Harley Davidson is arguably the most recognizable and iconic motorcycle brand in history. The brand has an extensive track-record of quality and remaining true to its core culture. Is Harley Davidson capable of pivoting, despite its almost 120-year age, into the electric era? Can Harley HOG culture show it still stood the test of time? Let’s explore the strengths, weaknesses, opportunities and threats.
1. The Harley Davidson brand reaches beyond selling just motorcycles and manages to appeal to a broader market beyond just motorcycle enthusiasts.
When one thinks of a motorcycle, one thinks of a Harley Davidson – the brand has diversified itself into a cult. In addition to bikes, Harley Davidson sells products related to motorcycling tailored to those who appreciate the culture and its unique brand of “freedom,” yet are not in the market for a motorcycle.
Just over 20% of Harley Davidson revenue comes from a combination of “parts and accessories” and “general merchandise.” (DMR)
2. The company has a long-standing reputation of satisfaction given its success and loyal following.
Harley Davidson is an internationally known brand. In being in 100 different countries, the brand definition has become synonymous with quality. Whether a beginner or experienced motorcyclist, there is a sense of confidence in purchasing Harley Davidson, even among the most elite.
Harley Davidson products are retailed in 100 different countries. (DMR)
3. It has history, authority and experience in both motorcycles and parts associated with the company.
Harley Davidson was founded in 1903 – the same year Henry Ford founded his company. With almost 120 years of experience, Harley Davidson has fostered a reputation of experience and quality in its craft. Harley Davidson stands authoritatively as the most iconic and recognizable American motorcycle company and is a registered Fortune 500 Company.
Harley Davidson is the #1 motorcycle manufacturer in the USA, with 30.6% of the U.S. market share in 2020. (Statista)
4. Harley Davidson has cultivated an elaborate culture for itself and a broader cult following because of it.
Harley Davidson hosts HOG Rallies (Harley Owners Group) around the United States with its 1,000,000 members and 1,400 chapters worldwide (Harley Davidson). This helps elicit a feeling of connection and a bond to the product.
HOG Rallies are a massive source of cash generation for the brand, favorable to the company’s shareholders. HOG produces 167% of the 3-year average free cash flow for Harley Davidson. (Harley Davidson)
5. The company has enough cash flow to use to generate additional revenue through services in financing.
Harley Davidson possesses a cash flow to offer services in financing to those who might not be able to afford a motorcycle outright. Services in finance provide the company with an additional stream of revenue. With the cashflow Harley Davidson has, venturing into alternative routes of revenue or expanding the product is also feasible.
Between January and June of 2020, the company generated about $2.16 billion in revenue, $394 million of which came from its financial services. (Statista)
6. The business model is adaptive, with proven successful strategic plans in the past.
The company has revamped its strategy three times in two years, with the More Roads to Harley-Davidson road map, followed by the successful Rewire, and then the Hardwire. The Hardwire strategic plan for 2021-2025 focused on cutting costs and maximizing efficiency. It also brought in a new CEO in February 2020 to improve profitability.
The business model revamp saved an expected $250 million, with its global dealer net inventory down 30% more compared to the third quarter of 2019. (Yahoo)
7. Harley Davidson is forward-thinking with plans to continue to move into the electric motorcycle and bicycle markets left vulnerable by tech giants like Tesla.
The company has the Livewire electric motorcycle, which came out in 2014 and retails for just under $30,000. Its first and only e-bike, Serial 1, is built for an easy and intuitive riding experience.
The global electric bicycle market was an estimated $15 billion in 2019, with an estimated exponential increase of 6% through 2025. (TechCrunch)
8. Harley Davidson’s usage of social media has allowed it to begin appealing to younger generations, attempting to solve the age issue of its customers.
The brand is effectively using social media to try to lure younger demographics. Harley’s average buyer is over 50 years old and generally rides their Harley’s because they are “cool.” Younger people look to motorcycles for easy transportation and would likely prefer a cheaper and lighter bike. (New York Post)
Harley Davidson has over 13 million fans on Facebook (Unmetric).
1. The core demographic for Harley Davidson, baby boomers, are rapidly aging while younger generations are left uninterested in the same kind of HOG-style bulky motorcycle.
Harley Davidson, despite a social media campaign, is struggling to appeal to the younger market. Millennials and younger demographics don’t often purchase motorcycles. If they do, it is often for a more pragmatic, practical, logistical purpose rather than simply because “motorcycles are cool.”
