Opinion: Harley-Davidson’s Future

The media vultures are hovering low over Harley-Davidson right now. They’re waiting for The Motor Company to release its latest five-year strategic plan, with its new commitments to the future. This will happen sometime in the next three months, probably a few weeks after it releases its (very likely dismal) third-quarter results at the end of October.

This latest strategic plan is called “The Hardwire” and will be the baby of Harley’s new CEO, Jochen Zeitz. It replaces the “More Roads to Harley-Davidson” strategic plan that was the baby of the former CEO, Matt Levatich, who was fired in February after five years in the position and a lifetime at the company.

That More Roads plan from 2018 called for an ambitious global expansion over the following decade, with 100 new motorcycles, two million new riders in the U.S., and at least half of Harley’s business coming from outside North America. It also called for the new Livewire to lead the way for more electric motorcycles and even bicycles.

Zeitz now says the company needs to scale back and refocus for greater efficiency. The plan involved shaving 700 jobs from its global workforce of 5,600; this includes 70 jobs in India where it is closing its Bawal assembly plant and will no longer manufacture bikes for the local market. It will trim one-third of its model line-up, which means the promise of 100 new bikes is now gone. And it will “invest in the products and platforms that matter the most while better balancing our investment in new, high-potential segments,” said Zeitz, speaking to investors back in July. “In this context, we plan to expand our offering of iconic motorcycles, those which most embody the spirit of Harley-Davidson.”

It’s obvious that Harley has to do something. Sales of heavyweight cruisers are dropping every year, and its core ridership is aging out and dying off – maybe more quickly than expected after attending this year’s Sturgis rally. Covid decimated the industry this year, but especially Harley-Davidson, which was forced to shutter plants temporarily in Pennsylvania and Thailand and then couldn’t supply enough bikes for the all-important spring market. Revenue and shipments this spring were less than half that of the previous year. Ouch!

This is a damn shame, but haters gonna hate and Harley has more haters than most. Those vultures are circling. “All Harley has been building is a taller and taller cliff to ride off,” said Fortnine’s Ryan F9 earlier this year, and he’s not wrong. So this radical restructuring is not only necessary but essential. If Harley screws this up, it’s screwed.

But the fight is far from over. It may have lost US$92 million in the last quarter but Harley still has more than US$4 billion in liquidity, so it’s not that small. Its brand recognition is stronger than probably everything else on the planet, with the exception of maybe Coke. Maybe. Its challenge, like all public companies, is that it’s beholden to its shareholders and those include asset managers and hedge funds. One major shareholder, Impala Asset Management, claimed this spring it forced the Board to get rid of Levatich because it didn’t like the direction he was taking the company. Those Impala people like money, not motorcycles.

So what will this new direction be?

1) A refocus on globalization and markets. Harley needs to diversify away from the United States, but more than most, America is its brand.

It was building bikes in India for the Indian market, but it’s tough to be truly American when your product has never touched the United States. The Indian-made bikes needed to be smaller and far more affordable than its high-profit deckers and cruisers (and don’t even think about trikes and electric bikes), but it just couldn’t compete against the cheap and practical models sold by Hero, Bajaj and Honda.

High local taxes nailed down the coffin lid. In the world’s largest motorcycle market, which sells 17 million bikes a year, Harley peaked at 3,000 units annually. That’s just irrelevant.

(This must surely upset Anoop Prakash, Harley-Davidson Canada’s boss from just a few years ago, who came here fresh from building the Indian factory in 2011 and establishing the company there. But maybe not. He left Canada to return to a head office job in Milwaukee, and soon after that left to join Rev Group, a giant maker of specialty vehicles, where he now heads the ambulance division and wears a suit and tie to work.)

Harley now wants to concentrate on about 50 different international markets that it believes can be profitable, though hasn’t yet stated just which they’ll be. Its plants in Thailand and Brazil will probably continue to build bikes, but it’s quiet about its future in China, where it has a partnership with the Qianjiang Motorcycle Company to build a 338 cc model.

Rest assured, Canada is one of those markets. Prakash told me four years ago that he planned to expand Canadian dealerships, but didn’t. The current head of Harley-Davidson Canada, Scott Winhold, told me last year that he had no plans to expand the Canadian dealership network past its current 66 dealers.

