usa full report

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USA

MOTORSPORT

MARKET RESEARCH REPORT

2002

PREPARED BY

PREPARED FOR


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Study Objectives 5

Research Design 6

Stage One Scale, Scope and Potential of the USA

Motorsport and Performance EngineeringMarket

Section 1 Scale, Scope & Potential Overview

Section 1.1.1 Section Overview 7Section 1.1.2 Method of segment calculation 7Section 1.1.3 Method of segment value triangulation 9Section 1.1.4 Future potential of the USA market 9Section 1.1.5 A general overview of USA market trends 9

Section 1.2 Philosophy of the USA Motorsport market 11

Section 2 The USA Market SegmentsSection 2.1 Oval Racing - Stock Car 12Section 2.1.1 Overview 12Section 2.1.2 Market Trends 13Section 2.1.3 The UKs place in the Stock Car segment 14

Section 2.2 Oval Racing - Open wheel 15

Section 2.2.1 Overview 15Section 2.2.2 Market Trends 16Section 2.2.3 The UKs place in the Open wheel segment 16

Section 2.3 Drag Racing 17Section 2.3.1 Overview 17

Section 2.3.2 Market Trends 18Section 2.3.3 The UKs place in the Drag Racing segment 18

Section 2.4 Off Road 19Section 2.4.1 Overview 19Section 2.4.2 Market Trends 20Section 2.4.3 The UKs place in the Off Road segment 20

Section 2.5 Rallying 20Section 2.5.1 Overview 20Section 2.5.2 Market Trends 21Section 2.5.3 The UKs place in the Rallying segment 21

Section 2.6 Road Racing 22Section 2.6.1 Overview 22Section 2.6.2 Market Trends 22

Section 2.6.3 The UKs place in the Road Racing segment 23

Section 2.7 Karting 24Section 2.7.1 Overview 24Section 2.7.2 Market Trends 25Section 2.7.3 The UKs place in the Karting segment 25

Section 2.8 Autocross 25Section 2.8.1 Overview 25Section 2.8.2 Market Trends 25

Section 2.8.3 The UKs place in the Autocross segment 26

Section 2.9 USA OEM Performance Engineering 26

Section 2.9.1 Overview 26Section 2.9.2 Market Trends 26Section 2.9.3 The UKs place in the USA OEM

Performance Engineering segment 27

Section 3 The USA Motorsport Supply Chain 28

Section 4 Doing Business with the USA 29Section 4.1 Business Culture 29Section 4.2 Product Liability 29

Section 5 Selecting the Niches of BusinessOpportunity for the UK Motorsport and

Performance Engineering Sector 30Section 5.1 Section Overview 30Section 5.2 The Decision Making Process 30

Stage Two The USA Motorsport and PerformanceEngineering Market - niches of businessopportunity for UK companies

Section 1 Sports Compact (Import) Drag Racing Niche 31Section 2 Professional Level Stock Car Niche 35Section 3 OEM Performance Engineering Niche 39

Appendices

Appendix One Statistics on Motorsport in the USA 44Appendix Two USA Tracks by State 46

Map 1 Map showing number of racetracksper state and per million of population. 48

Map 2 Map showing number of drag stripsper state and per million of population. 49

Map 3 Map showing number of permanentroad courses per state and per million ofpopulation. 50

Map 4 Map showing number of ovals per state andper million of population. 51

Appendix Three Turnover and Employees for some

NASCAR Companies 52

Appendix Four NASCAR Touring Series 53

Appendix Five Late Model Asphalt Series in the USA 54

Appendix Six Decision Makers and OEM Relationships 55

Appendix Seven USA Market Trends 56

Appendix Eight Indigenous and Overseas Suppliers in the

USA Market 57

CONTENTS


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LIST OF TABLES

No. Page

1 Objectives of the study 52 The Calculation and Breakdown

of Market Segment Value 83 Overview of Stock Car segment 124 NASCAR Top Three National Series 125 Overview of the Oval Open Wheel segment 15

6 Overview of the Drag Racing segment 177 Overview of the Off Road segment 198 Overview of the Rallying segment 209 Overview of the Road Racing segment 2210 Overview of the Karting segment 2411 Overview of the Autocross segment 2512 Overview of the OEM Performance

Engineering segment 2713 Core UK Competences and USAmarket segments 30

14 SWOT Analysis of UK Motorsport andPerformance Engineering in the USA Market 30

15 Core British Component Competences and EndUser Usage Rates in Sports Compact

Drag Racing 3116 Core British Component Competences and Future

End User Buying Rates in Sports CompactDrag Racing 32

17 Core British Component Competences andEnd User Usage Rates in ProfessionalLevel Stock Car 35

18 Core British Testing and DevelopmentServices and End User Usage Rates inProfessional Level Stock Car 35

19 Core British Component Competences andFuture End User Buying Patterns inProfessional Level Stock Car 36

20 Core British Testing and DevelopmentServices and Future End User Buying

Patterns in Professional Level Stock Car 36

LIST OF DIAGRAMS

No. Page

1 Turnover of USA Motorsport andPerformance Engineering

by Market Segment 72 Future Potential of USA Motorsport and

Performance Engineering Market 93 Future Potential of the Oval Racing

Stock Car segment 134 Future Potential of the Oval Racing

Open Wheel segment 165 Future Potential of the Drag Racing

segment 186 Future Potential of the Off Road segment 207 Future Potential of the Rallying segment 21

No. Page

8 Future Potential of the Road Racingsegment 23

9 Future Potential of the Karting segment 2410 Future Potential of the Autocross segment 25

11 Future Potential of the OEM PerformanceEngineering segment 27

12 Most Popular Source of Supply for SportsCompact Drag Racing End Users 31

13 Supplier Rating: Sports CompactDrag Racing 32

14 What prompts you to buy new components?:

Sports Compact Drag Racing 3315 Current Supplier Rating:

Sports Compact Drag RacingEnd Users 3316 Capability of UK Companies already in

the Sports Compact Drag Racing Segment 3417 Best Way for UK Companies to supply the

market in Sports Compact Drag Racing 33

18 Best Information Sources and Influences inSports Compact (Import) Drag Racing 34

19 Most Popular Source of Supply of Componentsto Professional Level Stock Car End Users 35

20 Most Popular Source of Supply of Testing andDevelopment Services for Professional LevelStock Car End Users 36

Professional Level Stock Car End Users 3722 What prompts you to buy new components?:

Professional Level Stock Car End Users 3723 What Supplier Qualities are the End Users

looking for?: Professional Level Stock Car 3724 Perception of UK Companies already in the

Professional Level Stock Car segment 3825 Best Way for UK Companies to supply the market

in Professional Level Stock Car 3826 OEM Vehicle Application for Performance

Engineering 3927 OEM Engineering Application of Performance

Engineering 39

28 OEM Rating of Performance EngineeringBusiness Strengths 40

29 UK Performance Engineering Expertise 4030 Best way for UK Performance Engineering

Company to link with USA OEM 4031 Best way for UK Performance Engineering

Company to link with USA Tier 1/Tier 2 Supplier 4132 Market Trends for OEM Performance

Engineering Outsourcing 4133 USA OEM Criteria for Working with a

Performance Engineering Company 41

CONTENTS

21 Current Supplier Rating:


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Motorsport Research Associates werecontracted to undertake research on theUSA motorsport market. The MIA wishes

to identify business opportunities in theUSA for companies in the Britishmotorsport, performance engineering andmotorsport services sector.

The aims of this study are:

to provide members of the MIA andothers operating in this sector, with anoverview of the Scale, Scope andPotential of the USA Motorsport and

Performance Engineering Market.

to identify potential Niches of BusinessOpportunity for UK Companies.

The objectives of the study are listed inTable 1, along with their fulfilment withinthe report.

STUDY OBJECTIVES

Table 1: Objectives of the study

MIA Objectives Objective fulfilled in

1 Estimate the Size of the USA Stage One Section 1.1Motorsport and PerformanceEngineering Market

2 Establish the USA Motorsport and Stage One Section 2Performance Engineering MarketSegments

3 Establish the USA Motorsport and 1 Overview Stage One Section 1.1.5Performance Engineering Market 2 Individual Market Segments seeTrends Market Trends section on each

segment of Stage One Section 23 Appendix Seven

4 Identify Key USA Motorsport and 1 Suppliers to the Individual MarketPerformance Engineering Suppliers Segments see The UKs place

in... section on each segment ofStage One Section 2

2 Appendix Eight

5 Identify Key USA Motorsport and 1 General Overview Section 1.2Performance Engineering End Users 2 Segment Overview see Overview

Philosophy of the USA Motorsport Marketsection on each segment of Stage OneSection 23 Stage Two The USA Motorsportand Performance Engineering market niches of business opportunity

6 Evaluate the USA Motorsport and Stage One Section 3Performance EngineeringSupply Chain

7 Investigate USA Motorsport and Stage One Section 4Performance Engineering BusinessPractice


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Stage 1

SCALE, SCOPE AND POTENTIAL OF

THE USA MOTORSPORT ANDPERFORMANCE ENGINEERING

MARKET

The aim of Stage One was to provide acomprehensive overview of the USAmotorsport and performance engineeringmarketplace. Firstly, it sought to identify,and provide an overview of, each of themarket segments in the USA motorsportand performance engineeringmarketplace. Secondly, it sought toidentify the market trends in each segment

and identify the UK motorsport andperformance engineering industrysmarket position within those segments.Thirdly, Stage One sought to give ageneral overview of business culture andthe supply chain structure in the USAmotorsport and performance engineeringindustry. Lastly, this stage sought toidentify potential niches of businessopportunity for consideration in Stage Twoof the research.

