Fortune Magazine-Harley Davidson Has a Big Problem

[J.Mencalice]

http://fortune.com/2018/10/02/harley-davidson-motorcycle-sales/

Too much new stock.  Too many used on the cheap.
 

[The Walrus]

The first part of the article is incorrect!!

   "Harley-Davidson (hog, -0.20%) motorcycles don’t wear out quickly, in function or in style, and it   means the company is competing against its own used motorcycles for sales."

 

All the ones for sale used are less than 10 years old or are nearly brand new.  So they are competing against all the wanna be's who bought into the HOG image and then never rode the f-ing things.

[JimmyG]

yup, gotta know when to get in, and when to get out

[Moonshot_1]

The first part of the article is incorrect!!

   "Harley-Davidson (hog, -0.20%) motorcycles don’t wear out quickly, in function or in style, and it   means the company is competing against its own used motorcycles for sales."

 

All the ones for sale used are less than 10 years old or are nearly brand new.  So they are competing against all the wanna be's who bought into the HOG image and then never rode the f-ing things.

I'd say your analysis is not too far off the mark. These bikes are not appealing to the current generation. This style of transportation is not appealing to up and coming generation.

Largely I believe the underlying issue is social media and the inability to participate in it while riding a motorcycle. I realize some have mastered the skill until the day they T-bone someone. But this generation would spend their dollars on virtual reality than on reality. This includes gamers.

The other motorcycle manufactures are in the same predicament. Not just Harley.

[bscrive]

If you look at the majority of millennials and GenXers, you will see that they are riding smaller CC bikes.  Whether it is a sport bike, cruiser, or scooters.

[Beardo]

I was watching Barrett Jackson this weekend...I always enjoy how they go through the differences between the years of the cars...just look at the differences between a 68, 69, 70, 71 Mustang, for example. Really makes you want to upgrade. For the most part, a 2005 HD looks very similar to a 2018 HD. Why buy one for a new engine with a few more HP...when HD owners clearly don’t buy their bikes for the HP.  Sure, they’ve made the odd suspension upgrade or infotainment upgrade, but they’re still similar.

Having said that, it’s not just HD. Honda kept the Wing basically the same from 2001-2012, changed it a bit, then kept that for 5 more. Just lazy. Need to innovate, create, excite in order to motivate people to upgrade.

[DIGGER]

I am way down the list of high mileage Valkyries with just over 90,000 miles.  When I am around Harley riders and they see my mileage they can't hardly believe I have ridden that far on a motorcycle.  Most Harleys I see for sale no matter the age have less than 30,000 miles on them.    Harleys are fully capable of higher mileage it's just that the average Harley rider didn't buy their bike to travel on but to go to meets, rallys, and bar hopping and locall scenic rides.  Therefore their bikes as a used bike look newer and have fewer miles on them.    I actually have had a Harley rider, when I showed him our Valkyrie website High Mileage Valkyries, say there was no way that could be true.   Were I to be looking to buy a Harley I would definately look at low mileage used Harleys before I payed the high price of a new one.

[F6Dave]

I remember about a decade ago there were shortages of some new Harleys.  There were even waiting lists.  Some owners would buy a new one, ride it for a year, then sell it used for more than they paid for it new. 

[Kokomo Kevin]

I also remember that decade that F6 Dave talks about as well! I worked at that time in a GM Assembly Plant and Harley was rationing bikes by region at that time. There were groups of people who "moved"
via a post office box to different areas of the country, just be be able to buy the newest model. They then bought as many as the local Harley dealer would sell them and brought them back to the midwest to resell them. They made quite a killing. The local dealers would wink at them at that time, they did not care, they just wanted to sell as many as they could.

[DIGGER]

I remember about a decade ago there were shortages of some new Harleys.  There were even waiting lists.  Some owners would buy a new one, ride it for a year, then sell it used for more than they paid for it new. 

I remember that happening.  Had a BMW buddy that did just that.    Sold his Beemer, bought a Harley, later sold the Harley for more than he paid new.

[pago cruiser]

I own an XR1200, prolly the most anti-HD ever sold.  Love it. But you could not give me one of their current cruisers. I've rented them on a few trips, but... no. From  ...heft..., to vibration, to heat, to handling, to the way the goofy key fob works,  no.  YMMV...

However... from MCN received a couple days ago:

"HD is currently sitting on nearly 1 Billion (with a B) in cash.  They have generated over 100 million more in cash year-to-date than in 2017. This year, HD increased its dividend and repurchased 2.3 million shares of its common stock, with 10X additional shares remaining on repurchase authorization.

Year to date, HD has sold 125 Million in apparel and collectibles, 366 Million in financial services (Bike loans!), 400 million in parts and accessories,  and 2.3 Billion in new motorcycles. 

