demand for off-road vehicles.

The company took steps to mitigate tariffs before Tuesday, when the 25% duties on Mexican and Canadian imports went into effect and levies on Chinese goods were doubled to 20%.

Polaris has moved "a fair amount" of its Mexico inventory to Laredo, Texas, Chief Executive Michael Speetzen said Tuesday at a Raymond James conference. It also moved vehicles that are going through a rework process--adding on decals and hang tags, for example--into Texas to avoid tariffs.

The steps outlined show how far some companies have gone to implement preemptive measures as the Trump administration threatened sweeping tariffs on imports from China, Canada and Mexico. Such moves can help lessen the effect in the near term, but the longer the trade war drags on, companies will have a harder time avoiding the higher cost.

Polaris has accelerated the flow of vehicles coming out of its factory and into distribution centers and sped up production schedules. It also put more products on the water from China because there is a grace period before that tariff is enacted. Polaris has about 100 days of inventory sitting at dealers, it said.

"We should be able to insulate consumers at least from a short-term price impact," Speetzen said.

Still, Polaris' footprint in Mexico is sizable and it is actively working to figure out a surcharge for the vehicles that are continuing to be shipped from there. About a third of Polaris' production is based in Mexico, with 60% of its off-road segment there.

If the tariffs are long-term, the company would consider moving everything out of Mexico, but that would take years and likely be expensive, Speetzen said, noting that its Mexico plant is about two times the size of its Huntsville, Ala., location.

Tariffs are adding uncertainty as Polaris has already been struggling with low consumer confidence, which contributed to a $2 billion decline in revenue last year, Speetzen said. Consumers are still wrestling with elevated debt levels, high interest rates and persistent inflation, making them less inclined to spend on snowmobiles and all-terrain vehicles.

"It's been really tough to make a call on the consumer right now," Speetzen said. "It certainly is getting worse, not better."

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

March 04, 2025 15:26 ET (20:26 GMT)

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