In the motorcycle industry, personal income levels and interest rates tend to drive demand. Profitability often depends on the volume of sales that can be achieved in any given year. An emphasis on accessories and add-ons with high margins help to improve profitability, while larger companies like Harley Davidson can also influence profitability by using economies of scale and customization.
In 2014, consumers in the United States purchased 484,000 motorcycles. This was a 3.8% increase over the total number of sales in the previous year.
The motorcycle industry focuses on California when it comes to sales, thanks mostly to the fact that the state leads the US in the total number of registered motorcycles at 800,000 and counting. Harley Davidson leads the US market share in this industry with 35% of overall sales, but a 55% market share in 601cc motorcycle sales according to Statista.
Income Isn’t The Only Influential Factor
- The motorcycle industry is seeing two trends that are hindering growth: an aging population and an increase in the number of imports available in the United States.
- Overall annual growth between 2011-2016 in the motorcycle industry has been a -1.3% each year, indicating contraction has been occurring.
- Revenues within the motorcycle industry are still above $6 billion each year despite the volatility being seen.
- Although the US market is somewhat stagnant, motorcycle sales in the UK were up 15% in 2015 compared to 2014 figures and total registrations were up 13.2%.
- Motorbikes on their own in the UK have seen a sales increase of 30%, but touring motorcycles saw a decrease of 12.9% and moped sales were down 11.8%.
- Cost-cutting factors have helped to keep Harley Davidson in the black despite weak sales forecasts. From 2009-2013, the manufacturer was able to add 118 new international dealerships despite having their shares slump by more than $6 per share during the same period.
- 20% of motorcycles that are owned as a primary mode of transportation in the US was manufactured in 1994 or before.
- Nearly 40% of the motorcycles that are owned and operated in the United States have owners that are in the 50+ age demographic.
Motorcycles are often seen as a way to experience freedom on the open road. As households cope with stagnant or falling wages, but increased costs, there is less overall disposable income available. This means working households are not buying bikes, which is why the average age of a motorcycle owner has been steadily rising over the last decade. This means the focus of the motorcycle industry may move from the mature US market to the potential segment growth being experienced internationally.
Who is the Target Customer of the Motorcycle Industry
- According to the American Motorcyclist Association, the average member age of a motorcycle owner is 48 and they’ve been riding a bike for more than 25 years.
- Just 5% of the AMA membership are women.
- The average household income of a motorcycle owner is above $85,000, or nearly $30,000 higher than the average household income in the United States.
- 84% of motorcycle owners have at least attended college. 56% have at least a 2 year degree, with 16% having a post-graduate degree or are enrolled to receive such a degree.
- 78% of motorcycles that are purchased today are used for on-road riding. 38% of AMA owners reportedly use their bikes to race in sanctioned competitive events.
- Nearly 1.5 billion miles are driven on motorcycles in the United States every year.
- South Dakota has the most motorcycles per person, with 1 motorcycle for every 12 people. Mississippi has the least motorcycles per person registered, with 1 bike for every 106 people.
- 36% of Harley Davidson’s total sales in 2015 occurred outside of the United States.
- $3 out of every $4 in disposable income that is available in the US for purchasing motorcycles is owned by the 50+ age demographic.
The motorcycle industry can work to combat some of the negative influences being seen today by focusing on their core customer bases. People in South Dakota are much more likely to purchase a motorcycle than people in Mississippi. California might lead in total registrations, but Florida, Texas, Pennsylvania, and Ohio all have around 400,000 or more total registrations on file. By identifying the high income households which exist in these areas, it may become possible to create more sales opportunities and reverse the trends that are being seen.
External Influences That Affect the Motorcycle Industry
- With a minimum of 100 driving days each year, many motorcyclists are using their bikes for commuting to work – especially when gas prices surge above $3 per gallon in the United States.
- Many motorcycles have to be stored at least 2 months per year because of weather conditions that make it difficult or impossible to ride.
- Motorcycle training courses are often mandatory to receive a license to ride. About 30% of motorcycle owners say that they’ve never taken such a course, which means they may not be able to legally ride their bike.
- Just 1 in 10 motorcycle owners say that they are able to ride their bikes for more than 300 days on any given riding season.
- 4 in 5 motorcycle owners say they are willing to invest into add-ons, such as a windshield, a saddlebag, or a luggage carrier to enhance their riding experience.
- Just 35% of motorcycle owners say that they ride with a passenger on a frequent basis.
- Just 1 in 5 of all new motorcycle purchases are coming from first-time bike buyers, which is a trend that has remained steady for 15 years.
- Only 1 in 4 US households say that they’d be willing to consider the purchase of a motorcycle if they had a need for transportation within the next 12 months.
- When customers have what they describe as a “satisfying experience” when purchasing a bike, the average sales price goes up by nearly $1,000 per transaction.
- Although women make up just 5% of the total industry, Generation X women are 3x more likely to own and/or ride on a motorcycle regularly, making them one of the fastest growing demographics for the industry.
If the motorcycle industry can begin to adapt to some of these external influences, then there is the possibility to experience a surge in interest and sales. In the US especially, population trends seem to indicate the potential for a lot of long term growth. It goes beyond targeting women who may be interested in owning a motorcycle. A more diverse customer pool is being targeted across the board. Both Hispanics and African-Americans are starting to embrace motorcycles as a transportation option, especially with the on-road 601cc bike and the Harley Davidson brand. If these trends can continue, then not only can the HD brand continue to grow, but it can provide growth options for the industry as a whole.
How the Motorcycle Industry Can Begin Evolving
- As motorcycle owners age, they become more likely to spend money on accessories for their bike instead of wanting to purchase a new one. Being innovative in the accessories market can help to push sagging sales that are seen in specific niches, especially with the touring bikes.
- A majority of motorcycle fatalities are now in the 46-65 age demographic, which means an emphasis on safety features for the older owners who may want to hit the open road could help to push future sales as well.
- 75% of motorcycle owners say that they have experienced at least 1 crash or accident involving their bike, so parts and repair as an emphasis can also help to stabilize industry revenues.
- 1 in 5 motorcycle owners say that they’ve been involved in 3+ crashes or accidents with their motorcycles over their lifetime.
- Up to 30% of motorcycle owners in any given year report that they will do all of the maintenance work on their bike that is required. Just 10% of owners say that they take their bike into a shop to get all of their maintenance work done.
There are some niche areas that could be an opportunity for growth in the motorcycle industry. This is especially true for dealers who can provide maintenance services. Not only does the experience of a customer affect the amount they are willing to spend, but additional services can result in parts sales, maintenance work, and other revenue generating services that help to keep the relationship strong between the dealer and the customer. The end result here is that everyone wins. The customer gets a bike with consistent performance, while the dealer and manufacturer benefit from the sales. As the population ages, they may embrace motorcycles more frequently as well, which means the industry may be in a period of waiting for Millennials and Gen X’ers to have the same levels of disposable income as Baby Boomers to see the growth they expect.