Commentary

Harley Says It Was Too Optimistic -- But It's Still Pumped About What's Coming

Harley Davidson, which has been embroiled in an off-again, on-again battle  with President Donald Trump over moving some of its production overseas, yesterday lowered  its expectations for global sales this year, continuing a downhill trend as it fails to attract younger riders to its century-old “hogs”  in the U.S. and European markets.

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“The Milwaukee-based motorcycle maker … expects to ship 212,000 to 217,000 bikes worldwide this year. That range is 5,000 lower than the company’s previous forecast -- and well short of last year’s total of 228,051. If Harley’s downbeat outlook holds, it will be the fifth straight year of declines for the company, whose sales peaked at 267,999 bikes in 2014,” Carleton English writes  for the New York Post.

On the positive side, Harley “reported stronger sales in China and other Asian markets and said U.S. sales should improve in the second half of the year, positive news that offset a cut to its full-year motorcycle forecast and sent shares up 5.3%,” Reuter’s Rajesh Kumar Singh writes.

CEO Matt Levatich “credited the performance to the company’s decision to set up a plant in Thailand to serve the Southeast Asian market as well as China. The decision had drawn flak from both … Trump as well as Harley’s labor unions. The move, however, has allowed the American icon to circumvent the region’s tariff barriers and price its bikes more competitively, resulting in a 77% jump in sales in Southeast Asia during the June quarter,” Singh adds.

“We are in a tough environment,” Levatich tellsThe Wall Street Journal’s Austen Hufford and Micah Maidenberg. “It’s going to take time. We are very confident that what we are doing is working.”

“Harley wants to sell half of its motorcycles overseas by 2027, up from 42% last year. It is introducing new models including an electric-powered motorcycle, racing-style sport bikes and so-called adventure bikes that can be used on an unpaved trail as well as a paved street. The company expects to release its $30,000 all-electric motorcycle, called the LiveWire, in September,” Hufford and Maidenberg continue.

“Harley’s financial troubles are nothing new, but its focus on other, non-U.S. markets is. The company has pushed to gain more market share in China and the rest of Asia -- places where motorcycles are much more of a part of everyday life. … Levatich has stated in the past the company plans to eventually derive half of Harley's revenue from outside the U.S.,”  Kyle Hyatt reminds us  on CNET’s Roadshow blog.

Hyatt surmises that Harley’s optimism for the rest of the year is rooted in expectations for Livewire, which will be its first electric vehicle.

“The Livewire situation is one that could honestly go either way for HD. The motorcycle is expensive, unlike any of its other bikes in terms of riding dynamics and performance, and of course it’s electric -- though we did really like it when we had it out  on the roads of Oregon. If its core demographic fails to embrace the model once the tech-savvy early adopters get their preorders, Harley’s outlook could become less sunny in a hurry,” Hyatt continues.

That core demographic, though, has been more the source of Harley’s woes in recent years rather than the solution to its sales slump.

“The bottom line is that they continue struggle with baby boomers and it’s not enough to offset the declines we’re seeing,” Edward Jones analyst Brian Yarbrough tells CNBC, the network’s Elijah Shama writes.

“Bigger bikes are falling out of favor with younger riders. Sales of the industry’s largest bikes, with engines of 601 cubic centimeters or bigger, fell 4.9% in the second quarter versus a year earlier, Harley said. All but one of the 36 models it sells are at least that big with some hogs weighing in around 1,000 pounds,” Shama reports.

“They need to see better growth with middle-aged and young people and their smaller bikes. They need to offset their 600cc-plus declines,” Yarbrough says.

“I’ll give them credit. They’re not just sitting on their hands and waiting for things to change. Some of the things they’re trying are starting to work. The million dollar question is whether that’s enough to stop the sales decline,” Yarbrough adds. 

Here’s another idea: How about working with scientists who are developing ways to “make aged cells younger” to keep more boomers riding and buying into their 100s?

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