The information for Stage One was

gathered by means of desk-based andfield-based research. An Expert Panel,comprised of academics, consultants andindustry pundits, met to decide on theorganisations and personnel to becontacted for interview, in order that thewidest possible spread of information onthe USA market could be gathered. 25Key Informant interviews were conducted(see below). In order to protect sensitivecommercial information, intervieweeswere assured confidentiality:

Ten interviews with successful UKexporters to the USA motorsport andperformance engineering market.

Ten interviews with USA-basedorganisations dealing with theUSA motorsport and performanceengineering industry.

Five interviews with USA motorsportand performance engineering end-users.

Stage One also included the following

desk-based research:

examination of existing National Surveyof Motorsport Engineering and Servicesquestionnaire returns and assessmentof other MIA material.

trawl of UK and USA trade magazines(e.g. Autosport, RaceTech, RacecarEngineering, Performance RacingIndustry etc).

web-searches.

obtaining published business/marketreports in the UK and USA.

attendance at

- 2001 PRI Trade Show, Indianapolis- 2001 SEMA Show, Las Vegas- 2002 Autosport Show, Birmingham

Stage 2

THE USA MOTORSPORT AND

PERFORMANCE ENGINEERINGMARKET NICHES OF BUSINESS

OPPORTUNITY

Stage One split USA motorsport andperformance engineering into variousmarket segments. It also identified whichof those segments the UK motorsport andperformance engineering industry wasparticularly well qualified to supply. Theexpert panel then met again to narrowdown the choice of segments for furtherinvestigation as niches of businessopportunity. The niches were chosen on

the basis of market areas that couldprovide the most potential commercialreturn for the UK motorsport andperformance engineering industry. Thepanel chose three niches of opportunity.

These chosen niches were researchedthrough a process of 60 structuredinterviews with USA end users. Theinterviews covered all of the three chosenniches. Of the 60 interviews, 15 were face-to-face, and 45 telephone-based. Our

USA associate, NSJ International,conducted all these interviews in the USA.The interviews were then forwarded to ourUK office for analysis.

Information gathered during Stage One ofthe research was utilised in order toprovide potential interviewees for StageTwo. In addition our USA associate, NSJInternational, attended the 2002 MIANASCAR Inward Trade Mission inCharlotte, the 2002 SAE Conference inDetroit and the 2002 World Import

Challenge Drag Race Meeting and Showin Houston.

RESEARCH DESIGN


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1.1.1

SECTION OVERVIEW -

USA ENGINEERING AND SERVICESMARKETPLACE WORTH

$16.45B IN 2002

The USA motorsport and performanceengineering market was segmented,where possible, on the basis of the type ofmotorsport competed in by the individualcompetitor. The method was chosenabove any other type of segmentation, forexample by USA motorsport businessspecialism, due to the availability ofaccepted and reliable published figures for

USA competitor demographics.

The method of calculation of marketsegment values in this section is detailedin Section 1.1.2. The result wastriangulated against other forms ofavailable statistics in order to ensureaccuracy. This triangulation is detailed inSection 1.1.3.

Utilising these triangulated statistics, thetotal turnover of the motorsport and

performance engineering market in theUSA, for both engineering and services, isestimated at $16.45 billion in 2002. Thevalue of each market segment is shown asa percentage of this total in Diagram 1.

1.1.2

METHOD OF SEGMENT

CALCULATION

Given the total value of the USAmotorsport and performance engineering

marketplace, including both engineeringand services, at $16.45 billion in 2002,each market segment was calculated byvalue as depicted in Table 2.

Table 2 utilises the following method ofcalculation. Approximate competitornumbers and approximate seasonalbudgets per competitor are multiplied toestimate the segment value. To this valueis added an estimate of the incomegenerated from the service side of the

STAGE 1 SECTION 1.1

Oval-Stock Car (Professional)

Oval-Stock Car (Middle Level)

Oval-Stock Car (Amateur)

Oval-Open Wheel (Professional)

Oval-Open Wheel (Amateur)

Drag Racing, incl Sports Compact (Professional)

Drag Racing, incl Sports Compact (Amateur)

Off RoadRallying

Road Racing (Professional)

Road Racing (Amateur)

Karting

Autocross

OEM Performance Engineering

18%

1%

9%

9%

6%

3%3%9%

3%1%

6%

1%1%

30%

SCALE, SCOPE AND POTENTIAL OF THE USA MOTORSPORT

& PERFORMANCE ENGINEERING MARKET

Diagram 1

Turnover of USA Motorsport and

Performance Engineering by MarketSegment


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industry in each segment, such asmerchandising or track incomes, wheresuch a value is known. Where known, this

value has been attributed to theprofessional levels of each segment, forease of calculation. It should not beinferred from this that the less professionallevels of each segment have no servicesector income, merely that breaking downthe numbers at the lower levels of eachsegment becomes extremely difficult tocalculate as the required statistics are lessreadily available.

We estimate that engineering andservices components in USA motorsportare split in an approximate ratio of 50:50. A crude estimate of competitor budgetswould equal the total engineering spend atthis level. A similar amount can beapproximated for the service side of thesport, generated, for example, from suchactivities as merchandising and theincome from over 1300 tracks in the USA.

This 50:50 split is based on the findingfrom the National Survey of MotorsportEngineering and Services that the UK

engineering services split wasapproximately 60:40. Our expertsconcluded that due to the more complexdistribution channels in the USA, and themore spectator orientated motorsportculture, the engineering services split inthe USA would be more equal than that inthe UK.

Competitor numbers were taken from PRIfigures that are widely trusted within theindustry. Competitor budgets were takenon an individual basis from our expert

interviewee estimates for each segment.

STAGE 1 SECTION 1.1

Table 2: The Calculation and Breakdown of Market Segment Value

Description of Calculation of segment value by: Approximate ValueMarket Segment Competitors multiplied by of Market Segment

annual budgets ($ billions) Service Sector estimate

at Professional level1. Oval Stock CarProfessional 150 teams multiplied by 3

$3m -$20m budgets Over $1.2b in merchandise Approx $1b in track turnover

Middle Level 5,000 teams multiplied by 1.5$100,000 - $250,000 budgets

0.5b in merchandising / trackturnover

Amateur 50,000 - 70,000 cars multiplied by$15,000 -$40,000 budgets 1.5

2. Oval Open wheelProfessional 25 - 40 teams multiplied by $5m 1

budgets $0.3b in merchandising/track income Approx 2000 - 3000 Pro Sprint Cars

teams multiplied by$100,000 - $250,000 budgets

Amateur 50,000 cars multiplied by $10,000 - 0.5$40,000 budgets

3. Drag RacingProfessional 500 teams multiplied by 0.5

$100,000 - $2m budgetsAmateur 150,000 cars multiplied by 1.5$10,000 budgets (av.)

4. Off Road 400 Pro teams multiplied by 0.5

$200,000 - $500,000 budgets 4800 amateur cars multiplied by

$30,000 - $80,000 budgets (av.)5. Rallying

200 Pro teams multiplied by 0.1$200,000 - $500,000 budgets

1000 amateur cars multiplied by$20,000 budgets (av.)

6. Road Racing

Professional 300 teams multiplied by budgets from 0.75$100,000 - $20m

$0.3b (est) in merchandising/trackincome

Amateur 14,500 cars multiplied by $15,000 0.25budgets (av.)

7. Karting 40,000 karts multiplied by 0.1

$2,500 - $5,000 budgets8. Autocross

85,000 cars multiplied by $3,000 0.25budgets (av.)

9. OEM Performance Engineering Expert interviewees estimate 5




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1.1.3

METHOD OF SEGMENT VALUE

TRIANGULATION

The cross tabulation of segment valuewas achieved using the followingcalculations;

Using the known number of motorsportand performance engineeringbusinesses and employees (seeAppendix One) and dividing this into theestimated market turnover to provide anestimated average turnover figure. Thisfigure was cross checked with theavailable statistics on averagemotorsport firm turnover in the UK,extracted from The National Survey ofMotorsport Engineering and Services.

Using published information on theturnover of some USA motorsport andperformance engineering companies(See Appendix Three).

Using published information fromSEMA on the trade and retail level sales

of USA motorsport and performanceengineering businesses (see AppendixOne).

Using published information on thenumber of motorsport facilities in theUSA (see Appendix Two) and somepublished financial information on thelarger track owners (see AppendixThree).

Our expert interviewees were asked toverify the segment values given their

own particular segment experience.

1.1.4

FUTURE POTENTIAL OF THE USA

MARKET

Our expert interviewees were asked toestimate the future growth potential ofeach segment over the next five years.These results were validated using desk-based research. Both these methodssuggest that the future value of thetotalUSA motorsport and performance

engineering market, from a 2002 total of$16.45b, will increase to $22.1b in 2007,an overall increase of 34%.

As Diagram 2 indicates, the USAmotorsport segment is expected to growfrom $11.45b of this total in 2002, to$13.1b in 2007, a segment increase of14%. Performance engineering, bycomparison, is expected to grow from $5bin 2002, to $8b in 2007, a segmentincrease of 60%.

