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.
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.