The Problem Facing Harley-Davidson

[Music] for years motorcycles have been a bass part of American culture going all the way back to the early 1900s maintaining their popularity through the wars and finding their place in the hippy movement as shown in movies like Easy Rider motorcycles have sparked their own culture the culture is so expensive and rich I can easily fill an entire video about it from the invention of the motorcycle to motorcycle races to the rise of biker gangs like the Hells Angels to the culture that still exists today and we can't forget about the 77 years of Sturgis Motorcycle Rally in South Dakota too many motorcycle owners it's not just a means of transportation it's a way of life they've certainly made their impact on America and the rest of the world as well and what's the biggest name in the motorcycle industry well Harley Davidson of course people don't just want to ride a motorcycle they want to ride a Harley but despite their massive success in the industry there's one big problem that the company faces but first I want to talk a little bit more about the company the name Harley Davidson comes from William s Harley and Arthur Davidson in 1903 they made the first harley-davidson motorcycle available to the public in 1910 the Harley Davidson logo was debuted by 1918 almost half of all Harley's produced were sold to the US military and used in World War one in the early 1930s the Great Depression knocked out all US motorcycle producers with the exception of Indian and harley-davidson these were the only two producers until 1953 however when World War two came around they stopped almost all production of commercial bikes and focused their attention on the war effort in 1945 the war ended and they refocused their attention on civilian bikes they've continued this production through today now people haven't been purchasing Harley's like to have in the past I can think of a few possible reasons for this one is that motorcycles in general are thought of as being somewhat of a luxury item it's true that they're generally cheaper than a car but most people buying a motorcycle aren't buying it in place of a car it's in addition to an existing car motorcycles just aren't practical as a primary mode of transportation they're not something most of us can take to work every day especially in colder snow filled regions and as we know luxury items are one of the first things to be cut from the budget during a downturn in the economy in a recent annual report they state the motorcycle industry is impacted by general economic conditions over which motorcycle manufacturers have little control these factors can weaken the retail environment and lead to weaker demand for discretionary purchases such as motorcycles also Harley's are known for being large and powerful today we're more concerned about fuel efficiency and environmental impact more than ever before the company has recognized these issues and in the last decade have introduced smaller more efficient bikes but having trouble selling bikes isn't exactly their biggest problem their biggest problem simply put is that their customers are getting too old a while ago you would picture this as your typical Harley rider today you would picture something more like this [Music] the younger generation just isn't into motorcycles like they used to be they're more technologically inclined than mechanically inclined and to make matters worse for harley-davidson the few young people that are into motorcycles typically value speed over power they're gravitated toward the smaller faster brands such as Yamaha or Honda Honda's motorcycle segment is very competitive with Harley and it's not even the area in which they specialized the concept of pulling in younger generations to a product is nothing new in fact it's been done with every product that has lasted multiple generations and in most cases it's not all that hard take Disney their product is targeted toward young children and as you may or may not know young children don't stay young forever this means that Disney has to constantly capture new audience but it's not something that threatens the company the young kids of yesterday are the parents of today the parents promote the stuff to their own kids because they remember it as being great when they were young as long as they continue to put out a quality product it's not going to be an issue for Disney but for harley-davidson it's a little harder to capture the next generation the brand has just as much credibility as the Disney brand but unlike Disney it's hard to introduce it to someone when they're young you know when I was a young man riding on harley-davidson motorcycles okay so I like to think of maybe the open road now I never got it I spent the money on aluminum siding motorcycles probably aren't going to enter a person's life until they're much older and less influenced by their parents also the nature of Harley's product makes it a bigger task to interest new people Disney just requires the price of a movie ticket for some merchandise Oreo requires a few dollars for a box of cookies but harley-davidson requires thousands of dollars and basically the adaptation of a new lifestyle they demand a much higher commitment from their customers and for a company that relies so heavily on their brand name this could mean bad news the company has always had issues with attracting customers that aren't white males but in recent times they've been having trouble even capturing that young white male demographic the group that used to be the cornerstone of the company possibly the best thing they have going for them in this area is the tremendous brand loyalty that their existing customers carried remember these two well they're the same guy not literally of course but that young male customer of the past is the same old male customer of the present this graph comes straight from the harley-davidson website they seem to be doing fine in that white male above 35 category but everything else could use some work and they have been working at it if you visit the Investor Relations section of their website they talk about their efforts to attract young adults women African Americans and Hispanic riders they give their plans to focus marketing toward these areas and give charts about how they're doing well in the categories in terms of market share but I have trouble buying a lot of it even if you're able to increase market share it doesn't say much for the total number of customers in that demographic 42 percent of a pie sounds better than 31 percent of a pie but once you learn that the 42 percent pie is smaller it doesn't sound quite as good anymore they may be able to regain their former status in the industry which by the way it's not like they're struggling in the industry it's just not at the level they once were they're going to have to do it with their product they can't rely on the brand name like they have with younger generations they may have to tailor their product to what the younger population wants but still offer the classics that their older customers keep coming back for which is exactly what they've been attempting but my guess is that they'll never return to what they once were they could possibly steal customers from competitors but the competitors only have so many customers to steal what hardly really needs is to make motorcycles popular once again and that's probably a task that's too great for them some of you may be thinking so what's the problem continue selling to the older generation and forget about the younger one well this would be fine but their core demographic has gotten steadily older it's not like their customers are turning 50 in deciding to buy their first motorcycle that 50 year old is the 35 year old that bought one 15 years ago and the 20 year old that bought one 15 years before that which is where the problem lies when that guy 65 he may feel he's getting too old to buy a new one when he's 80 those chances increase and when he's 95 well you know what could happen then the existing customers won't be around forever and for the company to maintain itself it has to draw in new ones the future doesn't look great for harley-davidson I'm not saying to run out and sell your stock in the company stock symbol a choji by the way just know that there's a question as to their ability to continue selling bikes in the long term keep an eye on them and the industry over the next few years it's going to be interesting to see how this all turns out let me know in the comments any thoughts you have on harley-davidson the motorcycle industry or anything else I talked about I'd like to hear what you have to say thank you for watching [Music] you [Music]