1.1.5

A GENERAL OVERVIEW OF USA

MARKET TRENDS

The headline figure of $16.45b is for thecombined value of USA motorsport andperformance engineering in 2002. Thisfigure has already begun to reflect thechanges in the wider economicenvironment of the last year. Sponsorshipand rates of personal income are vital to

the growth of motorsport everywhere, not just in the USA. USA motorsport trendsare linked very closely to the generaleconomy in the USA, and, in particular,trends in USA advertising.

While the USA has not suffered arecession defined as two negativequarters of economic growth, there is nodoubt that the USA has had its first realeconomic downturn since the earlynineties. The fall out from the NASDAQ

STAGE 1 SECTION 1.1

MotorsportPerformance Engineering

14

12

10

8

6

4

2

0

Valueofmarket(

$b)

2003 2004 2005 2006 2007

Diagram 2

Future Potential of USA Motorsport andPerformance Engineering Market




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crash of two years ago and the aftermathof September 11 have combined toimpinge upon the scale and nature of the

economic growth from which the USAmotorsport market draws its funding.

While current expert estimates suggestthat the worst of the economic downturnmay be over, the advertising industry inthe USA, from which motorsport drawssponsorship, is also in the midst of itsworst downturn in a decade. Fuelled bythe dot.com boom that pushedadvertisings share of GDP throughhistorical cyclical levels, advertising in theUSA hit a peak in 2000 that experts saymight take up to four years to reach again.USA forecasters expect advertising to pickup again in the last quarter of 2002, butthis does not mean that motorsportsponsorship will recover as quickly.Sponsorship is usually the first of themarketing mix to be cut when times arehard, and the last to be reinstated.

USA motorsport gained, in the frenzy ofadvertising, from two main sources.Firstly, in the form of direct advertising

provided from new economy firms seekingto gain market exposure from sportssponsorship. Many of these sponsorshiparrangements no longer exist due to thedot.com crash. Secondly, the neweconomy, as personified by the newmedia companies, spent hugely onattempts to provide content for their newpathways to the consumer provided by thenew economy. These pathways wereexemplified by cable or digital TV, 3Gmobile phones and more sophisticatedinternet content.

In the rush for content for these newmedia firms, televised sports became oneof the key ways in which firms sought togain market share and subscribernumbers. There are many examples ofthese sorts of deals from both sides of the Atlantic. Today, the amounts paid totelevise sport are not delivering thepromised end users, and revenue returns,for these media companies. In recentmonths, the amounts paid for sport byEuropean companies such as ITV Digital(football) and the Kirch media empire

(Formula 1 and football) have directlyhastened those companies financialproblems.

In the USA, motorsport has yet to beaffected as directly as sport in Europe bythese sorts of overpayments. However,there are signs that, for example, Fox andNBC/Turner are not getting the rewardsthey would have liked for their six year$2.4b investment in NASCAR. It has beenreported that the networks were $100mdown on their $400m a year investmentdue to shortfalls in customers for TVadvertising supporting the NASCARbroadcasts. Existing advertising rates hadto be hiked to pay for the shortfall. WithinNASCAR itself, there are anecdotalstories of budget shortfalls amongst overhalf the teams, according to our expertinterviewees. Some teams have foldeddue to loss of budgets, and some trackowners have had to lay off staff. While TVviewing figures for NASCAR increasedlast year, due to the more integrated TVscheduling as the result of the Fox/NBCdeal, there were also reports thattrackside spectator viewing was not thesold out phenomenon that NASCAR has

experienced for many years. The potentialSMI lawsuit against ISC over a race datemonopoly is also not good news for thepublic profile of NASCAR, given thefamily values image that NASCARmarketers like to portray.

Outside NASCAR, the continuing rivalriesbetween the IRL and CART series seemto preclude the sort of public profile forsingle seaters that might generateincreased corporate sponsorship.Similarly, sports car racing in the USA is

also split between two similar, butcompeting, series.

Overall, as Diagram 2 indicates, the USAmotorsport market is suffering at themoment from the general downturn inadvertising. While it may take some timefor the sponsorship of 2000 to be availableagain, clearly as the general economicposition of the USA improves, andadvertising spend returns, motorsport willbe well placed to capture the corporatedollar, as it did so effectively in the

previous decade.

While the overall spend on motorsportmay have stalled, or even diminished, inthe short term, there are some other

changes apparent in the USA marketplacethat may affect how companies dobusiness with the USA. Firstly, the gradualincrease in NASCARs exposure to hightechnology engineering solutions mayslowly trickle down to lower levels of StockCar racing, if the price can be kept lowenough, therefore greatly expanding themarket for such solutions. These solutionsaffect both the search for extraperformance and the search for safetywithin NASCAR, in the face of some highprofile accidents in the series. Similarly,the growth in use of Sports Compact cars,generally Japanese Imports, also reflectsthe way that some segments of the USAmotorsport market are becoming moreopen to different technologies.

Secondly, as Diagram 2 indicates, therestructuring of USA OEMs caused byincreased outsourcing is deliveringgreater levels of performance engineeringexpenditure into the marketplace than hashistorically been the case. Our expertinterviewees suggest that this may soon

be the largest market segment within theUSA motorsport and performanceengineering market, and the one showingthe fastest growth.

Overall, the forecast is for the USAmotorsport market value to remainapproximately static in the near future untiladvertising and sponsorship picks up overthe next 18 months or so. There are areasof growth within this forecast, broadlycaptioned under the remit of advancedengineering for the higher levels of the

sport, and advanced engineering at aprice for the middle levels. The SportsCompact segment and the Professionaland Middle level Stock Car segment couldbe described in such terms. The mainarea for substantial segment value growthover the next five years appears to be inthe area of outsourced OEM PerformanceEngineering.

STAGE 1 SECTION 1.1




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1.2

PHILOSOPHY OF THE USA

MOTORSPORT MARKET

The general philosophy of USAmotorsport is quite different to thatprevailing in Europe. To caricature, USAmotorsport is driven by the show, whileEurope is driven more by the technology.

Much of USA motorsport utilises what, toEuropean eyes, is old technology. By thiswe mean carburettor V8s poweringtubeframe chassis. This formulaencompasses probably three quarters of

the competing cars, if not more, in theentire USA.

At the highest level of competition thisdifference in philosophy can be seenbetween the top ranking series in therespective countries. In Europe, F1 isking, with huge development budgets andrapid technological innovation. In theUSA, NASCAR is king, defined more bythe personalities than the innovation ondisplay.

In NASCAR, a manufacturer that islagging in performance can receive atechnical rules break in the week betweenraces. This would be unheard of inEurope. NASCAR keeps a level technicalplaying field for the benefit of thespectators, while in Europe spectators areexpected to be entertained more by thetechnology on display.

When British motorsport firms engage

with this different USA mindset, the keydifference to bear in mind is that the latestwhite-hot European technology is unlikelyto be of much use to most of the market.What will be of interest to the marketingmindset of the USAend user is likely to bethe selling of race proven technology,which will give more performance for thedollar.

This has three outcomes for the marketingstrategies of British companies trying toaccess the USA market;

At the top of the pyramid of USAmotorsport (CART, IRL, increasinglyNASCAR) there is a growing space forthe use of technology to optimise theracing package, as a British F1mentality transfers into the USAmotorsport mindset.

In the middle of the market place, thereis the possibility of offering anincremental increase over existingproducts. Volumes of sales are likely to

be much larger than the top endprofessional series. For example,perhaps 20,000 individual middle levelstock cars compared to the 1,000individual cars within NASCARs topthree series. The price for theseproducts can be higher, but thetechnology involved must not be too biga step from that already in use.Geographical and series niches mightprovide appropriated scenarios for entryin to this market.

At the bottom of the scale, at theamateur level of competition, the Britishmanufacturer is unlikely to be able tomatch the home-grown, low-tech, value-for-money USA manufacturers. The oneinstance where this might not be true isin areas of motorsport culturally differentto the mass of the USA market, wheretechnology is more valued than isnormally the case.

STAGE 1 SECTION 1.2

PHILOSOPHY OF THE USA MOTORSPORT MARKET


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2.1

OVAL RACING - STOCK CAR

2.1.1

OVERVIEW

Table 3 summarises the Stock Carsegment in the USA. Stock Car racing iscomprised of mainly showroom-lookingV8 engined saloon cars. It is the largestsingle group of motorsport competitorsand has the largest spectator following inthe USA. NASCAR is at the professionaltop end of the Stock Car segment.NASCAR is also the only truly national

stock car formula, and it dominates USAmotorsport TV coverage.

Top End Professional NASCARNational Series

NASCAR sanctions thirteen series across2,200 events at 135 tracks. All but one arefor closed wheel. The top three series(Winston Cup, Busch and CraftsmanTruck) are national series. The rest aremainly regional, utilising similarregulations to the top series. It has been

estimated that there are 800-1000 carscompeting in the three national series.Teams have up to 10 cars per driver, aseach car is purpose built for a certain typeof track. The top three series are detailedin Table 4.

NASCAR is the second most popular TVsport in the USA behind the NFL. Lastyear, it announced a new 6-year $2.4bdeal to televise the sport, and in 1999 itwas estimated that NASCARmerchandise alone produced $1.2b in

revenue. Some collated facts and figuresabout the bigger national NASCARorganisations are shown in AppendixThree. It should be noted that the majorityof NASCAR businesses are not listedcompanies.