The average Harley Davidson owner is a married man in his 50s with an income in surplus of $90,000. (CNBC)
2. Harley Davidson’s attempts at appealing to a younger, more environmentally conscientious demographic are over-ambitious and out-of-touch.
When Harley Davidson unveiled its first electric motorcycle – the LiveWire – in 2019, it did not perform as expected. The retail price of $29,799 could fetch somebody a new electric car rather than an electric motorcycle. The size and weight of the bike did not resonate with the younger market, who seek practicality in transportation rather than spectacle.
In 1999, the average Harley rider was 43.4 years old; in 2004, the age was up to 46.1; by 2008, the average rider was 48 years old – there is exponential aging of the core demographic. (Reuters)
3. The company’s timing of its infiltration into the electric motorcycle market was miscalculated and delayed.
A minor competitor to Harley Davidson, Zero Motorcycles, based in California, retails electric motorcycles at a much more appealing price point. While there is still room to adapt the business plan, Harley’s pricing is astronomical by comparison for simply the name Harley Davidson.
The Californian company offers bikes at prices between $8500 and $21,000 – almost $9000 under Harley Davidson. (Reuters)
4. There has been very minimal success outside of the company’s core product and core demographic.
Harley Davidson is having trouble expanding outside of what the company is at its core. With an aging core demographic and expensive advertisement and social media campaigns, Harley Davidson is having trouble sustaining relevance in the same way among Generation X and Millennials as it did with Baby Boomers.
In 2020, Harley Davidson began offering a $649 Harley for toddlers in order to help appeal to younger generations. (Bloomberg)
5. A lack of diversity of products leaves buyers with limited buying options, all similar to one another.
The only models introduced outside of Harley’s traditional “HOG-style” bikes were a smaller – yet still rather large and bulky – dirt bike type of model, and the electric LiveWire, both introduced in 2019. Despite the attempt to branch out of the size and weight of a Harley Davidson in the traditional sense, both bikes remain rather heavy and bulky.
The company’s major Cruiser line (which includes the LiveWire) netted just under $17 million in revenue, while its Sportster line pulled in $8.6 million. (Harley Davidson)
6. Reliance on the American market and pool of resources leaves the company potentially vulnerable.
Harley Davidson is a tried-and-true American company. Limiting itself to, and relying on, the American market – prolific as it is – can be potentially harmful in that it keeps the focus of the company narrow-minded. In the event of international tariffs, certain materials may become difficult to procure, driving up the cost of production.
The company’s CEO, Jochen Zeitz, plans to invest in growth in 50 markets in North America, Europe, and the Asia Pacific – eliminating an estimated 700 positions but saving the company an estimated ongoing $100 million per annum. (Reuters)
7. Harley Davidson’s supply chain is narrow: lack of supply diversity leaves the company easily at risk of distorted production, driving costs up or potentially halting production entirely.
The company commonly relies on one source to produce raw material or a given part required for production for the entire company. This leaves Harley Davidson at a drastic disadvantage since a lack of diversity in supply can be easily disrupted or corrupted. If the company’s single supplier for a given part experiences issues, the production in its entirety is disrupted.
Harley Davidson has not seen any company growth in the last 14 quarters. (Reuters)
8. Harley Davidson is at a competitive disadvantage as it faces competition already more diversified.
Harley Davidson faces competition already reaching into other segments of the market: Powersports and the automobile industry. Rival companies via diversity have more of a broader understanding, more experience in other fields, and more competitive pricing than Harley Davidson offers.
Harley Davidson’s top competitor, the British company Triumph – which is roughly the same age as Harley – brings in $4.7 billion less in revenue than Harley Davidson. (What Competitors)
9. Harley Davidson outsources operating and administrative services, resulting in risk with pricing, timely delivery, and quality.
Outsourcing and third-party material supply can act as a potential cancer in the supply chain. Lack of communication, fluctuating pricing, and inadequate delivery are all factors outside of the company’s control but can prove detrimental to its operation.
The company estimates that it pays 24-25% in taxes. (Harley Davidson)
1. Building on the lesson learned in expansionism of product can prove very beneficial for the company given its authority in the field of motorcycles in comparison to its competition.
With the lesson learned in growing into the electric market, Harley Davidson can apply itself to continue expanding its limited model selection and appeal to a broader type of motorcyclist.
In 2021, Harley Davidson is planning to unveil 2 new electric bike models and 4 new model motorcycles to its lineup. (TMW)
2. International expansion can allow the company to out-maneuver international tariffs, increasing production outside the United States and avoiding import tariffs in international markets.