Channel: Company Man

Views: 1,252,859

Rating: 4.5438623 out of 5

Keywords: Harley, Harley-Davidson, Company, Business, Economics, Motorcycle, Bike

Id: 1UF-w1yf894

Length: 9min 23sec (563 seconds)

Published: Wed Jun 14 2017

Reddit Comments

[u/allyouhadtosay]

Harley is in trouble because young people can't relate to the image/lifestyle they're trying to sell: "Owning a Harley makes you a tough guy, a rebel."

Having an ear-shatteringly loud bike that pisses people off may have been cool in past decades, now it just makes you look like an ass. And when most people think of Harley, they picture bandanna-clad, leather chap wearing old men. For a company marketing an image, that's not a great one to have.

[u/cortechthrowaway]

This kind of "blame the youth" analysis misses the bigger picture: Harley Davidson is the world's last undiversified motorcycle manufacturer.

When moto sales slip, companies like Honda, BMW, Kawasaki, Yamaha, &c. can draw on revenues from their global automotive, shipbuilding, and/or aerospace divisions to keep the motorcycle R&D going. Even Triumph is backstopped by a billionaire owner.

Harley doesn't have that kind of revenue base. A major retooling project would mean gambling the entire company on a new model. So they're kind of stuck.

[u/DemonEggy]

I don't know about US figures, but Indian in the EU and Asian markets are doing very well, massive year on year growth. Their market share is also growing, while that of HD is falling.

[u/howheels]

Well here’s my problem with HD. The only bike in their lineup that is remotely interesting to me would end up costing over $16k with some minor mods (clip ons, rearsets, exhaust, intake). And it’s still heavy and slow compared to everything at that price point.

[u/IconMoto]

9 minutes of screaming guitar solos and bad VO to say what could have been said in 1 min. Ouch.

[u/dBRenekton]

I'd like to point out that the Harley market share actually increased despite other dwindling numbers.

That means that whatever is hurting HD is hurting the other manufactures even harder. They're still on top.

So things like antiquated technology, an aging market base, and an inability to connect with the younger generation are absolutely valid criticisms of this company. But those issues aren't whats hurting the company YET.

Whatever it is hurting moto sales is hurting EVERYONE. Not just HD. In fact, they're doing the best right now.

[u/[deleted]]

I got invited to test ride Harley's entire 2018 and 2017 lineup. I'm not a cruiser guy, but I can enjoy any bike that runs, and while im not a fan of cruisers like the Virago, VMax, M109 Boulevard, etc, I can appreciate those bikes.

So I jumped at the opportunity and went into the test riding weekend with an open mind. So I showed up, got fed breakfast and watched a presentation on their new models and changes. Once the ride started, I could barely manage to get comfortable or manage to find the controls. As I race motorcyles, I'm very familiar with being cramped on a bike, but this was something else entirely, it was just feeling of my legs being cramped while somehow having the bats too far forward. At 6'5, I'm used to being cramped, but never to the point of being painful, and I have NEVER had the sensation that the bars were too far forward. It was just a strange feeling, and I got this on just about every bike I rode to some degree. On top of that, nothing really felt well built. The controls were loose and sloppy, and would rival a cheap Chinese scooter throttle tube. This was the case on all the bikes I rode that weekend. I was required to say at least 1 good thing about each bike, but many of them I legitimately struggled with.

Many of the bikes I rode had price tags higher than some houses I have lived in. My point, is that Harley isn't selling a motorcycle line, they are selling a lifestyle. Young adults do not have $30k+ to throw down on a subpar motorcycle, and even more so when the "lifestyle" that it's associated with isn't appealing anymore. Harley sales are declining because the only people who can afford and want their bikes are finally dying off.

[u/[deleted]]

How many times will this be posted?

[u/Teamrayray]

I disagree with this video's hypothesis. Harley has never needed a young buyer for success. I remember wanting to get my first harley (1987) and you had to have a Harley to trade in just to be considered as buyer for a new one. Harley will be fine for another 50 years, easy.