Middle Level Professional andSemi -Professional

NASCAR are also involved in organisingthis middle level of stock car racing. Eightof their categories cater for these

regionally based series, called NASCARTouring. The NASCAR Touring series aredetailed in Appendix Four.

Many other series are involved at thisregional level. It has been estimated therecould be as many as 5,000 teamsoperating at this level of racing. Othermiddle level series, utilising Late Modelcars and racing on short asphalt ovals, arelisted in Appendix Five. It should also benoted that there are approximately thirtyseries, with a similar geographic dispersal,running Late Model Cars on dirt shortovals, rather than the asphalt series, listedin Appendix Five.

To give an example of this middle rankingseries, the USAR will be outlined in moredetail. USAR was set up as a direct

marketing tool of Hooters restaurants. Itruns a tube frame chassised, steel bodiedV8 stock car, on paved ovals of 1 mile orless. It has a 14 event Southern Divisionand a 13 event Northern Division,culminating in a 5 race run-off between thetwo series. The series has 160 one-carteams operating on a yearly budget of$250,000 each. The series acts as aprofessional series in its own right, butalso as a feeder series for the higherNASCAR ranks.

Lower Level Amateur andSemi-Professional

The entry level for oval racing is mainlycomprised of modified tube framechassised, steel-bodied V8 stock cars runon short dirt, and paved, ovals. The lowerlevel of these Weekly Racing Series aregenerally organised around a particular

12STAGE 1 SECTION 2.1

THE USA MARKET SEGMENTS OVAL RACING - STOCK CAR

Table 3: Overview of Stock Car Segment

Description of Examples of Series Value of MarketMarket Segment in this Segment Segment($ billions)

Oval Stock CarProfessional Winston Cup 3

BuschCraftsman Truck

Middle Level NASCAR Regional 1.5Regional Late Model

Amateur IMCA, WISSOTA 1.5

Table 4 : NASCAR Top Three National Series (Source: NASCAR website)

No. Races No. Regular Series Detailsin 2002 Drivers in 2002

Winston Cup 36 47 NASCARs topnational series

Busch 34 52 Similar toWinston Cupbut lesspowerful

Craftsman Truck 22 49 Winston Cupengines inPickup basedbodies


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local track. They usually compriseapproximately three classes, withascending higher technical specification

between the classes. Most local tracksmight run one or two events a week,attracting perhaps 80 cars.

At the top end of this lower rung, NASCARruns a system of points classificationcalled the NASCAR Weekly Series. Thisallows drivers to compete regionally, oreven nationally, with drivers who theyrarely compete with directly. More than50,000 cars could be involved incompeting at this level of racing.

One of the most successful organisers,drawing together some of the very diverseregulations and geography of thisgrassroots level racing, is the IMCA(International Motor Contest Association).

The IMCA runs in 30 states on 200 tracksincluding both dirt and asphalt tracks. Theorganisation has 6000 licence holders,who generally race two nights a week attracks within 40 miles of their home. The

IMCA has five classes, with a lightlymodified Hobby Stock Class at the bottomstretching to a Modified class with loosertechnical regulations at the top. Generally,however, technical regulations are verytight, with the innovative engine claimrule allowing any competitor to claim theengine of another competitor, if thatcompetitor finished in the first 4 of a race. A complete new car is around $20,000and running costs are likely to be in thesame bracket.

2.1.2

MARKET TRENDS

In oval racing, the professional stock carseries, like NASCAR, have the biggestcommercial impact in USA motorsport.While the USA recession seems to havetaken the edge off the highly impressivegrowth rates of the past few years, it islikely that NASCAR will continue to growonce corporate America starts spendingmoney on advertising again. This isindicated in Diagram 3 above. Growth islikely to remain static, or even decreaseslightly, until new sponsorship startsflowing into the sport in 18 months or so.

One political stumbling block to thisgrowth could be the lawsuit thatshareholders of Speedway MotorsportsInc (SMI) have taken out against

NASCAR. The France family not onlycontrol NASCAR, but also theInternational Speedway Corporation(ISC), a track owning organisation.NASCAR awards ISC around 50% ofWinston Cup events, and SMI around25%. SMI shareholders have filed alawsuit against NASCAR claiming thatNASCAR gave a verbal agreement to SMIfor two Winston Cup races at one of SMIstracks, (the Texas Motor Speedway).NASCAR refutes this. It is possible thatthe row could escalate to a referral to theUSA equivalent of the Monopolies and

Mergers Commission. The stability ofNASCAR, and its market potential, couldbe threatened if such action took place.

NASCAR has traditionally been atechnically conservative series. In the last

decade that attitude has slowly changed.European firms are gradually entering themarket with more advanced equipmentthan their USA counterparts. One reasonfor this is the increasing amount of moneyin NASCAR over the last decade. AsNASCAR grew from a regional series to anational series, so the sponsors changedfrom a Southern base to more national,Fortune 500 type, companies. A top lineWinston Cup car will now costapproximately $20m a year to run, doublethat of five years ago, and quadruple thatof ten years ago.

This increase in finance has led to an F1style trickle up of resources as teamsincrease in professionalism to match theirfunding. The older, technicallyconservative, way of going racing is slowlygiving way to a more open attitudetowards the way in which new technologycan lead to competitive advantage. Thischange in attitude should not, however, beoverestimated. Entrenched regulatoryparadigms, organised by NASCARstechnical committees, and the strength of

STAGE 1 SECTION 2.1


10

8

6

4

2

02003 2004 2005 2006 2007

Va

lueofMarket

S

egment($b)

Diagram 3

Future Potential of the Oval Racing

Stock Car Segment


14/60

14

existing suppliers marketing relationshipsmeans change, in European terms atleast, is slow.

A further way in which NASCAR ischanging is the increased concentrationon safety. A number of high profileaccidents, particularly Dale Earnhardtsdeath at Daytona in 2001, have focusedNASCAR on the safety aspects of theirsport. NASCAR vehicles aretechnologically simple in many ways toEuropean eyes, and advanced technologyis one way in which safety in stock carracing might be improved.

There are a number of examples of theway technology might help the safetyissues present in stock car racing. First isthe use of advanced materials andconstruction to help the structure of thecar survive a high impact situation. Thework, financed by Humpy Wheeler ofTexas Motor Speedway, on the HumpyBumper, demonstrates this kind ofresearch. Second, the increasing role oftechnology in safety matters is shown bythe use of advanced data acquisition, the

black box, in understanding the dynamicsof the accident during and after it hasoccurred. Third, is the use of aerodynamicresearch to further understand the waythese large, heavy vehicles interact on theracetrack at extremely high speeds.Fourth, is the attempt to develop a barriersystem for racetracks so as to minimisethe impact of forces when these heavy,fast moving cars hit the concrete retainingwalls of an oval.

Within the lower reaches of stock car

racing trends are fairly static. There is aslow trickle down of technical innovationfrom the professional series as lowerranking teams buy equipment fromhigher-ranking teams. One future trend inthe lower levels of stock car racing, besidethe trickle down of components thatimprove the performance of the vehicle, islikely to be the trickle down of the safetyadvances made by NASCAR.

2.1.3

THE UKS PLACE IN THE STOCK CAR

SEGMENT

Domestic USA firms supply the vastmajority of stock car racing, fromprofessional to amateur. At the amateurlevel, there is virtually no market sharefrom overseas firms. In the middle levelseries there are some overseascomponent suppliers, while at the top levelof professional stock car racing there isthe most impact from non-USA firms.

British firms already have a strong

presence, compared to other overseasfirms, as non-indigenous suppliers toprofessional stock car racing. It seemsclear that professional stock car racingcould also be a further expanding marketfor British firms, as USA teams increase inprofessionalism to match their budgets.

The areas in which British firms canimpact this market, are dependent on thetight regulatory nature of the USA stockcar series and the existing strengths ofdomestic USA-based suppliers. This hasthree potential outcomes for British firmsto sell to USA end users. One outcome isthe supply of specialist components withinthe slightly less restrictive regulatoryenvironments of NASCAR, that currentlyallow some small leeway of technicalinnovation. The nature of British firmsimpact in this niche market lies not just inthe supply of the components, however,but also in the supply of extensivetechnical support for those components.The relationships being built up betweenthe USA end user and the British supplier

mean that the better quality componentincludes a high level of technical feedbackthat cannot be at arms length. Thisrequires the British firm to stationpersonnel in the USA as part of theservice required to stay ahead of thecompetition.

The second area in which British firms arebeginning to have an impact is in thesupply of technical equipment andservices to improve the existing regulatorypackage. This approach provides

technical equipment and services to

measure the small incremental changesallowed within the regulations by highlytechnical research and simulation models.

This equipment and services is more likelyto be found in Britain than domestically,due to the generally more advanced andbetter-funded high tech motorsportcompanies to be found in the UKsMotorsport Valley. The areas of researchand testing are twofold. One is in the areaof Mechanical Engineering Development,for example with Test and Motionsimulation (e.g. 7-post rigs) and modellingsoftware (e.g. CAD, FEA, CAE). Anotherarea is Aerodynamic Research;particularly utilising advanced windtunnels and computational fluid dynamics(CFD).

The third area in which British firms arebeginning to have an impact is in thesupply of safety equipment and services.This is to satisfy the increasing concernsover safety when racing heavy, high-speed vehicles on ovals lined withconcrete walls. The likely opportunities forBritish firms are to be found in the areas ofsupplying data acquisition tomeasure/record the dynamics of the

accident, and to help with the supply ofengineering services to increase thesafety aspects of the vehicles. The firstbuilds on expertise in data acquisitionalready on display in the USA stock carmarket from existing British suppliers. Thesecond builds broadly into the sorts ofengineering services already describedabove. For example, these services willsupply the end user with data in modellingthe dynamics of accidents onsophisticated computer software.

