Harley's Harsh Reality - Larger Motorcycles Sales Struggle

Harley-Davidson’s sales could be considered a tale of two motorcycle segments with the famed manufacturer falling on the wrong side of the story.

The American motorcycle manufacturer released its third quarter financial results and while some highlights can be found, it’s tough news for lovers of Harley and those who work there.

Starting with the good news, Harley-Davidson continues to dominate the heavier motorcycle segment, owning 53.1 percent in the 601cc-plus segment. The company claimed more of the segment when compared to the same quarter in 2016, which isn’t good news for Polaris. The other American motorcycle manufacturer eliminated its Victory line of motorcycles with the hope to shift their loyal customers over to Polaris’ Indian brand of bikes.

These results beg the question, is there an upside to dominating a shrinking market?

The apparent trend of larger motorcycles falling out of fashion has been discussed many times in the pages of Clutch and Chrome and the latest results from Harley-Davidson adds another footnote to the discussion. Harley-Davidson worldwide retail motorcycle sales were down 6.9 percent in the third quarter compared to the same period in 2016. Harley-Davidson U.S. retail motorcycle sales were down 8.1 percent compared to the year ago quarter, with the overall U.S. industry down 9.2 percent for the same period.   

“The continued weakness in the U.S. motorcycle industry only heightens our resolve and the intensity we are bringing to the quest to build the next generation of Harley-Davidson riders,” said a defiant Matt Levatich, president and CEO, Harley-Davidson, Inc. “Launching one hundred new high-impact motorcycles is a critical part of our 10-year journey, and the all new Softail line-up is a significant statement of our commitment.”

Harley-Davidson's 2018 Softail Slim

Harley-Davidson new retail motorcycle sales in the U.S. were down in the third quarter compared to the third quarter of 2016, primarily driven by weak industry conditions including the impacts of hurricanes in the southeast and Texas the financial statements explain. International new retail motorcycle sales were also down in the quarter compared to the same period in 2016, driven by weak performance in Japan, Australia and Mexico.  

Other areas to note in the financial results of Harley-Davidson are the different ways the company makes money. Aside from selling motorcycles, the company also sells aftermarket parts, clothing and other branded items as well as enjoying revenue from essentially self-financing the sales of their bikes.

Parts and accessories stayed on course when compared to last year and while its general merchandise sales were up slightly, the profit margin was down. However, it appears new motorcycle owners are paying their bike loans on time. The Financial Services segment operating income was up 11 percent in the third quarter compared to the year ago period due to a lower provision for credit losses. In other words, they expect to be dealing with fewer unpaid loans.

All the above leads to inevitable question asked too often over the last few years, what’s next for Harley-Davidson?

“As the motorcycle industry leader – with dealer strength and rider passion and loyalty like no other – we believe we are uniquely positioned to build ridership and strengthen the sport of motorcycling. Not just in the U.S. but around the world. Our investments in new product and marketing are targeted to drive ridership growth. We have the strategies, plans and people to make it happen,” said Levatich.

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