Advertisement
Business

From scooters to small bikes, Harley-Davidson embarks on a dramatic shift away from its traditional motorcycles

Harley’s “Future Custom” is intended to underline the company’s commitment to “power, masculinity an
Harley-Davidson says its future custom motorcycles are intended to underline the company’s commitment to “power, masculinity and comfort.”
(Harley-Davidson Inc.)

Harley-Davidson Inc. on Monday unveiled a plan to expand motorcycle ridership and increase global sales with bikes that will be hardly recognizable as Harleys – among them electric scooters and small bikes destined for foreign markets.

The plan, perhaps the most aggressive in the company’s 115-year history, is part of a broad effort to reverse eroding market share, attract new riders to replace older ones aging out of the sport, and correct a stock slide that has seen Harley’s per-share value drop nearly in half over the last four years.

President and CEO Matt Levatich said in an interview the initiative will require a reversal of corporate mentality.

“We are shifting our mindset from ‘we build bikes’ to ‘we build riders,’” Levatich, 53, said.

Advertisement

He also defended his company’s decision, much criticized by President Trump, to meet increased European Union tariffs by expanding production operations overseas.

“Our preference is to make motorcycles in the U.S. for the world market,” Levatich said. “But at the same time, we have to protect our business and preserve our market strength and serve our customers” in the EU.

A line of “Streetfighter” bikes, like this 975cc model, will arrive in dealerships by 2020. (Harley-
A line of “Streetfighter” bikes, such as this 975cc model, will arrive in dealerships by 2020.
(Harley-Davidson Inc.)

The strategy will come at a steep price. Levatich said the company’s multiple-year expansion could require a total investment of up to $825 million through 2022. But he added that the company expects to increase annual revenues by $1 billion to $1.5 billion by then. The investment goal can be met by “self-funding,” he said, without raising new equity or debt.

Advertisement

“We aim to do this with the same investment, return and cash-flow profile that we have today — without dipping into shareholder returns,” Levatich said.

The motorcycle company’s stock closed down slightly on Friday at $44.38 per share.

The product shift will be dramatic for the company, which specializes in heavy highway motorcycles powered by some of the industry’s largest engines.

Harley will for the first time enter the Adventure Touring segment, with two proposed Pan America bikes, and will add at least five new machines to its promised LiveWire electric motorcycle family, the company’s first foray into battery-powered two-wheelers.

Inspired by the design language of LiveWire, Harley’s upcoming electric superbike, the company will
Inspired by the design language of LiveWire, Harley’s upcoming electric superbike, the company will also create a line of midweight electric motorcycles.
(Harley-Davidson Inc.)

Harley will also build at least five new “Custom” models and nine new “Streetfighter” bikes, many as small as 500cc, in an effort to push further into those categories, especially in overseas markets that demand smaller motorcycles.

At the same time, the Milwaukee company will attempt to retain market dominance with the full-size touring and cruiser motorcycles that are the backbone of its international sales.

Skeptics are likely to suggest Harley risks alienating core consumers, or diluting its legacy position, by trying to attract new riders.

Advertisement

Veteran industry consultant Robert Pandya said Harley’s identity is both its strength and its liability. Appealing to a non-Harley consumer will require a top-to-bottom company re-education.

“If you’re trying to draw a new young customer or a female customer, you might win them with the marketing campaign but lose them when they walk into the shop, unless there is a real overhaul,” Pandya said. “Everyone in the entire organization has to buy in on the marketing message. That’s asking a lot.”

With an eye to affordable mobility in dense urban environments, Harley will produce a line of lightw
With an eye to affordable mobility in dense urban environments, Harley will produce a line of lightweight electric bikes.
(Harley-Davidson Inc.)

Levatich stressed that dealer participation was elemental to the company’s success, and would be reinforced by a massive education and engagement campaign at the dealership level.

The company will also create new urban retail outlets that will differ dramatically from Harley’s traditional suburban dealerships, and would reinforce its online sales efforts and partner with third-party e-commerce companies to help push Harley apparel and merchandise into new markets.

But Levatich said Harley-Davidson will continue to serve its traditional audience — which skews older, male and Caucasian — with continually improved versions of its traditional product.

“We are not running away from our core,” Levatich said.

The electric motorcycle effort will include several of what Levatich called “lightweight, urban” transportation products that are designed specifically to appeal to “young adults, globally, living in dense urban spaces.”

Advertisement

Calling this an “unmet need,” Levatich said sales of these small electric motorbikes, designed to compete with beginner-level mopeds and the electric scooters, bring first-time consumers into the Harley brand in markets where the company has not enjoyed strong sales — or any sales at all.

It’s official: This “LiveWire” electric superbike will be in dealerships in 2019, the CEO said. (Ha
It’s official: This LiveWire electric superbike will be in dealerships in 2019, the CEO said.
(Harley-Davidson Inc.)

Levatich also said the company will partner with an unnamed Indian manufacturer to build “a small displacement motorcycle bridge” to Harley-Davidson, as part of a global effort to “create interest in our brand sooner” among consumers who have found traditional Harley motorcycles unaffordable, unapproachable or unsuited to dense city environments.

The company will also be making a concerted effort to “grow China,” Levatich said, pushing into what has become the world’s fastest-growing motorcycle market.

The new products are not empty promises, the executive declared, but already exist as prototypes or in some other form. The Pan America 1250cc adventure bike, for example, “is on a test track in Arizona as we speak.” The LiveWire will be in dealerships in 2019.

Levatich said internal studies show his company created 32,000 new Harley-Davidson riders in 2017, after first announcing a 10-year plan for growth. He added that Harley may have only begun to tap into a large pool of potential riders who have not seen Harley-Davidson product that appeals to them.

“We know that only 2.9% of U.S. adults ride motorcycles,” he said. “So that makes us special, as riders. We get something that other people don’t get, or haven’t yet gotten. There is tremendous potential in that number.”

Entering a crowded and maturing segment, Harley will produce the Pan America, a 1250cc Adventure Tou
Entering a crowded and maturing segment, Harley will produce the Pan America, a 1250cc Adventure Touring motorcycle.
(Harley-Davidson Inc.)

In fact, according to the industry trade group Motorcycle Industry Council, new motorcycle sales in the U.S. dropped from a record high of 716,268 units in 2006 to 371,403 new bikes in 2016.

According to its 2018 second-quarter report, released last week, Harley domestic sales fell 6.4% from the same period in 2017.

Levatich, who has been with the company for 24 years and serves as president and CEO without an employment contract, said that increasing the population of future riders is essential for his company and the industry as a whole.

“This whole plan to create new riders is a bold, ambitious and bordering-on-audacious goal,” Levatich said. “But there is no other option.”


Newsletter
Get our weekly California Inc. newsletter
Advertisement