At the level of the basic, technologicallysimple components like spaceframes,wheels, and body panels, for example, thesheer size and experience of the USArace industry means that British firms areunlikely to be able to match their pricingstructure. British firms must be able tooffer an innovative product, but not be tooexpensive or too advanced to scare theend user away.

This means that British firms can offer theUSA stock car market two sorts of product.

STAGE 1 SECTION 2.1



15/60

15

One is the offer of a level of technology ata price that only the bigger budgets teamsand formulae can afford. In this section is

the engineering, safety and aerodynamicresearch mentioned earlier. The secondproduct British firms can offer is a lowerlevel of technology, yet still at a higherprice than available from domestic firms inthe USA. This must offer enough gains forthe USA end user to justify a higher pricethan for a similar product from anindigenous supplier.

For these reasons, in the middle levels ofstock car racing, the lower budgets of theteams means the likelihood of success forBritish suppliers is less. They will beunable to afford the engineering andaerodynamic research mentioned earlier,and only perhaps a small fraction (10%?)could afford more advanced componentson offer from British firms.

While the latter 10% may still be asignificant number of teams on a nationalbasis, supply problems mean thatreaching this 10% is likely to be verydifficult. USA racing series are

geographically dispersed and fragmented,making the problem of accessing themarket very difficult. In addition, thecomponents that British firms will be ableto market are likely to be those needingsome degree of technical support to justifytheir higher price. Supplying this supportfor a new product is likely to be verydifficult when the geography of the USA istaken into account. It should be noted thateach USA motorsport segment, evenwithin the same geographical region, islikely to have its own distributors.Therefore, trying to lower costs by finding

a common distributor in one region toaccess both the stock car market and thedrag racing market, for example, will be adifficult task.

At the amateur level of stock car racing,British firms impact is likely to be low. Thelow budgets and low technology of theselower ranking series means thatcompeting with indigenous suppliers willbe a difficult process.

2.2.

OVAL RACING - OPEN WHEEL

2.2.1

OVERVIEW

Open wheel racing on ovals in the USA isgenerally split into three categories. Thefirst category is the IMS (IndianapolisMotor Speedway) IRL (Indy RacingLeague) series. This series is a directcompetitor for the CART (ChampionshipAuto Racing Team) Champcar series (seesection 2.6), but races only on ovals. IRLcars race in a professional, national seriesof approximately 15 races, attracting 25

cars per race. The cars are Europeanstyle (and built) carbon fibre monocoquesingle seaters, utilising a purpose built 3.5litre V8 race engine, many of which aredesigned and built in Britain. Incomparison to Champcars, IRL cars arenot as technologically sophisticated astheir technical regulations are designed tokeep down cost. The main race in the IRLseries is the Indianapolis 500, the largestone-day motorsport event in the world.From 2002 the IRL also has a juniorfeeder formula called the Infiniti ProSeries. It is a one-make chassis andengine series, utilising Dallara chassisand Nissan Infiniti engines.

Below the IRL are two series, with moresimilarities to each other than they have tothe IRL. The first of these uses larger carsgenerically known as Sprint Cars. Thesecond uses smaller cars known asMidgets. Sprint Cars are open-wheeledtube frame chassis with domestic V8engines. They are normally classifiedaccording to engine capacity; 410 cubic

inches, 360 and 305. The larger the

engine capacity the bigger the budgetneeded. Midgets are smaller versions ofSprint Cars, generally with 4 cylinderengines but with the same sort of tubeframe chassis. Both classes run on pavedand dirt ovals of1/2 mile or less.

In the Sprint Car category, the most highprofile national series utilises the 410class. This is the main place that the 410

cars race, due to their expense. The mostfamous of the 410 organising bodies is theWorld of Outlaws (WoO) Series, followedby the All Stars Series. The WoO races at70 events in 41 states with a prize fund of$10m.

The next category of Sprint Car is the lessexpensive, and increasingly popular 360class. The main organising bodies hereare USAC (United States AutomobileClub) and the ASCS (American Sprint CarSeries).

USAC runs national and regional seriesfor two categories of Sprint Car and onecategory of Midgets. Their top nationalseries called Silver Crown runs 12-15races a season for 45-60 entrants, eachwith annual budgets of $100-150,000.Their middle national series, entitledSprint Cars, runs 30 races with 25-40entrants and $100-150,000 budgets. Theirlast national category, Midgets, runs 25-30 races, with 25-40 entrants on budgets

of $50-100,000.

STAGE 1 SECTION 2.2


Table 5: Overview of the Oval Open WheelSegment

Description of Examples of Series Value of MarketMarket Segment in this Segment Segment

($ billions)

Professional IRL 1World of Outlaws

Amateur ASCS plus local 0.5organisers


16/60

16

The ASCS is a Midwest based regional

Sprint Car Series. ASCS sanctions 60races a year with 1500 teams. Three-quarters of these teams are amateur.Budgets average $40,000 a year for eachteam. Sprint Car regulations vary fromtrack to track, and region to region, but ASCS rules are being adopted moregenerally across the USA, whether thetrack is an ASCS member or not. Thereare also around 50 smaller Sprint Carorganisers.

2.2.2

MARKET TRENDS

Within the Open Wheeled Oval Racingcategory, the Sprint Car segment is fairlystatic at the professional level, while muchthe same can be said of amateur levelopen wheel racing. However, within theprofessional level of open wheel racing,IRL is currently experiencing high growthand will add much of the turnover depictedin Diagram 4 above.

In 1996, Tony George, owner of theIndianapolis Motor Speedway, removedthe Indianapolis 500 from the CARTschedule. He cited three main reasons forthis; the growing cost of competing inCART, the lack of opportunity for USAdrivers in CART, and the increasingdistancing of CART from oval racingtowards road and street courses. Georgeset up the oval based IRL series around itsshowpiece event, the Indianapolis 500.Technical regulations were set to producelower cost racing with the result that thetwo series shortly became technicallyincompatible. Due to the place of the Indy500 in USA sports culture, the centrepieceevent of USA open wheel racing was lostfrom CART. Over the last 6 years anincreasingly divisive CART/IRL war hassplit USA open wheel racing to the benefitof neither series.

Recently, CART has managed to hastenits own problems with a series ofmarketing, technical and managementdecisions that have not increased its

attraction to USA audiences. Increasingly

over the past 2 years, existing CARTteams have begun to cross over to IRL,with the major defection of Penske thisyear highlighting the level of teamdissatisfaction within CART. In the shortterm it appears that Tony Georges IRLmay be winning the war for the hearts andminds of USA open wheel racing.

While IRL technical regulations are morerestrictive than CART, the closeness toEuropean style regulations andtechnology levels, in comparison toNASCAR, has always meant a highdegree of involvement for the technologyled European firm in this arena.

2.2.3

THE UKS PLACE IN THE OPEN

WHEEL SEGMENT

Within the Open Wheel segment, twodistinct areas arise for the UK supplier.The close nature of the professional,Open Wheel IRL market to a Europeanregulatory environment, and the budgetsavailable, mean that IRL is a strongmarket for European suppliers. Incontrast, the professional open wheeledSprint Car market, and the amateur openwheel market, has virtually no overseaspenetration at all.

The Open Wheel, Professional Sprint Carsegment is a low technology formularelying on V8 engined, spaceframechassis. While its higher-levelcompetitions, like the World of Outlawsseries, are well funded, there is no currentnon-indigenous motorsport firminvolvement at any level. The cost ofsupply of advanced technical serviceswould be beyond the reaches of thebudgets of these teams, but it appearsthere may be some room for the sorts ofservice-rich components mentioned in thestock car section above.

For example, the synergies between stockcar components like brakes, clutches,hydraulic transfer, gearbox componentsand data acquisition, and those samecomponents in Sprint Car, at least on thesurface, appear quite close. While UKfirms do get involved in supplying these

components to stock cars, it seems thatthe budgets and technology level of SprintCars, while similar to a middle rankingstock car series, might offer a potentialopportunity to the UK supplier, especially ifthe firm has a presence already in theUSA market.

At the amateur level of open wheel racing,it is unlikely that UK firms would be able tocompete in what is a very price conscious,low-tech market.

STAGE 1 SECTION 2.2

THE USA MARKET SEGMENTS OVAL RACING - OPEN WHEEL

3.0

2.5

2.0

1.5

1.0

0.5

0 2003 2004 2005 2006 2007

ValueofMarket

Segment($b)

Diagram 4

Future Potential of the Oval Racing

Open Wheel Segment


17/60

17

In the open wheel professional segment ofthe IRL, as mentioned, overseas firmsenjoy a large, virtual monopoly position in

the market. This is due to IRL being a veryhi-tech market in comparison to most ofUSA racing, with a very similar regulatoryenvironment to that existing in Europeansingle seat racing. The engine suppliersare mainly British, gearboxes are all fromone British firm and chassis are British orItalian. Component suppliers like brakesand data acquisition are also British.

One comment mentioned by ourinterviewees, was that IRL would increasein specialisation, as it became moreprofessional and gained access to biggerbudgets. This would lead to an increase indemand for technical and engineeringservices like aerodynamic research andtest and motion simulation.

