Harley Sees The Light

"Harley-Davidson has one of the strongest brands in the world, a leather-clad aura of Americana that resonates with Texas border-patrollers, Queens hipsters and Easy Rider fans the world over. It also makes fine motorcycles.
Neither of those things seem to be enough anymore. That was the troubling message the company sent to Wall Street on Tuesday when it unveiled a plan to increase its marketing budget by 65 percent next year, while dialing up its new product R&D by 35 percent. All told, Harley will fork out $70 million in 2016 in hopes that an infusion of cash will turn around a prolonged sales decline.

With any other company the strategy wouldn?t be surprising. But Harley executives talk about their brand and the quality of their bikes like they are unassailable truths, the benchmark currency of motorcycles. In the past, the company?s response to rough financial stretches has been pretty straightforward: blame the economy, tweak production or distribution, and keep on cruising.
That was the case in July when Harley also posted a dismal result. It cited a glut of imports?particularly Japanese brands?that were able to slash prices because of the relatively strong dollar. Rather than following suit, Harley said it would trim production, stay the course and wait for better times.

The message: a Yamaha or a BMW will never represent ?freedom,? no matter how cheap they get. Now, Harley has changed course. It is bent on ?increasing product and brand awareness? and cranking out even better bikes.
In truth, Harley?s market-share is under attack and not just via price cuts. A whole gang of motorcycle brands are after the next generation of riders that may have never seen Easy Rider (or even Wild Hogs).
The biggest threat has been Polaris?s Indian, a resurrected brand that also dials up the Americana. Royal Enfield, an India-based manufacturer, opened a dealership in Harley's hometown of Milwaukee in August with plans for 100 more U.S. stores. Triumph Motorcycles has a burgeoning line of ?classic? bikes and cruisers. Yamaha has a new model for purists and Ducati is about to start selling another machine for speed-freaks and Italophiles.
In fact, the biker economy is booming. In the first nine months of the year, the number of registered motorcycles surged by 6.6 percent in the U.S. and 10.2 percent in Europe, according to data compiled by Harley.
The people buying these machines are probably very familiar with Harley and that should scare Hog investors more than anything else?the prospect that the brand isn't fading or forgotten, but irrelevant to a growing chunk of the market".

Author: Kyle Stock - Bloomberg Business

Every time I hear about how good they've gotten with their suspension, I notice the rear travel and wonder how anyone could get a good ride out of 2".

raybob said:

Well, here's my $0.02 worth.

"pitching, heaving, yawing, and wobbling, bouncing and flouncing about the island, every bit of plastic on the thing creaking so loudly I could hear it over the stereo and and ear plugs. The 2" (and I'm being generous) of rear suspension bounced us both up out of the saddle multiple times on the "interstate".

After the ride, my wife asked me how I liked the bike. I told her, "Remind me never to buy one of these things.".

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I always wondered just what it was REALLY like on a Harley. NOW I know. My suspicions are found to be true.

With 2" of rear travel, you use up half of that just sitting on the bike which is one reason you rarely seem them motoring down a bumpy road at a brisk pace - they're usually in "parade formation" going 15-20 mph below the posted speed limit and holding up soccer moms, older folks, and even semis. It's just part of the price of being cool. :-(

People have been predicting the demise of H-D for decades and so far it hasn't happened. One major problem for them has to do with demographics. Their bikes are too expensive for someone with a wife & kids so they are often bought by baby boom retirees and that group is dwindling smaller each day.

I have rented several Harleys including the Dyna Low Rider, Softail Classic, Street Glide, and Electra Glide Classic. The Harley dealer was the only place to rent a bike when my son came in on leave while in the Army.
My conclusion was the same, not my cup of tea, no thanks. Especially when you see how much they want for their bikes!
I now have two bikes, so when Brian comes in for a visit, don't need to rent any more.

It is interesting that many 'riders' seem to like some of the Sporty's better than the hogs. I know one guy traveling the US on his and he loves it.

But, if you go into an HD dealer they will use terms like "girls bike" or "it comes with training wheels" when they refer to one. Kinda like, if you really, really want one, we'll sell it to you, but, that will make you a wimp and we'll no longer consider you a real biker.

HD might have to admit that they are having another brand crisis such as the one back in the 70's/80's. Will be interesting to see what the result is.

Obviously the Big Twins have more profit involved - both for the store and the salesman so they want to push those over a Sportster or one of the new 500/750 V-twins. Has anyone seen any of the new 500/750s twins in a dealership?

