Years ago, back in my grandfather’s time, Harley-Davidson was the most desired motorcycle brand in the world. Sure, the Brits loved their Triumphs and the Germans their BMWs, but it was Harley that represented American freedom to everyone else. The Motor Company landed the main military contract to supply the U.S. army in World War II, effectively putting its main competitor, Indian, out of business, and it never looked back.
Unfortunately, it never really looked forward, either. It sat on its success and cultivated its Easy Rider lifestyle while making underpowered bikes that dripped oil and broke down. They were soon overtaken in almost every aspect by the well-engineered machines from Japan.
Don’t worry – this isn’t a Harley history lesson. There are enough of those already filling the Internet and sagging bookshelves. It’s just a reminder that, like the larger U.S. auto industry, Harley was once great and then fell into complacency. By the time it saw the problem and began to catch up (by dragging down the international competition through President Ronald Reagan’s punitive tariffs), it was too late to ever get ahead.
These days, Harleys are finally well-built and reliable. I know – I own a Low Rider that I bought new 12 years ago and she’s never given me grief (terrible brakes, but Harley’s fixed those in more recent models). Mechanically, they’re no better than anything else, but they do have two things that set them apart: They’re American (mostly), and they’re a true icon in the classic sense of the over-used term.
This means that plenty of people still aspire to own a Harley-Davidson motorcycle, and that’s why Harley’s main focus in its new “Hardwire” five-year corporate plan stresses the desirability of its bikes.
“Our ambition is to enhance our position as the most desirable motorcycle brand in the world,” Harley’s Jochen Zeitz told investment analysts Tuesday.
“Desirability is a motivating force driven by emotion. Harley-Davidson has long been associated with igniting desirability. Done right, Harley-Davidson’s desirability preserves the value of our customers’ purchases, builds our brand beyond our riders, and ensures loyalty and drives engagement.”
Zeitz is a veteran Harley executive but new on the job as the overall boss. When he was named Chairman, President and CEO last year, he halted the company’s previous corporate plan, which had it launching a hundred new bikes into dozens of new markets, and throttled right back on the wide-ranging line-up. One in three of its 2020 models are now gone, as are about 160 of its dealers.
Harley had little choice in this. Those ambitious plans were too expensive. The company still has about $4 billion (US) in liquidity, but it must be careful with its money. Its revenue last year dropped by a quarter compared to the previous year, and it sold 17 per cent fewer motorcycles – a recurring pattern for years now.
“Five years is a long time,” said Zeitz. “If you look at the past five years, we’ve never hit our numbers, and we’ve underperformed and overcommitted every single time, and that’s got to stop.”
Harley’s well-publicized challenge is that its core buyers are aging out and dying off. (Now that the Daytona Motorcycle Rally has confirmed it’s going ahead with its massive Florida gathering next month, with Covid-19 still devastating the United States, this may happen even more quickly.) Zeitz says at least half the company’s revenue comes from this aging demographic.
Take a look at Harley’s Hardwire slide presentation and you won’t see a single old grizzled biker. They’re all attractive hipsters in the photos, livin’ the life. This is the future Harley must aspire to if it’s to be successful, and it includes electric mobility and “experiences.”
Ultimately, though, the key to desirability is price. Not long ago, Harley was pumping out as many bikes as it could slap together, with extra shifts and extra speed on the assembly line. That was the company’s most recent downfall. It glutted the market and was forced to offer crippling discounts and incentives.
There’ll be no more of that, said Zeitz. Harley cut production last year to scale back its overstocked inventory. “We will deliver enough (motorcycles) for growth, but we will not chase volume for volume’s sake,” he told investors. For now, it’s concentrating on the big cruisers, tourers and trikes that dominate their market segments and make the most profit. As well, it’s investing in electric development, and on the new Pan America adventure tourer that we’ll see later this month that will open a whole new segment of riders.
That’s just as well for Harley. There’s plenty of money in the world, perhaps more than there’s ever been, but fewer people have it. This creates a solid business model for Rolls-Royce and Ferrari, even for BMW and Mercedes, but it’s a harder sell when the American Freedom Machine sells for the price of a Toyota Corolla.
For the next five years, Harleys are going to be expensive and its smaller-displacement, entry-level models will be built in partnership with other makers. If you aspire to one day own a new Hog that’s well-built and reliable, you’re going to need money.
That’s the American Way, after all. True freedom is expensive, enjoyed only by those with the cash to afford it. Everyone else can ride Suzukis and Kawasakis. Harley’s just hoping those people don’t have too much fun along the way.