However, this scenario depends on theability of the USA to support two singleseat series at the high budget levelcapable of buying these services.Historically, with the popularity ofNASCAR with corporate America, this has

not occurred. It is more likely that theexisting professional teams from CART,like Penske, will gravitate to the mostsuccessful series bringing their existingtechnical relationships with them. Otherteams, who at the moment do not havethe budget of the bigger teams, will eitherbe forced out, or forced to compete in alower level series, like the newlyintroduced IRL feeder series called InfinitiPro. Conceivably, if the IRL seriesbecomes more successful, lesser teamsmight actually migrate back to CART, if thecompetition from larger teams is less

strong there. In order for the smallerteams to be able to buy the technicalservices that Britain can supply, thereneeds to be a general increase in theprofile of series, like the IRL, in order toattract the corporate dollar.

2.3

DRAG RACING

2.3.1

OVERVIEW

Drag racing in the USA is generally splitalong three lines, Professional,Sportsman and the amateur racer. TheProfessional racers are those competingin National Championships in veryspecialised, very expensive, purpose builtcars. Sportsman racers compete moregenerally at a regional level in highlymodified saloon cars. The amateur racer

competes at their local drag strip in a lessmodified road car. This lower level ofcompetition can be unlicensed and left toa local track to organise.

At the professional end of the scale, themain organising bodies are the NHRA(National Hot Rod Association) and thesmaller IHRA (International Hot RodAssociation).

The NHRA claims to be the worlds largest

motorsport organising body, with 32,000licence holders competing in 4,000 eventsat 144 tracks. Its Top Series is theprofessional Powerade Nationals,competing at 23 events, of four daysduration, across the USA. This series hasa high TV profile, leading to drag racingbeing the second most popular form ofmotorsport in the USA (after NASCAR).

The other national NHRA series is the 10round Summit Sports Compact series.

This caters for the rapidly growing marketfor modified Japanese cars and is the firstnational series to cater for this category.

This is also known as the Import Market,due to the preponderance of non-indigenous cars used.

On the next rung down on the NHRAladder, are the seven regional SportsmanSeries. These are geographicallyorganised series, where 90% of NHRAmembers will compete. Most teams will besemi-professional, or amateur, in nature.The NHRA also organise a Junior DragRacing League, utilising half scaledragsters for children aged between 8 and17. This has 4,000 competitors at 130tracks.

In contrast, the IHRA is the next largestdrag racing organiser. It has 9,000 licenceholders, 5% of whom compete in atelevised, 12 race, professional, nationalseries across five classes. The rest, theSportsmen, compete at a regional levelacross nine classes. The IHRA sanctionsraces at 82 tracks across the USA.

At the lower level of drag racing are thehuge numbers of amateur racers.Numbers at this level may exceed100,000 cars and drivers. This categoryincludes drivers competing at local dragstrips on a Saturday night, but also theincreasing number of Test and Tunenights. The latter are similar to track daysin the UK, and allow the amateur to drivea car, unlicensed, at a local venue.

STAGE 1 SECTION 2.3

THE USA MARKET SEGMENTS DRAG RACING

Table 6: Overview of the Drag Racing Segment


($ billions)

Professional NHRA 0.5IHRA

Amateur NMRA 1.5IDRC


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18

2.3.2

MARKET TRENDS

Diagram 5 provides an estimate thatprofessional levels of drag racing will carryon growing, once the general USAeconomy enables advertising budgets toincrease again. At the amateur level, weanticipate that the sport will also carry ongrowing, particularly within SportsCompact, as personal disposable incomebegins to increase in the aftermath of theeconomic downturn.

At the professional level of drag racing,the sport continues to have high levels ofTV coverage and sponsor input, secondonly to NASCAR. The NHRAs loss ofWinston as its primary sponsor seems tohave been overcome with theannouncement of Coca-ColasGATORade brand as a replacement.Increasing TV coverage for theprofessional series of NHRA and IHRAcontinues to indicate that drag racing isgrowing at the professional level.

Nevertheless, it is the lower levels of dragracing that are of as much interest. Thegrassroots of drag racing is showing asustained increase in the number ofamateur enthusiasts becoming involved. At this level of competition two strandsstand out, indicating divergentdemographic interests in the drag racinggrassroots fraternity.

Firstly, is the resurgence in popularity ofOne-Make competitions. Principal hereare competitions for the Ford V8 Mustang,

which due to its availability and price, hasgalvanised the Domestic drag-racingmarket. The NMRA (National MustangRacers Association) are the mainorganisers, with a seven event nationalseries attracting 300 competing cars.Budgets in this series can range from$60-$400,000. One-off events by otherorganisers, or series finals, can attract upto 1,500 cars and 30,000 spectators. Thedemographics of this revival are based onan increasing affluence of older racers(35-55 years old) in drag racings

traditional strongholds, and reflecting thetraditional domestic marques chosen forcompetition.

The second fast growing grassrootssegment is the increasing popularity ofSports Compact (or Import) drag racing.Most of the cars are Japanese, particularly

the Honda Civic and Acura Integra,although the Ford Focus is increasinglypopular. This sport grew from the WestCoast, where many of these imported carscame into the country. The demographicsare entirely different to most other forms ofdrag racing. Most of these enthusiasts areyoung (16-25 years old) non-whites,reflecting the California demographic inwhich the phenomena originated.

There are two main national drag racingseries for these cars. Firstly, the NHRA

organises a ten round national seriescalled the NHRA Summit Import DragRacing Series. It is claimed that rounds ofthis series attract 20,000 spectators andup to 1,000 cars. Secondly, the IDRC(Import Drag Racing Circuit) organises afifteen round national series. IDRCmeetings attract 500 cars and up to18,000 fans.

These two trends indicate two distinctapproaches to the sorts of technological

paradigm inherent in the grassroots ofdrag racing. On the one hand is theinterest in buying and modifying traditionallarge V8 engined, technologically simplecars from domestic USA manufacturers.On the other, is a younger, technologicallymore astute audience, interested in usingup to date technology like computers, fuelinjection and turbochargers to modify their

cars. To caricature a little; the domesticdrag racer relies on the tried and testedapproach to performance based on cubicinches, while the Import racer relies moreon a technology led approach.

2.3.3

THE UKS PLACE IN THE DRAG

RACING SEGMENT

Drag racing at the professional level isalmost all supplied by indigenous USA

suppliers. There are consequently veryfew British companies involved. Ourinterview respondents intimated that theyforesaw few opportunities in the nearfuture for British companies at theprofessional level of drag racing. In factsome mentioned that, technologically,drag racing was less open to change thaneven stock cars.

At the amateur level of drag racing thetraditional domestic V8 engine market is

STAGE 1 SECTION 2.3

THE USA MARKET SEGMENTS DRAG RACING

3.0

2.5

2.0

1.5

1.0

0.5

02003 2004 2005 2006 2007

ValueofMarket

Segment($b)

Diagram 5

Future Potential of the

Drag Racing Segment


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19

again mainly supplied by the indigenousindustry. British companies are notinvolved at this level of the sport and there

seems little hope that this wouldsubstantially change in the near future.

However, the fastest growing section ofUSA amateur drag racing is the SportsCompact market. This is composed mainlyof imported Japanese cars and so thelevel of non-USA suppliers iscorrespondingly strong. British firms arealready involved in this sector(occasionally via Japan), mainly in theareas of engine, gearbox and clutchtechnology.

There are two good reasons to believethat this market segment might offerstrong opportunities for British firms in theyears ahead. Firstly, the cultural affinity ofthe demographic audience for this sort ofcar is much closer to that already existingin Europe. Sports Compact fans aregenerally younger, ethnically diverse,brand conscious and technologicallyaware. These characteristics play rightinto the hands of the hi-tech expertise of

many of the firms from the UK motorsportindustry, and are in contrast to theprevailing technological culture of themajority of the rest of the USA amateurdrag racing market.

The second reason for the potential in thissegment, is the existing expertise of thesefirms with Japanese cars. The mostdemanding level of competition in theworld for Sports Compact cars is theWorld Rally Championship (WRC). Withinthis series, Japanese manufacturers have

been very successful, particularlyMitsubishi and Subaru. However, boththese manufacturers subcontract theircompetition car development to Britishspecialist firms; respectively RalliartEurope and Prodrive. In addition to theWRC, the British Touring CarChampionship has a long history ofsuccessful Japanese manufacturersinvolvement, particularly Nissan, Toyotaand Honda, again built and run throughBritish subsidiaries. Many of thecomponents sold in Japan for the Sports

Compact motorsport market were, in fact,developed, or made, in Britain.

Due to the high rates of computertechnology existing in Japanese OEMcars, the market audience is already morecomputer literate than most. Many existingJapanese OEM cars are more easilytuned by a laptop than with bolt onaftermarket engine accessories. ExistingUK experience of small, turbocharged fourcylinder engines is at a greater level thancurrently to be found in the USA. Theproducts that this market would beinterested in are specialist componentslike brakes, clutches, gearbox, gearboxcomponents, hydraulic transferequipment, engine components, fuelinjection, engine management andturbochargers. Much of this equipment issimply not yet made in the USA. The otherarea of British expertise in this segment isdata acquisition. Computers andelectronics are at a relatively low level inmuch of amateur drag racing, but thetechnologically savvy audience existingfor the Sports Compact market couldmake the supply of data acquisition alucrative area of opportunity.

