In 2018, there was a wave of speculation that Harley-Davidson might be in serious trouble. To some extent, this was fueled by the kerfuffle kicked up when the corporation made the announcement that it would be moving some of its production overseas, which was very much fueled by how fast the whole thing became a political issue in the United States. However, it is important to note that the move reflected serious, longstanding issues for the U.S. motorcycle manufacturer. As such, while it is still much too soon to say that Harley Davidson is doomed, there are definite challenges that it will have to overcome, especially given their most recent earnings miss.
What Are Some Factors that Harley Davidson Needs to Overcome?
For starters, the problem is that Harley Davidson is suffering falling sales in the United States. The numbers state that the U.S. motorcycle manufacturer hit its peak in 2006, which was when it managed to sell more than 260,000 motorcycles in said market. However, its sales have been much lower in recent times, consisting of 168,240 motorcycles in 2015, 161,658 motorcycles in 2016, and 147,972 motorcycles in 2017. Meanwhile, international sales have seen a less consistent pattern with 96,387 motorcycles in 2015, 98,631 motorcycles in 2016, and 94,816 motorcycles in 2017, but once combined with U.S. numbers, the result is a clear pattern of falling sales in recent times for Harley Davidson. Some people might be curious about whether that changed in 2018 or not, but if so, they should know that Harley Davidson reported a 13 percent fall in retail sales in the U.S. market in the third quarter of 2018 compared to the third quarter of 2017, meaning that the trend looks like it is continuing on.
As for why this is happening, well, it is connected to Harley Davidson’s business strategy, which has become rather out of date. In short, motorcycles aren’t a primary means of transportation in the United States, meaning that Harley Davidson’s motorcycles are very much reliant on prevailing tastes, so much so that one of the corporation’s own important figures has been known to call it a “fashion business.” Unfortunately, Harley Davidson’s single biggest segment consists of Baby Boomers who see its brand as a mix of outlaw coolness and quintessential Americana. This is a huge problem because Baby Boomers are aging out of the motorcycle market, whether because they are dying or because they are just becoming too old to continue riding motorcycles. Even worse, more recent generations lack the same sense of fondness for Harley Davidson, meaning that they are not exactly rushing in to fill the void left by departing Baby Boomers.
Of course, there are various ways for Harley Davidson to get out of this problem. However, none of them can be called simple and straightforward. For example, Harley Davidson could seek to increase its sales in overseas markets, but that means facing off against other motorcycle manufacturers that are much better-adapted for those same markets. Likewise, Harley Davidson could seek to reinvent its brand for a new generation of motorcycle riders in the United States, but that would take a colossal amount of time, effort, and other resources because its current setup is not well-suited for bringing in new customers. In part, this is because Harley Davidson’s motorcycles are not cheap, as shown by the fact that a huge proportion of Harley Davidson customers are actually upper-middle class regardless of how they might represent themselves. However, it is also important to note the extent to which Harley Davidson’s operations are oriented towards Baby Boomer nostalgia, with an excellent example being its merchandising practices. As such, even thinking about such a huge move can’t be comfortable, not least because it could mean sacrificing a well-established market for uncertain gains at best.
Harley Davidson is not doomed. There are plenty of corporations that manage to reinvent themselves when their chosen markets change out beneath them. However, even if Harley Davidson manages to do something similar, it won’t be an easy process because the challenges that are awaiting them are genuinely intimidating. Regardless, it will be very interesting to see how Harley Davidson responds to its issues in the times to come, particularly since Baby Boomers are going to become less and less important as a consumer segment in the times to come.