Investing money into its international production plants – and building more – will provide a loophole in avoiding paying international tariffs, if they are imposed on motorcycle importation. Though Harley Davidson has remarked that it wishes to keep production predominantly American, it already has assembly plants in Thailand, India, Australia and Brazil.
European Union tariffs on motorcycles cost Harley Davidson an average of $2200 extra per imported bike to the European market. (BBC)
3. Expansionism of demographics, appealing to a broader audience, and diversifying the target client can help bring sales in the same way expansion of product can.
Harley understands the appeal of younger markets to the industry of e-motorcycles. With the adaptation of product range comes the adaptation of demographic appeal – as is exemplified in California through its competitor. Electric motorcycles sell so long as they are easy and efficient enough for the young driver to operate.
Harley Davidson began to introduce smaller 500cc and 750cc bikes in order to appeal to younger buyers in 2020, starting at $7000. (US News)
4. Sales and demand in foreign markets are ramping up for Harley Davidson with no foreseeable international competition.
Despite a shaky 2020 in domestic American sales, there is an increased international demand for American motorcycles. Germany, Japan, France, Canada, Australia, and Brazil are massive teeming markets for the company, left ripe for the taking by Harley Davidson alone.
In 2020, the United States represented only 58.6% of Harley Davidson’s global sales.
5. The desire to appeal to demographics outside of the dominant client type – men in their 50s – has led to the company to tap into the growing market of female riders.
The market of riders in America has traditionally been susceptible to gender: Harley Davidson’s average customer is a man in his 50s. In recent years, more and more women are taking to riding, resulting in a growing, diverse, and more healthy market that can be exploited by Harley Davidson.
In 2018, 19% of riders in America were women. Of these women, 34% seem to favor a cruiser style HOG, while another 33% prefer scooters, which max out around 850cc. (Biker Lawyer)
6. The company could sell its bikes directly to the public – like Tesla – to decrease the price of its products and reduce retailer risk.
The company retails via independent middleman dealerships, relying heavily on their own sales rather than sales from Harley Davidson itself. By ceasing wholesale dealership reliance, the company could open its own dealerships and sell directly to the public – a more economical and self-sufficient means of retail – as opposed to relying on independent retailers with external factors outside of the company’s control.
Harley Davidson’s cost before income taxes was approximately $118 million. (Harley Davidson)
1. Within the vein of attempts at exploiting the international market as a whole, Harley Davidson has to fight its way through smaller-scale local motorcycle manufacturers already in operation in these foreign markets.
Some of the largest markets in the world today are India, Japan, and China. Taking India as an example, Indian-owned Royal Enfield proves itself as a capable competitor already dominating the Indian marketplace of 1.3 billion people – four times the size of the United States. The originally British company has a history and track record comparable to that of Harley Davidson.
Though the name Harley Davidson carries weight in India and enjoys its fair share of Indian buyers, but its price point is simply too high for 95% of Indian buyers. (CNBC)
2. Where Harley Davidson fails, other companies and competitors are beginning to imitate Harley models and exploit market vacuums left by the company.
Japanese automotive companies such as Suzuki, Yamaha, and Honda are beginning to offer bikes dangerously close to the style and comfort traditionally offered by Harley Davidson. With production in Japan, it is easy for these companies to offer their bikes to the prolific Japanese market ahead of Harley Davidson.
Entry-level bikes from Suzuki ($5749), Yamaha ($4349), and Honda ($6199, or a lower cc model for as low as $4499) are cheaper and more lightweight than the massive American cruiser. (Cruiser)
3. Increasing demand for electric motorcycles can be threatening if Harley Davidson does not rise to meet the occasion.
The last time Harley Davidson failed to meet demand, it resulted in the market being saturated with competition – and imitation. If Harley Davidson cannot meet the demand for electric motorcycles, it will likely lose it to competitors.
As of 2020, there were at least 19 electric motorcycles – including Harley’s LiveWire – on the market offered by a broad range of dealers. (Cycle World)
4. Changes in international trade policy, such as tariffs, could have an adverse effect on the company’s bottom line.
With international expansion comes problems. External factors outside of the company’s control, such as domestic or international politics, can influence the price of international motorcycle trade via tariffs, exportation fees for products, and importation fees for foreign materials.
The United States tariff on the importation of Chinese materials into the country cost Harley Davidson approximately $15 million. (Harley Davidson)
The timelessness of Harley Davidson is beginning to show its age. Though it has almost 120 years of experience in motorcycle dealing, the dated modus operandum can be detrimental as the world moves beyond loud, heavy, bulky HOGs. Can Harley Davidson save itself?
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