This does not sound like a failing company."

It's a really good article.  HD is rapidly (for HD... ) moving into expanding offerings. Also from the article: "The traditional HD dealership has proven it won't sell anything other than a traditional HD cruiser...".  While I personally have my doubts about HD's technical prowess, their projected future offerings appear to be steps moving forward. Whether their current buyers see this as progress, or whether they can indeed expand their demographics and sell the products remains to be seen.  It should be interesting to observe...

[Mongo]

I have my 1999 Valkyrie since 2000 and plan to keep it forever but this summer I sold my VStrom and bought a 2017 Ultra Limited. Really like the bike. Even with the new Milwaukee 8 it's not as fast as the Valkyrie or feel as good running above 70, but the brakes are a lot better the sound system and the gps are great. But what sold me was the dealer network. I also like to buy gear t-shirts, jackets etc.. Honda  has done almost nothing to promote their brand  Some of best Honda dealers in my area (60 miles)have closed. The one nearest me didn't even have a wing in stock. Took the Valkyrie on a couple of poker runs this summer and it still gets more attention than the Ultra 

[¿spoom]

The original article seems way to simplistic. The entire cruiser market has shrunk, and probably will stay contracted as older riders leave in greater number than are replaced by youth. If Harley has made major mistakes, they have been poor quality/engineering and failure to aggressively design and market a basic smaller bike at a very low price point. They are trying to turn that around now with the 500cc & 750cc Street Model bikes, but waited far too long. They should have pursued a very inexpensive, basic, Harley Davidson-badged project based on the Buell Blast for a "thumper" single cyl. starter bike to get high school and college aged riders into the H-D family. Anyone who's ridden a 650 single Suzuki Savage back in the day knows what a fun, nimble, high torque bike it was. Very forgiving to riders learning to use a hand clutch. Good manners, great sound, able to cruise at 70mph all day long. Engineering-wise, all Harley had to do was lose the back jug from a 1200 Sportster and do a new frame take advantage of the vacant space to lower the seat height for smaller/newer riders to stand flat-footed-something only the later "Hugger" model Sporties ever delivered.
Bike sales are based on price and value. Price is an absolute, but value is based on perception. Over and over, Harley let it's riders down with a new engine that seemed to have a huge flaw. Whether it was a cam tensioner, oil migration, failure to deal with heat, coolant leaks, whatever, it became impossible for many to figure out why/how they could seem to make the same basic engine for decades and never get it as reliable as a first-year bike from metric competitors. I've had several H-D, many Hondas, and still have 2 Hondas & a H-D in the garage, so I'm not a hater. Just disappointed.
 

[9Ball]

I’ve had quite a few conversations with Harley owners over the past twenty years and one common comment was that their new Harley was an “investment.”

This may have been true (that they hold their value) at one time when the bikes were in short supply but that is pretty far from the current reality for a used bike.  Harley sold and financed a lot of bikes to people with poor credit histories and this came back to bite them when they were repossessed.  I doubt that any current “investors” feel they made a smart investment.

It’s still somewhat true for the antique Harley bikes, even those made during the AMF days.

[Willow]

It appears to me the author is not really familiar with the motorcycle world and has seriously misdiagnosed the issue. 

[cookiedough]

The cycle sales for all mfgs. will continue to decline in next few decades pretty sure on that.  The 17-30 year olds are not interested in cycles for the most part.  My kid is age 17 now started age 16, but he is the exception only one in the school that has a valid cycle license.  When I was age 17, we had about 5-6 same small school system riding cycles in high school.    Also, parents are unable to afford the higher premiums on cycle and car insurance if a teenage driver is on the insurance policy.  I know 3 parents in my own small town who still refuse to allow their 16-19 year old kids to get even their car driver's license since unable to afford the 30-50% price increase on their vehicle insurance policy.  All 4 of my vehicles went up 30% price increase for 2 teenage drivers and my cycle insurance on 5 cycles the same as well, not happy about that either.  I tried arguing with Progressive keeping my kid ONLY able to drive 2 of the 5 cycles but they said NO he must be on ALL 5 cycles and assign him to the HIGHEST risk and HIGHEST priced cycle which is bogus if you ask me.  I did for giggles try to write him a separate insurance policy for just his 2005 yamaha fjr1300 cycle in  his name ONLY and just laughed when it was over 600 bucks per year on ONLY that ONE cycle.  NO ONE can afford that age 16-25 for sure.

