Harley-Davidson Continues Profit Slide at the Hands of Victory and Indian Motorcycles

Harley-Davidson, who commands a massive 52 per cent market share in the United States is facing growing headwinds in part thanks to increasing competition from Victory and Indian Motorcycles, both companies under the Polaris umbrella. HD’s global sales were down 1.4 per cent in the third quarter while profits fell 6.5 per cent. And the trend looks unlikely to reverse anytime soon.

For those hoping that HD might see this as an opportunity to improve their product offering, think again. Instead, CEO Matt Levatich announced 250 job cuts (equating to roughly 4% of employees), the savings from which will be funneled into a huge marketing spend – up a massive 65% for next year.

Which really highlights the issue with Harley-Davidson – its continued reliance on style over substance. No doubt, Harley-Davidson’s image is its biggest draw, but it’s also its greatest weakness. Essentially, you either love Harley-Davidson’s or hate them and hence why Polaris has made such inroads with both Victory and Indian. Polaris has created one brand and resurrected another and have relied instead on good quality motorcycles at fair prices.

Not only has it captured some older riders who previously would have opted for a Harley, it’s grabbing younger and newer riders for the brand before HD gets a chance due to their cost. Polaris reported just two days ago that its motorcycle sales jumped 154% in its latest quarter to $160.4 million and given that Victory sets to expand its range to sportsbikes plus their acquisition of electric manufacturer Brammo, that momentum is likely to continue.

In fact, buyers in the US and other countries can now get a brand new Victory or Indian bike that is sometimes cheaper than a second hand HD. And when your bikes continue to suffer quality concerns, that second hand purchase is increasingly risky.

Harley-Davidson have often been criticised for the quality of their bikes. Some of that is undeserved as they do make some good machines. But it’s also fair to say that some of their bikes are overpriced and below par. The statistics back this up. Recalls of Harley-Davidson bikes have increased tremendously over the last few years. All manufacturers issue recall notices but HD has stuck out like a sore thumb in recent times.

According to an article in the Wall Street Journal, 210,000 HD bikes were recalled in 2014 and 312,000 have been recalled this year as of September. That compares with an average of 94,000 annually in the 10 years through 2013. Recent Harley recalls have involved problems including a faulty cylinder that could prevent the clutch from disengaging, a defective fuel-pump seal, and a clasp that could allow saddlebags to fly off the back of the bike. Harley reported 35 crashes or other incidents from the defects and six minor injuries.

The article further stated that the recalls have cost Harley-Davidson about $30 million in the three years through 2014. That is up from $7.9 million in the three years through 2004, even though Harley sold about 27% more motorcycles in the U.S. in the earlier period.

So what can Harley-Davidson do? It needs to realise that the baby boomer generation that was behind so much of its success is waning and they need to completely overhaul their image for broader appeal. To do that they need to start making quality bikes with technology that comes from the 21st century and isn’t priced so far ahead of competitors. So far, Matt Levatich doesn’t seem to be too interested in rocking the boat. Let’s hope it doesn’t spring too many more leaks.

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  • Tom King

    I can attest that Victory makes a good machine. I’ve put 47000 miles on my Vic in under 2 years.

  • Sean Evans

    I’ve been riding Victory for the last 11 years, on my 2nd one. The first one still going strong, only had to do tires, brake pads & oil in all that time. Extremely reliable, crisp & powerful machines. I’ve noticed alot of changes in HD’s similar to what the Victorys had & have no doubt Victory has force HD to improve quality over these last 15 years.

  • Al Engel

    Owned Harley’s for years, I bought a 2nd hand 2007 Victory in 2009. “Ridiculous” Ran better, more powerful, 10X more reliable. All I did was basic servicing, at a 3rd of the cost of a Harley Servicing. Traded it in on a New Victory -“NEVER GOING BACK” love my Victory. 7 years owning Victory’s now and not 1 repair only serving every 5000 miles for $99.99 out the door.

  • Who Cares

    My new bike will be a Victory or a Indian all done with Harley’s to many recalls and parts from all foreign countries!

  • Michael

    I’d definitely consider a new Harley if they made a new bike that had more than a 35 degree lean angle unlike the majority of their current range. They could also do with a diet but that’s just me. I’d be opening my wallet faster than they could take my money if they announced a scrambler / adventure Iron 883 with more power.

  • Tina Giles

    The outsourcing of everything and laying off of 1000+ long time experienced employees and replacing them with seasonal casuals in York didn’t help. Seems most of recalls have came after this happened. Seasonals don’t care…only work 3 months. Worked there for 16 years and lost pride and left 4 yrs ago. Saw too much junk being sent out the door.