By the way, I don't believe the lame excuse that Japanese cruisers are hurting H-D's business. That's the excuse they used in the 1980s to get Congress to enact a tariff. People who want to buy a H-D, buy an H-D and they won't settle for a lookalike not made in Milwaukee. The Power Cruisers from Yamaha and Suzuki have taken some potential H-D sales but perhaps an even bigger bite was taken by the new Indian.

Yep, and no one in the Indian showroom is telling people the Scout is a 'girls bike'.

Harley owners are "bikers". The rest of us are riders.
Look in the classifieds in your local paper, and at Ebay ads. Most Harleys get less than 1000 miles a year added to the odometer. Many average less than 300.

suvcw04 said:

Most Harleys get less than 1000 miles a year added to the odometer. Many average less than 300.

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300 miles? A year!? That would be a nice mornings' ride for most of us on this forum.

Daboo said:

Interesting article, Warren. Thanks for posting.

To me, every H-D looks about the same, even though there is a plethora of models. It's like we take this part out of the parts bin and marry it to this previously built bike...and call it something different.

Chris

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Disclaimer: I have never ridden or even sat on a Harley-Davidson motorcycle.

Exactly, saddle bags or not. Two different bikes. Fairing or not, two bikes.

I visited Rock and Roll City Harley-Davidson last week when I took my wife's MINI in for a recall service. I wanted to give them a fair shake. It's a warehouse size dealership. Melissa greeted me as I entered and I told her I didn't know anything about HD and I was curious. She assumed I didn't ride because I was not knowledgeable about HD. I told her I did ride, she asked what. I told her Triumph and she looked at me like I was a visitor from the planet Argon. She asked me how to spell Triumph!

She showed me Sportsters, Ultras, Fat Girls or some such machine. She was all about the chrome or lack of chrome, the latches on the saddle bags, the navigation system, radio, etc. I gotta say the Willie G foot pegs were real nice. Not much about the bikes and how they work.

I came away thinking they were basically all the same, some just a little bigger or smaller, with a little more or a little less chrome; fairings or windshields or nothing; or saddlebags or no saddlebags. What's the draw? Is it being in the tribe?

I really was impressed with the Harley-Davidson ping pong balls, cue balls and thermometers. The guitars signed by the members of Led Zeppelin, the Rolling Stones and Bob Dylan were the highlight.

All that said, EVERYBODY, okay almost EVERYBODY in Ohio has a Harley. They must be doing something right.

vzshadow said:

Disclaimer: I have never ridden or even sat on a Harley-Davidson motorcycle.

Exactly, saddle bags or not. Two different bikes. Fairing or not, two bikes.

I visited Rock and Roll City Harley-Davidson last week when I took my wife's MINI in for a recall service. I wanted to give them a fair shake. It's a warehouse size dealership. Melissa greeted me as I entered and I told her I didn't know anything about HD and I was curious. She assumed I didn't ride because I was not knowledgeable about HD. I told her I did ride, she asked what. I told her Triumph and she looked at me like I was a visitor from the planet Argon. She asked me how to spell Triumph!

She showed me Sportsters, Ultras, Fat Girls or some such machine. She was all about the chrome or lack of chrome, the latches on the saddle bags, the navigation system, radio, etc. I gotta say the Willie G foot pegs were real nice. Not much about the bikes and how they work.

I came away thinking they were basically all the same, some just a little bigger or smaller, with a little more or a little less chrome; fairings or windshields or nothing; or saddlebags or no saddlebags. What's the draw? Is it being in the tribe?

I really was impressed with the Harley-Davidson ping pong balls, cue balls and thermometers. The guitars signed by the members of Led Zeppelin, the Rolling Stones and Bob Dylan were the highlight.

All that said, EVERYBODY, okay almost EVERYBODY in Ohio has a Harley. They must be doing something right.

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Then there's all that Village People clothing you have to buy. And, don't forget the scarf.

HD is like Jeep. They are in the business of selling image. They certainly are not in the business of selling performance or reliability.

JohnC said:

They are in the business of selling image.

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Bingo, John! You win the prize. Hit the nail RIGHT on the head.

[...Most Harleys get less than 1000 miles a year added to the odometer. Many average less than 300...]

When I was an MSF instructor, that was pretty evident because people who rode such a tiny amount each year still rode like beginners, even after 5-10 years!

There's no such thing as Harley riders; only Harley owners.

"Faced with disappointing earnings and declining market share, companies typically reduce prices to regain a competitive edge. Harley-Davidson (HOG), though, is anything but typical.

