Harley-Davidson and the road ahead

July 30, 2018, may go down as the most significant date in modern Harley-Davidson history.

Harley changed gears this week from its traditional cruiser formula and announced it will be building an adventure bike. And a streetfighter. And experimenting with multiple electric vehicle formats.

So how’s this going to work? For decades, there’s been very much an Us vs. Them culture in the motorcycle world: some Harley-Davidson riders want nothing to do with other brands, and there are plenty of owners of European or Japanese bikes who aren’t impressed by Harley-Davidson. Until now, only the European and Japanese OEMs have built adventure bikes and streetfighters. Will the naysayers ever be convinced to buy made-in-Milwaukee machines?

We talked to  Steve Lambert, Harley-Davidson’s U.K.-based International Marketing Director, to find out what’s going on.

Will fans of Japanese and European adventure bikes be convinced to buy American? There’s certainly been a subset of Harley-Davidson fans who have been asking for this for years. What about the rest of the motorcycling world?

Lambert says the key for Harley-Davidson’s success will be actually building its new bikes and showing them to consumers as proof that they work well.

It’s “changing those perceptions that people may have of the brand,” says Lambert. “Proof will be when people get to ride the product, proof will be when people get to own the product, and I think we will be judged exactly on that when we deliver exceptional product and exceptional customer experiences.

“We can’t tell people to change perceptions, we have to allow proof to do that.”

He says these machines will not just be styling exercises, they’ll actually perform like they’re supposed to.

“We’re going into the market to be competitive. We’re not turning out a bike that sort of looks like an adventure bike or looks like a streetfighter. These are going to be genuine, bona fide competitive models in each of those segments.”

There’s some serious backing behind this commitment. Harley announced it will invest about $200-$250 million each year until 2022 in capital spending, introducing several new models each year. The plan is to increase revenue by at least $1 billion by 2022, with an annual operating income by then of up to $250 million.

The plans are even more ambitious in the longer term. By 2027, Harley wants to have two million new riders around the world, with half of its business outside the United States. It intends to launch 100 new “high-impact” models by then. It will achieve its overhead efficiencies by “reducing costs through prioritization, automation, continuous improvement and closing gaps to best-in-class benchmarks,” and will “reallocate investment and resources to growth opportunities.”

MIXED REACTION

News of the new bikes coming from Harley-Davidson was greeted with a mixed reaction on social media; some of the online peanut gallery was happy their favourite brand was changing things up, while others waxed cynical on the news, labeling it a desperate move, an emergency shift in direction to boost sales. After all, there’s been plenty of talk about dropping sales numbers for Harley-Davidson in recent months.

That’s not the case, says Lambert: the announcement is the result of extensive behind-the-scenes work, particularly with confirmation the LiveWire electric motorcycle will be launched next August.

Launching our first EV motorcycle is not just as simple as saying ‘Here’s a motorcycle.’ There’s obviously infrastructure, dealer readiness and all those sorts of things which we need to take into account,” he says.

The cynics said Harley-Davidson would never bring it to production, but Harley seems intent on selling the LiveWire next summer.

The electric vehicles are a new direction for Harley-Davidson, but a jaded consumer might say Harley-Davidson already had a pretty good streetfighter and an adventure tourer in the company fold not that long ago — the Harley-owned Buell company built them both, although neither carried the Harley-Davidson badge.  Harley-Davidson axed Buell in 2009, and since then those markets have just grown tougher: there’s more competition in the naked bike and adventure bike segments than 10 years ago.

Lambert won’t comment on Buell; he says he wasn’t with the company then. But he does say that Harley-Davidson did a lot of research before it settled on the streetfighter and adventure bike markets. While some are writing off the ADV trend as a movement in decline, Lambert says the adventure bike scene is just like the SUV craze of the 1990s: people thought it was over, but there’s still strong demand.

Company research shows adventure bikes and streetfighters are both machines that are appealing to new riders. That’s a market segment Harley-Davidson very much wants to grow if it’s to create those two million new Harley-Davidson riders within the  next decade.

This is what we’re familiar with from Harley-Davidson: a made-in-America cruiser. But even this bike has new touches that hint at a change in company direction, starting with those flat track-style exhaust pipes, and an upside-down fork.
NEW PLATFORMS

Lofty goals indeed, but the new liquid-cooled V-twin platform introduced Monday is a key part of that plan. The new engine will come in four different displacements: the company pressers indicate a 500 cc, 975 cc and 1250 cc version, without mentioning the fourth size.

Without a shadow of a doubt, the smaller displacement makes our products more attractive to people who are new to the sport,” says Lambert. And while he didn’t talk about price tags, he did say that “as a big major brand, it’s our duty to make sure the sport of motorcycling is sustainable and one which is always exciting for new people.” Translation: Harley-Davidson knows it has to make affordable motorcycles to attract new riders.

There are a few extra tidbits in the Harley-Davidson release to its investors this week: talk of strategic partnerships with other companies to build bikes for the Asian market, machines in the 250-500 cc range. These bikes are intended to grab just a tiny bit of the market share in Asia, but the market there is so huge that even a small percentage is big business.

These teaser images of new electric vehicles, including a scooter and e-bike, show Harley-Davidson is moving itself past the old Americana tropes.

For now, Lambert says those bikes won’t be coming to North America — they’ll be built overseas for those markets. He also confirmed that global production of the Livewire electric bike will be based in the United States. But as for the rest of the lineup, Lambert wouldn’t say either way.