2.4.

OFF ROAD

2.4.1

OVERVIEW

The Off Road market segment in American motorsport caters for 4 wheeldrive vehicles (USA Land Roverequivalents), USA pickups and highly

specialised niche buggy vehicles. Due tothe sort of terrain needed, the sport is

concentrated in the Mid-West and theSouthwest. The Federal Bureau of LandManagement owns much of the land used.

The differences between this categoryand rallying, are twofold. First, Off Roadracing is comprised of laps of a course,ranging between 35-100 miles per lap.Rallying uses one-off special stages.Second, most of the cars are USA built.The sort of competition and the type ofvehicle used are quite close to the formatof the Paris-Dakar Rally.

The main organising body for Off Road isSCORE International Off Road Racing.SCORE run a 6 race series, of which halfthe events are run in Southern Nevada,and half in Baja California. The famousBaja race is part of this series. SCOREraces feature 17 pro classes for cars andtrucks in USA races and 7 more proclasses for motorcycles and ATVs for thethree races held annually in Mexico.Races in the USA average 150 entries,and 225 in Mexico.

Other organisations include the Best in theDesert Series, who run four events a yearin Nevada, and CORR (Championship OffRoad Racing). CORR differ from theprevious two organisations in thatalthough they use the same sort ofvehicles, they compete on short tracks,much like rallycross does in Europe.CORR have a 14 round series basedaround Wisconsin and Michigan.

STAGE 1 SECTION 2.4

THE USA MARKET SEGMENTS OFF ROAD

Table 7: Overview of the Off Road Segment


($ billions)Off Road SCORE 0.5

CORR


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20

2.4.2

MARKET TRENDS

In the Off Road segment, trends are fairlystatic apart from the growing interest in aform of stadium racing, more suitable fortelevision coverage, and promoted byCORR. In Diagram 6 we predict fairlysimilar levels of turnover over the next fiveyears.

2.4.3

THE UKS PLACE IN THE OFF ROAD

SEGMENT

The Off Road market is mainly comprisedof USA suppliers. Foreign imports to themarket do exist, but are mainly to servicethe modification of Japanese vehiclesused in Off Road competition. Britishentrants in this market arecorrespondingly few, although theJapanese connection may be one area inwhich existing British experience ofmodifying small capacity Japaneseengines might be utilised. Ourinterviewees did suggest that there mightbe a market for some British goods in thissegment, principally in the area ofcomponents like clutches, gearboxcomponents, hydraulic transfer andgearboxes. However, the number ofparticipants in this area is quite small,compared to other segments like stockcar. The one factor in its favour may bethat due to the terrain requirements of theevents, Off Road competitions do tend tobe concentrated in the California - Nevadaarea of the USA. This could indicate thatreaching the end users via distributors isnot such a geographically dispersed affair

as exists in some other segments.

2.5.

RALLYING

2.5.1

OVERVIEW

Special stage rallying in the USA isorganised along similar lines to that in theUK. The SCCA (Sports Car Club ofAmerica) is the main organising body. The

SCCA organises regional championships,called ClubRally, and a national series,called the ProRally Series.

The SCCA has 1200 competitors for itsrally programmes. The regional ClubRallyseries are for amateurs and semi-professionals, while the National ProRallyseries is for professional teams.

In the ClubRally Series there areapproximately 35 events spread overseven regional championships. Thehighest placed finishers in each regionalseries all meet in one event to find the

National ClubRally champion.

ClubRally events have five differentclasses from Production to the highlymodified Open class. The ProRallySeries has those same five classes, but

adds the FIAs Group A and N classes.There are ten ProRally events that attractapproximately 80-120 cars each.

Another rally organising body is the ARSG(American Rally Sport Group) of Nevada.This is a much smaller organisation thatorganises one big event a year, and a fewsmaller local ones.

STAGE 1 SECTION 2.5

THE USA MARKET SEGMENTS RALLYING

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.02003 2004 2005 2006 2007

V

alueofMarket

Segment($b)

Diagram 6


Off Road Segment

Table 8: Overview of the Rallying Segment


($ billions)Rallying SCCA 0.1

ProRally


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21

2.5.2

MARKET TRENDS

Rallying is the fastest growing form ofmotorsport outside NASCAR, according tothe SCCA. We reflect this in the growthfigures indicated in Diagram 7. As thegrowth of the WRC brings in moremanufacturers, so the SCCA ProRallySeries has also grown and expanded inpopularity. One of the main reasons forthis is the increasing participation ofJapanese manufacturers at the top levelof USA rallying. Reflecting the samedemographics as demonstrated by thegrowth of Sports Compact drag racing,firms like Subaru and Mitsubishi arefielding importer run works teams in theSCCA ProRally Series. While in the earlystages of development, there is no doubtthat the continued success of SportsCompact cars in the USA market will leadto these cars eventually being used at thelower levels of the USA rallying market.

One of the interesting future trends of thissegment will be if the huge popularity ofSports Compact (Import) Drag Racing can

be transferred to rallying. Many of theSports Compact audience are youngadults, and it is possible that as the DragRacing market matures, some of thisaudience may graduate to other forms ofmotorsport. Road racing, as seen in thenext section, is already growing in theSports Compact categories, and if rallyingcould appeal to the technically literate,brand conscious Sports Compact DragRacing audience, then its growth potentialcould be very significant.

2.5.3

THE UKS PLACE IN THE RALLYING

SEGMENT

At the professional level of the USArallying segment, non-indigenoussuppliers are very apparent. Many of thecars used at this level are JapaneseSports Compacts similar to those used inthe WRC. Consequently many Britishfirms are already involved at this level ofUSA motorsport. British firms are at anadvantage in this market, not just becauseof the Japanese connection, however.Rallying is still a comparatively new sportin the USA, and many of its influences are

European, if not British, in origin. Thisstretches not just from the areas ofcomponent supply, but also through theorganisational structure of the eventsthemselves.

Firms, like Prodrive, already have a bigpresence in the USA professional rallymarket and its USA-based team has wonthe SCCA ProRally championship. As thestature of the championship increases,and more USA teams use contemporaryWRC technology, British suppliers role in

the market can only increase. This rolecould encompass the wide array ofspecialist components and services

currently in use in European rallying.Future prospects look bright for thissegment if rallying continues to grow inpopularity, even though it is starting from arelatively low baseline.

Amateur rallying in the USA currentlyutilises older technology than existing atthe professional level. Some vehicles areEuropean in origin, reflecting the newnessof rallying in the USA and Europeanrallying tradition. In the future, astechnology filters down from the

professional levels, the amateur levels ofUSA rallying could prove lucrative forBritish firms.

STAGE 1 SECTION 2.5

THE USA MARKET SEGMENTS RALLYING

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.02003 2004 2005 2006 2007

ValueofMarket

S

egment($b)

Diagram 7

FuturePotential of theRallying Segment


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22

2.6.

ROAD RACING

2.6.1

OVERVIEW

Road racing in the USA is the categorymost similar to European style racing.Professional road racing is split amongstseveral organising bodies and disciplines,as is Amateur road racing.

Professional Road Racing

CART (Championship Auto Racing

Teams) is an international series cateringfor carbon fibre monocoque single seaterscurrently powered by turbocharged V8racing engines. Chassis are built inBritain, while engines come from Britainand Japan. CART has a 20 raceinternational schedule, with 11 races in theUSA, and has fields of 20 cars. Teambudgets run to the tens of millions ofdollars. The IRL is the major competitor toCART.

CART also has two domestic, lower level,single seat series for professional teams.Both series are for identical engines andchassis. The lower category is BarberDodge Pro, while the intermediatecategory is Toyota Atlantic.

In the sportscar arena there are two mainorganisers. The first is Professional SportsCar Racing Inc who are mainly known fororganising the American Le Mans Series(ALMS). ALMS is a 10 race series, basedin North America, for professional

sportscar teams running to Le Mansregulations. Professional Sports CarRacing Inc also sanction three supportseries for the ALMS; the Panoz RacingSeries for one-make Panoz sportscars,the Historic IMSA GTP Challenge forhistoric sportscars, and the Star Mazdaseries, for identical Mazda powered singleseaters.

The second main sportscar organiser isthe Grand American Road RacingAssociation (GARRA). This organisation is

closely connected to ISC, run by theFrance family that control NASCAR. Theysanction three main road racing series.One is a 10 race national series forsportscars similar to the ALMS, butwithout the factory involvement occurringin ALMS. This is called the Rolex SportsCar Series and their main event is theDaytona 24 Hours. The second seriesruns the same 10-event schedule and iscalled the Grand-Am Cup Street StockChampionship. The Grand-Am Cuporganises events among street stock carswith liberal modifications. The third seriesis slightly different to the first two. This is

because the series is sanctioned byGARRA, but organised and administeredby Formula Motorsports Inc. This series iscalled FF2000 Zetec, and it has a 14 racenational series. The series utilisestubeframe single seaters, mainly made inEurope, and is recognised as a key feedercategory to the higher levels ofprofessional single seater racing likeCART.

The last of the major professional roadrace organisers is the SCCA. SCCA Pro

Racing has three main areas ofcompetition encompassing 800 licenceholders. The three categories are Trans- Am, World Challenge and Pro SpecRacer. Trans-Am cars are highly modified,V8 tube frame cars with composite bodiesrepresenting road-going cars. It is thelongest running road racing series in theUSA, comprising 11 rounds across thecountry. World Challenge Cars are splitinto two classes; production basedsportscars, and production based touringcars, also racing in 11 rounds across theUSA. Pro Spec Racer features identical

sportscars all made by an SCCAsubsidiary. It is the national series of theSCCAs amateur racing Spec RacerClass.