The motorcycle maker that's been synonymous with loud, powerful bikes roaring down the highway for more than 100 year is one of the world's most recognizable brands. But it has struggled lately in the face of heightened competition and the rising dollar. According to Harley-Davidson, now isn't the time to cut prices even though its market share fell 3.9 percent in the latest quarter.

"While we anticipated some level of share loss following the 13.4 points of market share gains in recent years," said Harley CEO Matthew Levatich during Harley's earnings call on Tuesday, "our market share over the last four quarters was more severely impacted than we expected as a result of the competitive environment and the inclusion of autocycles in the industry numbers." In case you're wondering, autocycles are three-wheel vehicles that are part automobile and part motorcycle.

"We aim to put out foot down and defend our leadership position," said Levatich in interview Wednesday with CNBC, adding that the company's "incredible brand loyalty" would be undermined if it starting discounting its bikes.

Harley still has a dominant market position, with a 52.4 percent share, and its rivals are willing to do whatever it takes to take sales from the Milwaukee-based company, including offering discounts.

Polaris Industries (PII), parent of Indian motorcycles, is offering some models for no money down, with a complimentary five-year warranty and a $1,500 credit for accessories. That strategy is working. Polaris, which also makes snowmobiles and all-terrain vehicles, reported on Wednesday that its motorcycle sales surged 154 percent in its latest quarter to $160.4 million, fueled by strong demand for Indian, Victory and Slingshot bikes.

That far surpassed industrywide sales growth of midsize and heavyweight cycles, which rose in the low-single digits, according to Polaris. However, the company's stock sold off sharply (down 10.2 percent to $107.83) on Wednesday after it reduced its 2015 revenue growth forecasts from a range of 10 percent to 12 percent to a range of 10 percent to 11 percent.

"Basically, Polaris and some of these other guys have brought their pricing down to the point where a used Harley was competitive with their new bikes," said Brad Lamensdorf, who manages AdvisorShares Ranger Equity Bear ETF, which is shorting Harley, meaning he profits when its shares fall. He added that Harley will need to start pricing "more aggressively" to counter these market trends.

"We really felt like this premium that Harley-Davidson had over the rest of the industry for a long time, was part of the feel-good phenomena from the baby boomers," he said, adding that boomers are now trading in their bikes for La-Z-Boy recliners.

Harley remains unmoved by such arguments. Instead, it plans to rev up demand for its bikes by ratcheting up spending on "customer-facing marketing" by 65 percent in 2016 compared with this year. It also will hike outlays on new product development by 35 percent. To pay for all this, Harley says it will cut an undetermined number of jobs.

Longbow Research analyst David S. MacGregor, who has a "neutral" rating on Harley and Polaris, argues that Harley should stick to its guns about discounting.

"It's definitely the right call to avoid discount and heavy rebating, and focus more on delivering a better product, a more relevant product," he told CBS MoneyWatch, adding that executing such a strategy is easier said than done.

Harley shares, which have dropped 29 percent so far this year, fell by 2.5 percent on Wednesday to $47.03, continuing Tuesday's sell-off. Investors sent the company's shares into a skid after it slashed its outlook for 2015 shipments."

Author: Jonathan Berr : Moneywatch

I remember someone in the rider safety community making a comparison that is still valid today. I can't recall his exact words but it went something like this "You can ride for 6 years in rural (just add any state name) and learn very little, but riding and surviving for 6-months in NY City is quite another matter."

People who only ride infrequently no matter where they live are usually in the first category.

DirtFlier said:

I remember someone in the rider safety community making a comparison that is still valid today. I can't recall his exact words but it went something like this "You can ride for 6 years in rural (just add any state name) and learn very little, but riding and surviving for 6-months in NY City is quite another matter."

People who only ride infrequently no matter where they live are usually in the first category.

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That is a very accurate statement. A lot of "riders" posting in this thread wouldn't last five minutes before becoming "road kill" in Atlanta's Friday Night Follies. Riding around corn fields is a lot easier than riding in city traffic.

RedLdr1 said:

That is a very accurate statement. A lot of "riders" posting in this thread wouldn't last five minutes before becoming "road kill" in Atlanta's Friday Night Follies. Riding around corn fields is a lot easier than riding in city traffic.

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Or as is the case down here, rides around the cane fields.........

If you can survive traffic around Baton Rouge and on I-10, you can survive about anywhere. New Orleans traffic is worse than Baton Rouge, if you can imagine that!