Given US President Donald Trump’s trade war with the European Union and other countries, it’s becoming harder for Harley-Davidson to sell made-in-America motorcycles overseas. Harley-Davidson already has a manufacturing presence in other countries, and it might make sense to build the new bikes in Brazil or Thailand to take advantage of trade loopholes. However, all the bikes sold in the US will be built in the US, Lambert says.

DEALER INNOVATION

The investors’ document talks about a plan to “Launch new urban and flexible format storefronts.” Lambert says this is to try out new downtown storefront retail space, bringing the bikes into people’s consciousness — something that’s lacking in today’s increasing urbanization, which sees more and more downtown motorcycle shops heading to the outskirts of the city, or folding completely. How can millennials and other city dwellers get excited about motorcycles if they can’t even visit the showrooms easily?

Interested in checking out a new Harley-Davidson? In a few years, some cities will see what’s essentially a “satellite dealership” model, with smaller storefronts affiliated with large dealerships, bringing the company’s motorcycles to urban centres where they will be seen.

These new stores won’t be a complete dealership, says Lambert: “Obviously we don’t have the ability to show complete breadth of range, but we can bring technology to the environment, we can put the brand in front of people, and of course clothing, merchandise, experiences, all of these things are a key part of that as well.”

Maximizing profits? Moving motorcycles back into public spaces where people can see them? Maybe the future is brighter for Harley-Davidson than the naysayers want to believe. With the new bikes supposedly coming on the market, we’ll know either way soon enough.

Read Harley-Davidson’s information package for investors here.

11 thoughts on “Harley-Davidson and the road ahead”

  1. With the aging demographic of North American riders playing havoc with H-D sales and continued survival of the Brand, I find their latest shift in direction, interesting to say the least. And while I am a die-hard Sportster fan, I wish The Mo Co the best of luck with their latest endeavour!

  2. when will they stop putting their Vtwins sideways in the frame? (I do love my Guzzi)

    But seriously, an ADV bike? The best ADV’s are made by KTM and Triumph (and more recently Honda). Why would anyone shell out more $$ for an inferior bike??? Oh. Branding…. and brand loyalty….. and fancy branded clothing… (hi there BMW!!)

  3. I have to apologize: I misread the article. It’s not 200 million total, it’s one billion dollars total! The ONLY way that pays off is if HD winds up with a significant percentage of the world market for motorcycles.

    That’s absolutely nuts: Does anyone think HD’s prospects to take over the world markets to an extent where they make a billion in profit to pay back the investors are anything better than winning the lotto?

  4. I have to think that in the market that is interested in electric bikes, the HD name and culture are actually a detriment. Another comment I read sums it up: “I say get stuffed Harley Davidson. I don’t give a damn about your bikes and their sound except to deride the self-indulgent man-children who ride them.” Maybe they should brand then as “Alta” and in small letters “by HD”

  5. Had lost any hope about H-D agricultural designs, until the 2018 Softails ! Oh ! Some promising bikes with a few new and well thought out parts. But July 30th brings great great news. H-D is going head on with the competition and stops thinking about making money adn starts about thinking to stay alive by making at last great motorcycles! Allelujah! A Streetfighter with proper placed pegs ! Jesus! And if producing motorcycles overseas save the company and jobs in America, then let it be!

  6. Ambitious, but I have to wonder if it’s got any chance. I can’t see HD trying to join in the lower end of the market. The Chinese will own that soon enough. The upper end of adventure bikes is owned by KTM and BMW with the Japanese bikes owning the middle of the market. Hypermotard is owned by Ducati, again with the Japanese owning the middle. And if you want a streetfighter you look at Ducati or Triumph. The euros have been doing this for a long time and they are very, very good at it. And anyone who thinks the japanese are going to sit still while HD tries to steal their lunch is fooling themselves.

    The Europeans and Japanese are no longer producing cheap scooters and generic low end bikes. Their quality, durability and reliability are at least as good as what comes out of HD, and the only places HD has any advantages are their appeal to tradition, a certain look, and a rabidly loyal fanbase. Also, sometimes a better paint job. But: That fanbase is notoriously averse to any changes, witness the short life of the v-rod series. And that fanbase is getting older all the time.

    So HD is going to jump into a mature market with competitors who are seriously good at their products, and where they have no real experience in making light, powerful and fast motorcycles which is what will be needed. I don’t think 200 million is going to be enough to see them through. They’ll burn through that in 5 years and they still won’t have more than a few percent of the market.

    Probably when it’s all over Indian/Polaris will buy them out and put the HD name on some chinese scooters just to keep the brand alive.

    1. Agreed. I can see why they had to try, but I have serious doubts that they will be competitive in weight, performance and pricing with no previous experience building these kinds of bikes. The Japanese and Europeans have evolved and improved their designs over many years. How can they realistically expect to compete with their first attempts?

      Harley needed Mission to create the livewire concept, and when they went under, had to acquire interest in Alta to produce their electric bike coming to market next year. Who is helping them develop the streetfighter and adventure bikes, and if the answer is “no one”, why should we think they will be anything but a styling exercise?

      I sincerely hope they use these mini-stores to create a Canadian dealer network for Alta. I’d be willing to walk past all the Harley swag to get a chance to try a Redshift EXR! I just hope that Alta doesn’t suffer the same fate as previous Harley associated motorcycle brands.

  7. It’s about damned time HD! You guys go! GO Go Go!
    Pop out a kick ass sport tourer with that new 60 deg mill somewhere in that 100 new bikes would ya Mr CEO ?

  8. It’s a big risk they’re taking for sure. H-D, through offerings like the new Softails, show they can build a more “modern” bike, but one fo the best of the series, the Fat Bob 114, doesn’t seem to be selling because its not a “classic” Harley.

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