Now, the rumour mill has it that the contract for every Canadian Harley-Davidson dealer is up at the end of this year, and the network will be trimmed right back. As well, multi-line dealers will apparently be forced to separate their lines to provide exclusivity to Harley. I was unable to contact Winhold this week to confirm this. But if it’s true, there are pros and cons.

The pros are that Harley shops could all be the clean, corporate, metal-and-glass dealerships that premium products demand, with no more dirty bikers hanging out in the back; the cons are that you might have to ride six hours to your local dealership for warranty work, like owners in Nova Scotia when Sydney’s Cabot Power Sports stops selling Harleys at the end of October.

2) A refocus on the line-up. After all, we don’t really need 100 new motorcycles by 2028. We just need the motorcycles that we want, and it’s much better to get those fewer bikes right than to pump out a truckload of alternatives nobody will buy.

There’s gossip and speculation abound over what’s on the chopping block of offering 30 per cent fewer models, with bikes like the Street and the Breakout and the Sport Glide at the top of the list to go. You’d better believe Harley knows what sells and what doesn’t make much money, for whatever reason, and now it wants to reinforce its base with its popular and profitable motorcycles.

It wants a “balanced investment in current stronghold categories,” which is corporate-speak for air-cooled Ultras and Fat Boys, making sure the quality doesn’t slip from those bikes and that their buyers remain happy with their machines. And then it wants “expansion into new, high-potential segments,” which means both electricity and the Pan America adventure bike.

One can only imagine the hand-wringing at Harley-Davidson when they started talking with Ewan and Charley about riding hogs up from Argentina to Los Angeles for Long Way Up, which just debuted on Apple TV.

On the one side, Ewan and Charley not only single-handedly romanticized modern adventure touring with the original Long Way Round, but they also made the BMW GS become BMW’s best-selling motorcycle.

On the other hand, Harley must have longed for them to be able to ride the Pan America adventure bike, which is not due for release until next year. It’s the two-wheeled equivalent of the SUV. After all, Porsche now makes more money than ever before by selling Cayenne and Macan SUVs, padding the profits of the iconic German sports cars. Harley longs for the same.

But no – Ewan and Charley rode the $40,000 Livewire electric motorcycle, for better or for worse, and we’ll find out as the season progresses how they did. The series will give huge publicity to Harley’s massive investment in electric motorcycles. Whether or not any bikes will get sold because of it, we’ll also find out. It’s an entirely new market for Harley, heading into the electric future spearheaded by multi-billion-dollar investments from the big automakers, and it’ll be sink or swim.

However, if there’s to be a future for electric motorcycles – and the Livewire is not it, because it’s too expensive and too limited in its range to be more than a niche product, but you’ve got to start somewhere – then Harley is very well placed to be a leader in it. Especially with the unique publicity from Ewan and Charley.

3) A refocus on profit and the premium experience. Harleys have never been cheap, but they kept their value because they stuck to the maxim of making one bike fewer than the market could sell.

Then in the 1990s and 2000s, the company grew greedy as affluent Americans flooded the showrooms with cash and cheap credit. In 2006, Harley celebrated 20 consecutive years of record growth and earnings, with sales of almost 350,000 units. Then in 2007 as the market glutted, sales began to slide, just a bit, and then a bit more in 2008, and then the recession hit, hard. Both the company and its dealers offered deep discounts from the bikes’ prices to get them off the floor, and now buyers are used to this. Last year, Harley sold 218,273 motorcycles and few of those went at full price.

The new slimmer and trimmer Harley-Davidson will “focus on products and initiatives that add value – fewer promotions and discounting activities.” It wants to re-establish itself with premium bike brands like BMW, Triumph and Ducati, which have a special relationship with their owners who don’t mind paying a little more to be a part of that family. (They’ll grumble, but still cough up.) And don’t forget, international protectionist tariffs might well force Harleys to be expensive when they’re sold offshore, like it or not.

Will Harley-Davidson succeed in its stated focus to become the most desirable motorcycle brand in the world? It’s too early to say, but all bets should be off until after Zeitz fills in the blanks with the Hardwire strategy in another couple of months. The vultures may be hovering low, but Harley’s swinging hard and there’s still plenty of life in the old hog yet.