The RV industry has been plagued by high interest rates, dealer inventory expansion, production cuts, and rising promotional prices, experiencing the most difficult 24 months in a decade. After a difficult first half of 2024, thanks to the Fed's rate cut, the RV industry may eventually emerge from the predicament and usher in a healthier cost environment.

Truist analyst Michael Swartz stated that despite potential economic recession and challenges from upcoming elections weakening discretionary spending on high-priced commodities, market prospects appear to be stabilizing and showing broader investment value for the first time in two years.

Citigroup also stated in August that the affordability of ships and RVs will not only improve at 2024 levels, but will also provide buying opportunities for stocks in the industry under pressure.

For investors, Citigroup believes that Thor Industries (THO.US), Winnebago, Camping World (CWH.US), Brunswick Corp (BC.US), and Marine Max (HZO.US) are the best stocks to capitalize on changing interest rate environment.

On the frontlines are RV dealers. Dampened demand has exacerbated inventory conditions, leading to significant price reductions in RVs. Lazydays Holdings (GORV.US) cut the listed price of its 2022 and 2023 models in half to offset the low prices of 2024 models. During the company's recent earnings conference call, CEO John North stated that they will focus on what they can control, specifically maintaining a healthy vehicle inventory.

In Truist's survey of dealers, only 13% of respondents indicated that inventory levels were relatively high compared to demand, while 38% said inventory levels were too low. Apart from the inventory shortage during the epidemic, this is the largest "low inventory" reading since the end of 2017, mainly related to discretionary products, amounting to only 11%-12% of demand.

In terms of demand, the Federal Reserve cut interest rates by 50 basis points, coupled with recent promotional activities, providing consumers with more attractive purchasing opportunities. Since 80% of large items (such as RVs) are purchased through financing, even a slight interest rate cut will have a significant impact on the total financing cost.

Data shows that if the financing rate for a 0.1 million US dollar vehicle purchase over 10 years is reduced from 6% to 5.5%, savings of nearly $3,000 can be made during the repayment period. If it is over 20 years, the savings amount will more than double, while over 30 years, the savings will skyrocket to $11,433.

In addition, consumers can allocate the cost savings due to lower payment amounts each month to stocks and other areas.

For dealers like Lazydays and Camping World (CWH.US), a normal inventory environment coupled with fewer promotional prices and lower holding costs means an increase in profit margins.

Swartz stated, 'We believe that considering a healthier inventory environment, stable pricing, normalized discounts, and the recent Fed rate cut, dealer profit margins may have fallen to their lowest.'

The higher the profit, the more capital for expansion. To take advantage of a more favorable environment, Camping World has been expanding, with its market share growing from 15-18% to 25% by the end of the first quarter. With acquisitions becoming more attractive, the company plans to continue expanding, aiming to open 7 new stores every quarter.

Camping World CEO Marcus Lemonis stated in the company's recent earnings conference call, 'We will enjoy the fruits of these acquisitions,' and added that lower prices will make consumers prefer the RV lifestyle.

'Customers love this lifestyle. So, I believe that as interest rates fall, they will love this lifestyle even more. And affordability restrictions will increase because it's just an increase in monthly payments. The lower the rate, the lower the monthly payment, the wider the channel.'