Money is not the only problem, there is also lack of interest doing other things non cycle related.  Pretty sure if I did not buy his first cycle last year he would still not be driving cycles today.  Us older generation age 45ish or so on up need to promote cycle riding for it will continue to decline pretty sure on it.  I think Scooters are pretty hot though right now with teenagers and young folks due to cheap to buy and cheap to repair and cheap on gas.  I for one will not be caught dead on a 50cc scooter for I test rode one once was faster to pedal a bicycle with top speed of 25-30 mph with my big keester on it.  I have a 250cc scooter for basically a few hundred bucks more than a 50cc puddle jumper scooter able to keep up on all hwys. except the interstate of course.  You can only push so hard though the younger generation since I tried letting my now 20 year old daughter ride when age 17 my 250cc scooter and she had no desire to learn or try it so I backed off.

I would have given anything if my Dad let me buy or get a used road worthy cycle age 16 but he said NO having to wait until near age 18.

[Kokomo Kevin]

Reminds me of when my son wanted his first bike. I told him I would help him if he graduated college on time which he did. Bought his first bike, a Valkyrie,  after he learned to ride his Dad's Valkyrie. When I went to work he would take it out and ride up and down the street. Caught him one day and then took him over to an empty lot and held my breath. Set up cones and we started on slow riding. After he mastered it, I would not let him ride until he passed his driving test and held the beginner permit. We have both now traveled together from East to West coast on our Valkyries several times. I made him make the promise, that if he ever had a son, that he would try and give him the same experience that we had. These were trips of a lifetime, I will always cherish this time with him. He still has his Valk as do I 18 years later.

[¿spoom]

I’ve had quite a few conversations with Harley owners over the past twenty years and one common comment was that their new Harley was an “investment.”

This may have been true at one time when the bikes were in short supply but that is pretty far from the current reality.  Harley sold and financed a lot of bikes to people with poor credit histories and this came back to bite them when they were repossessed.  I doubt that any current “investors” feel they made a smart investment.

It’s still true for the real antique Harley bikes, even those made during the AMF days.

The "investment" silliness seems to come & go, the realities of the past decade should have quieted most everyone on that count. When there wasn't production capability, they could often be sold at 2-3 years old for original sticker, but that was more a manipulation than reflection on value. With the KC plant closing, perhaps the over capacity may go away.Regardless, it's a mass produced vehicle. It'll be a used vehicle the day you drive it home. It may hold it's value better than some other bikes, but it's not an investment.

[cookiedough]

It is an investment all right spending say used 8-14K on a HD and then having to spend another 5K to get it to run faster/better or 5K in repairs....

My fanatic HD neighbor having his 2003 ultra classic even admitted his 88cu in. engine was a pooch before he spent over 5K in upgrades to get it to run faster/better.  Now guessing having to spend 18K on it overall including repairs and upgrades,  he be lucky now asking 8K for it.  Still has it not sold been 2 years now wanting to sell it.  Nothing wrong with it,  just that even at 8K, is a dime a dozen. 

[Tx Bohemian]

It is an investment all right spending say used 8-14K on a HD and then having to spend another 5K to get it to run faster/better or 5K in repairs....

My fanatic HD neighbor having his 2003 ultra classic even admitted his 88cu in. engine was a pooch before he spent over 5K in upgrades to get it to run faster/better.  Now guessing having to spend 18K on it overall including repairs and upgrades,  he be lucky now asking 8K for it.  Still has it not sold been 2 years now wanting to sell it.  Nothing wrong with it,  just that even at 8K, is a dime a dozen. 

Got a buddy with a similar story.
In '99 HAD to have a HD and brought up the "it's an investment" scenario. So he traveled to a dealer in Phar, Tx (about 200 miles away) to get a new Dyna Wideglide. Paid $16K for it (or so I heard), had it 10yrs, put 9900 miles on it and sold it for $7500. (P'd me off cause I would've given him that for it, I didn't know he was selling).
Now I'm not a financial whiz by no means but to me that's a BAD investment (aren't you supposed to MAKE money on investments?)

Now on the other side of the coin, when my wife got her MC license we got her a Suzuki 250 for her first bike, neat little cruiser.
Paid $1200 for it and after about 8 months she wanted something bigger (she's an old Hotrodder) so we sold it for $1800!

To me, THAT was a GOOD investment! But again, I'm no "financial whiz"!!

[msb]

Reminds me of when my son wanted his first bike. I told him I would help him if he graduated college on time which he did. Bought his first bike, a Valkyrie,  after he learned to ride his Dad's Valkyrie. When I went to work he would take it out and ride up and down the street. Caught him one day and then took him over to an empty lot and held my breath. Set up cones and we started on slow riding. After he mastered it, I would not let him ride until he passed his driving test and held the beginner permit. We have both now traveled together from East to West coast on our Valkyries several times. I made him make the promise, that if he ever had a son, that he would try and give him the same experience that we had. These were trips of a lifetime, I will always cherish this time with him. He still has his Valk as do I 18 years later.

