OPINION: Harley-Davidson Isn’t Doomed, Despite What You’ve Heard
Sales are down, jobs are being cut, and millennials supposedly don’t want the bikes. But here’s why you should look beyond the fear mongering.
If you believe everything you read and take it all at face value, you probably think that Harley-Davidson is doomed right now. And there’s no denying that the iconic motorcycle maker is going through a bit of rough patch. It all began when Harley announced a 6.5% decrease in worldwide retail motorcycle sales in the second quarter of 2017. Making matters worse, U.S. sales dipped 9.3%, the largest decrease of any country in which Harley operates.
At the time, Harley-Davidson CEO Matt Levatich cited “challenging market conditions” and “U.S. industry challenges” as the culprits behind this drop. And in response to growing inventory levels resulting from the sales drop, Levatich announced that the brand would cut shipments for the remainder of the year. In addition, Harley expects to eliminate an undetermined number of jobs as well.
If that wasn’t bad enough, things quickly got worse just days after these results were released. As CNBC first reported, investment firm Alliance Bernstein issued a note to investors informing them that they were downgrading Harley stock from “outperform” to “market perform.” The reason? millennials. Yes, the age group that gets blamed for everything is the reason why Harley-Davidson allegedly won’t see rider growth for the next five years.
“Our data suggests the younger Gen Y population is adopting motorcycling at a far lower rate than prior generations,” Alliance Bernstein analyst David Beckel said in the investor note. “Gen Y’s are aging into the important ‘pre-family’ cohort of riders and Boomers are increasingly handing over their keys to the smaller Gen X population.” In all fairness, the prediction is based on real data. Fewer millennials are riding motorcycles at this stage in life than Baby Boomers or Gen Xers. At least for now.
But why, exactly, don’t millennials want to ride motorcycles? As Morgan Stanley analyst Kimberly Greenberger told Business Insider, it’s the same reason they supposedly don’t want to buy houses and cars. Because Gen Y’ers grew up during the last recession, they’re reluctant to make financial commitments they deem risky or unnecessary. Well, except for avocado toast and fancy coffee, we hear.
But there are a lot of problems with every one of these arguments. First, let’s take a look at Harley’s declining sales in comparison with the rest of the transportation industry. Following the end of the recession, automakers enjoyed a couple of record sales years. With gas prices sinking and people returning to work, they did what Americans do best. And that’s buy stuff. Much of it stuff they didn’t necessarily need.
With more discretionary income, buyers that previously eschewed things like trucks, motorcycles, and heavy SUVs started buying them in throes. But eventually, that boom in sales slowed down. As The New York Times points out, this happened in part because interest rates rose, making loans more expensive. Most people that wanted a new car or toy now had one. And automakers knew this was coming. So did Harley, who have said for months that they expected a slowdown. But for whatever reason, people ignored them. As well as the fact that the economy ebbs and flows.
Now, on to those pesky millennials, the generation that’s been blamed for killing everything from restaurants to the housing market. It’s true that the younger generation might exhibit different spending habits than the rest. But the same can be said about Gen Xers versus Baby Boomers. And let’s not forget one simple fact – Harley-Davidson is a premium brand. Up until recently, they haven’t offered much in the way of entry level bikes. Nor ones that cater to the tastes of younger folks specifically.
If you’re a Gen Xer or Baby Boomer, think back. Did you have $20,000+ to blow on a motorcycle when you were in your teens or twenties? For most people, the answer is no. Heck, millennials aren’t buying luxury cars, either, like that should be a surprise. While there are some (lucky) exceptions to the rule, most folks, regardless of generation, are still climbing the career ladder at that point in life.
Plus, Harley is just beginning to break into the affordable city cruiser market with their Street lineup. And even though the early impressions on those bikes are good, it’s going to take some work (and time) to change the company’s image.
And they know that. Levatich admits that Harley must work to convince the younger generation, who’ve reportedly been scooping up used bikes in “encouraging numbers,” to buy new ones. Meanwhile, the legendary motorcycle maker is facing stiff competition from the likes of Indian. For the first time in a long time, they’re not the only American company pumping out quality cruisers. It’s part of the reason why H-D has been lulling the idea of buying Ducati, a company that’s enjoyed a 13% sales increase in the last two years.
The fact that Harley-Davidson has issues is not a surprise to Harley-Davidson. And they began to make major changes years ago to rectify them. Those moves include major expansions into global markets and the development of 100+ new models. Many of them designed specifically to appeal to today’s new generation of potential riders. Heck, they’re even going to build an electric bike. It’s what good businesses do when the market dictates it – change.
So, while other “media” outlets continue to use sensationalized headlines to predict the motorcycle maker’s demise to get cheap clicks, we’re pumping the brakes on the fear-mongering train. And you should too.
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