Amateur Road Racing

Amateur road racing in the USA has manysanctioning bodies, but the SCCAsanctions 60% of the competitors. In themain, the other sanctioning bodies arehistoric racing and one-makeorganisations.

The SCCA has 24 categories of amateurroad racing, stretching from singleseaters, to sportscars and saloons. TheSCCA has 10,000 licence holders in thiscategory, a third of whom compete in thesingle seater categories.

Another smaller, but similarly broad basedorganising body, is NASA (National AutoSport Association), which grew out ofrunning track days. In terms of numbers,the one-make car organisers like the

Porsche Club of America, BMW and Viperare also large. The Porsche Club, forexample, has 1600 road racing licenceholders. It estimates that 250 carscompete at each of its 26 events.

2.6.2

MARKET TRENDS

As depicted in Diagram 8, on the facingpage, turnover in the Road Racingsegment is foreseen to decrease over the

STAGE 1 SECTION 2.6

THE USA MARKET SEGMENTS ROAD RACING

Table 9: Overview of the Road Racing Segment


($ billions)

Professional CART 0.75ALMS

Amateur SCCA 0.25PorscheOne Make


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23

next few years. A slight recovery from2006 may be possible. This is dependenton increasing numbers and

professionalism of amateur road racing, apossible recovery of CART, together witha general recovery in the USA economyand advertising budgets.

At the professional level of road racing,the major negative trend is the continuingbattle between IRL and CART (seeSection 2.2.2). Other trends inprofessional road racing are theincreasing move to one make chassis andengine formulae in the single seatcategory, mirroring similar changes in

Europes road racing categories. BarberDodge Pro and Toyota Atlantic are twosuch spec chassis and engine series. Insports car racing, a similar situation existsas that between CART and IRL. Twoseries, the ALMS and GARRA seriesostensibly cater for differing budget levelsof professional sports car series.However, splitting the two sports carseries in this way, is to the benefit ofneither.

At the amateur level of road racing trendsare fairly static apart from in one area.This is the increasing (25% a year) use of

Sports Compact cars at the amateur level,mirroring the national automotive trendtowards smaller, lightweight, moretechnologically advanced vehicles. Whilethere are domestic manufacturersinvolved, the Ford Focus for example,most sports compact cars are fromJapanese manufacturers.

2.6.3

THE UKS PLACE IN THE ROAD

RACING SEGMENT

The CART series is still the premier roadracing series in the USA. Due to thesimilar regulatory environment this seriesshares, with Europe, the level of non-USAfirms involved in CART is high, and themajority of these are British. All thechassis come from the UK, as do thegearboxes, data acquisition and some ofthe brakes and engines. Many of theteams also utilise the specialistengineering and aerodynamic servicesthat UK firms offer, like wind tunnel testingand test and motion simulation.

The future of this part of the road-racingsegment is difficult to predict (see Section2.2.2), as many CART teams are

migrating towards the IRL series. This isdue to the current strength of the IRL, withthe Indy 500 event as its centrepiece, anddue to political problems within CART. It islikely that British component and servicessuppliers in this segment will continue tokeep business if CART teams migrate toIRL, because they will continue to utilisethose services whilst in the IRL. However,it is difficult to foresee the combinedIRL/CART market segments increasingoverall unless both CART and IRL jointlygain a higher profile in the battle for theUSA corporate advertising dollar - whichappears unlikely.

At the lower levels of single seatprofessional road racing, the similarity toEuropean series sees a continued strongEuropean manufacturer presence. At thislevel, the UK industry dominance is lessmarked. The feeder series to CART areToyota Atlantic, Barber Dodge Pro andFormula 2000. These first two series areone make chassis and engines. Toyota Atlantic chassis and engines are built in

the USA; in Dodge, the chassis are Britishwhile the engines come from the USA. InFormula 2000, Britain has a strongpresence that is sometimes threatened byother European manufacturers. In thefuture, it is possible that when the onemake formula regulations come up forrenewal, British suppliers may besuccessful in bidding for the productionrights.

In other levels of road racing, USAsuppliers have more of a stronghold. In

Trans Am, for example, many componentscome from the USA, as do chassis andengines. Trans Am rules rely on V8engined spaceframe chassis, somethingof a USA speciality. While Britishcomponent supply here is strong, it isdifficult to foresee any change in the abilityof British firms to supply the market. InSports Car racing, the European supplierelement is strong. Chassis are Italian andBritish, although there are some key USAplayers. Engine supply is more strictly splitbetween Britain and the USA. Like TransAm, British component supply is strong in

STAGE 1 SECTION 2.6

THE USA MARKET SEGMENTS ROAD RACING

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.02003 2004 2005 2006 2007

V

alueofMarket

Segment($b)

Diagram 8


Road Racing Segment


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24

this area, with significant UK presence in,for example, brakes, gearboxes, and dataacquisition. Again while a strong market

for the UK, it is difficult to foresee anymajor change in demand unless SportsCar racing increases its presence on theUSA television stage.

Below sportscar racing there is theproduction racing series organised by theSCCA and GARRA. The GT series ofthese championships compete with anequal mix of USA and German cars, whilethe Touring series compete with a mixtureof imported cars from Germany and astrong Japanese presence. Due to thesimilarity of regulations to British series,like the British Touring Car Championship,some of the cars competing in the Touringseries are fully built in the UK. Britishcomponent supply is already strong and islikely to remain that way, with dataacquisition and brakes having a strong UKpresence. The obvious potential increasein market for UK suppliers in the segmentis the increasing use of Japanese SportsCompact cars in the Touring series, whereBritain already has a strong level ofexpertise.

The amateur level of road racing mirrorsthe same mixture of indigenous and non-USA suppliers as in the professional levelsof road racing. In the single seatcategories there is a high level of UKinvolvement in both chassis manufactureand component supply. Domesticmanufacturers are present in supplyingchassis at this level of racing, but incomparison to their UK counterparts, tendto be smaller firms producing smaller runsof cars. Popular UK components sold in

this market are typically data acquisition,gearboxes and brakes. In the non-singleseat categories, the growing trend is againthe use of Sports Compact cars inproduction car classes, an area whichcould be very fruitful for UK firms giventheir existing expertise.

2.7.

KARTING

2.7.1

OVERVIEW

Karting in the USA is less professionalthan that in Europe. Most karters do notrun under the auspices of an organisingbody, but run instead in outlaw series.These series are usually organised at thelevel of the individual track owner.

Of the estimated 40,000 karters in theUSA, 80% compete on oval tracks,whether dirt or paved. In Europe the 2stroke is the common engine, whereas inthe USA the 4 stroke is far more common.

Less than 20% of USA karting is poweredby 2 strokes. Road racing is most popularon the West Coast, whereas in the MidWest and the South, oval racing is morepopular. There are hundreds of classesand many regional variations to USA

karting.

The WKA (World Karting Association) isthe largest sanctioning body with 10,000licence holders. It holds nationalchampionships and regionalchampionships across all the categoriesof USA karting; dirt oval, paved oval, roadracing, endurance and gearbox/non-gearbox. The IKF (International KartFederation) is another large organiser,with the same sort of geography/classstructure as the WKA. There are many

STAGE 1 SECTION 2.7

THE USA MARKET SEGMENTS KARTING

Table 10: Overview of the Karting Segment


($ billions)Karting WKA 0.1

IKF

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.02003 2004 2005 2006 2007

ValueofMa

rket

Segment($

b)

Diagram 9


Karting Segment


25/60

more kart organisers operating on aregional level, or operating nationally butwithin one class, like SKUSA (SuperKarts

USA), who deal purely with gearbox karts.

2.7.2

MARKET TRENDS

In Diagram 9, opposite, we do not foreseeany significant increase in value in thesegment. Karting is generally seeing amove away from 2 stroke engines towardsmore environmentally clean 4 strokes, andthis is reflected in the karting segment ofUSA motorsport. Concurrent with these

changes is an increasing interest in usingthis more environmentally friendlytechnology in an indoor environment. TheUSA has far less indoor karting facilitiesthan are present in Europe.

2.7.3

THE UKS PLACE IN THE KARTING

SEGMENT

Most suppliers in the karting segment areindigenous. There is one large domestic

engine manufacturer, and one mediumsize manufacturer, that supply the majorityof the market, while most chassis aremade locally. Overseas manufacturers areinvolved in supplying some engines,mainly Japanese, while some tyres arealso sourced from Japan. Some of the topend kart road racing uses the best Italianequipment, reflecting the presence ofItalian manufacturers in many countries.British suppliers are scarce in karting inthe USA. The growth of indoor karting inthe USA may be a potential market for UKsuppliers, for example, through the

development of clean propulsiontechnology for the indoor environment.

2.8

AUTOCROSS

2.8.1

OVERVIEW

Autocross is known in the UK as Autotest.Although a strictly amateur sport, it is thegrassroots from which competitors canmove into other, more expensive andcomplex categories, as well as being anend result in itself. Autocross is run ontemporary paved courses, such as can bemarked out in a large car park, forexample. The main organising body hereis the SCCA.

The SCCA has 15,000 licence holders

competing in 1,200 SCCA licensed eventsa

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