Harley-Davidson shares dropped around 8% in New York when it forecast considerably fewer sales this year than last. 2016 sales totaled 262,221 motorbikes. 2017 sales have been forecast at between 241,000 and 246,000. This is an indication of how demand for Harleys has been slowing over recent years.
Ten years ago, the firm was shipping almost 350,000 a year. This year’s forecast equates to a 29.7% – 31.1% drop in sales over the decade. It is fairly obvious that this trend cannot continue for much longer, and that some action has to be taken. So why are Harleys becoming less popular?
One issue facing the company is fierce competition from Polaris, based in Minnesota, and Japanese manufacturer Honda. Both these companies are selling their bikes cheaper than Harley-Davidson. However, it’s not just Harley-Davidsons that are suffering. Biking is becoming less popular almost universally. This is particularly true of the big, expensive motorbikes.
Lower priced competition from firms like Honda and Polaris is becoming more attractive to those finding new Harleys too expensive. The company has no intention of reducing prices to meet this competition. Instead, it has been introducing less expensive models to meet the needs of younger bikers.
Demand for Harleys is also dropping due to its traditional baby-boomer customers growing older. As they do so, they sell their bikes to others, leading to a reduction in demand for new motorbikes. Matthew Levatich, President and CEO of Harley-Davidson, stated that lack of sales would force the company to make cutbacks. This would involve production cuts and a reduction in working hour at some US plants.
It ‘s no coincidence that registrations of big bikes have dropped around 7% for the year to date, while Harley-Davidson shares dropped 8% in the US (its biggest market). Also, the company’s income for the second quarter of 2017 was $258.90 – around 8% down. The only positive for the company was a 2.9% increase in revenue per bike for the same quarter.
President Trump’s proposed changes, such as more spending on infrastructure and reduced middle-class personal and corporate taxes, have not materialized. These would have helped companies such as Harley-Davidson, but now it appears that they may never happen. The drop in value of Harley Davidson shares may be a presage of what is to come for such businesses. As money becomes tighter fewer people will spend on big bikes when cheaper high-quality alternatives are available.
So we have a combination of reducing interest in large motorbikes, more used bikes entering the market and lower-cost alternatives. Then add to that a gradual squeezing of available cash that leads people to think twice about what they spend. It follows that luxury motorcycle sales are sure to fall off when Honda and other brands are perfectly good alternatives. This combination of factors is certain to have a negative effect on Harley-Davidson shares.
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