Great story, and I can only imagine the experiences and memories of being able to do those rides with your son. My daughters would ride on the back of my bikes on occasion and the youngest did ride a scooter while in university but alas, neither took to riding motorcycles and while they both married great guys, neither of my son in laws are interested in riding either (yet...still working on son in law #2)

[¿spoom]

I know of some special 'vette and 'stang buyers that thought their cars were an investment based on past models, kept them on blocks instead of driving them, and now they see similar ones selling for less than original sticker when they come to auction. Very few vehicles will ever appreciate any more than a large screen TV. Many people don't really understand what the word "invest" actually means. invest and spend are not synonyms 

[Beardo]

Bikes ARE investments.

Not all returns on investment are measured in dollars. 

[msb]

Bikes ARE investments.

Not all returns on investment are measured in dollars. 

     an investment in life experiences...I'm a rich man in this regard

[9Ball]

Bikes ARE investments.

Not all returns on investment are measured in dollars. 

That’s a keeper of a quote....

[Tx Bohemian]

Bikes ARE investments.

Not all returns on investment are measured in dollars. 

Totally agree!!

But you can spend $25-30K on an "investment".

Or spend $10-12K and get the same exact "investment not measured in dollars"!
And, then not lose near as much when deciding to sell or "invest" in something else!

But, alas, as I always say: to each his own!

[Willow]

...
Not all returns on investment are measured in dollars. 

Actually not so much.  By definition an investment is capital put into something that will return capital.

The thought is correct but would more accurately be stated that not all value is measured in dollars.  Perhaps most real value is not measured in dollars.  Incredibly financially wealthy people often tend to be so unhappy and unfulfilled.

[Beardo]

...
Not all returns on investment are measured in dollars. 

Actually not so much.  By definition an investment is capital put into something that will return capital.

The thought is correct but would more accurately be stated that not all value is measured in dollars.  Perhaps most real value is not measured in dollars.  Incredibly financially wealthy people often tend to be so unhappy and unfulfilled.

  you know what I meant.

The important thing is...that line worked on my wife when we were deciding on  buying the new Wing.

[¿spoom]

...
Not all returns on investment are measured in dollars. 

Actually not so much.  By definition an investment is capital put into something that will return capital.

The thought is correct but would more accurately be stated that not all value is measured in dollars.  Perhaps most real value is not measured in dollars.  Incredibly financially wealthy people often tend to be so unhappy and unfulfilled.

  you know what I meant.

The important thing is...that line worked on my wife when we were deciding on  buying the new Wing.

Yeah, but you knew what I meant when I said, "not an investment"  so Willow just got us back on track IMHO. The topic was clearly not about enjoyment of owning A bike, but of the situation with H-D, and my example was apples to apples on that. 

[msb]

I purchased a new Shovelhead in 1980 for $6500. Rode it for 5 years and sold it for $6000. Not only did I get 5 years of NOT trouble-free riding out of it, but I met my bride of almost 37 years and counting on it when it broke down one night and she was there to help me push it to get it going... I think that bike was a pretty good "investment" in anybody's sense of the word

[cookiedough]

It is an investment all right spending say used 8-14K on a HD and then having to spend another 5K to get it to run faster/better or 5K in repairs....

My fanatic HD neighbor having his 2003 ultra classic even admitted his 88cu in. engine was a pooch before he spent over 5K in upgrades to get it to run faster/better.  Now guessing having to spend 18K on it overall including repairs and upgrades,  he be lucky now asking 8K for it.  Still has it not sold been 2 years now wanting to sell it.  Nothing wrong with it,  just that even at 8K, is a dime a dozen. 

Got a buddy with a similar story.


In '99 HAD to have a HD and brought up the "it's an investment" scenario. So he traveled to a dealer in Phar, Tx (about 200 miles away) to get a new Dyna Wideglide. Paid $16K for it (or so I heard), had it 10yrs, put 9900 miles on it and sold it for $7500. (P'd me off cause I would've given him that for it, I didn't know he was selling).
Now I'm not a financial whiz by no means but to me that's a BAD investment (aren't you supposed to MAKE money on investments?)

Now on the other side of the coin, when my wife got her MC license we got her a Suzuki 250 for her first bike, neat little cruiser.
Paid $1200 for it and after about 8 months she wanted something bigger (she's an old Hotrodder) so we sold it for $1800!

To me, THAT was a GOOD investment! But again, I'm no "financial whiz"!!

Yah,  same as neighbor guessing paid 10+ years ago around 14K for it, spent over 5K to upgrade so near 20K am sure.  Now hard to get 8K for his 2003 ultra classic.  I spent 1K on a 250cc scooter can get easily 1K out of it if sold as well as around 2K for 1997 honda magna added a few extras am sure can get 2200 easily for it.  Much better investment than in a HD...