Harley Davidson is a financial smash hit. The company is wealthy. Last year alone, Harley had gross sales of over $2.2 Billion Dollars and net profits of $240 Million Dollars.
Although Harley is still smaller than some of the Japanese giants, its revenues and profits dwarf Ducati’s and Triumph’s. Ducati and Triumph build cutting edge sport bikes. Harley doesn’t. Why not?
Instead, Harley bought Buell – an interesting company built by a passionate engineer that stuffs relatively ancient 1200 cc Harley v-twins into modern chassis and calls them sport bikes. Here is a statement from Buell’s web site:
“Buell manufactures a complete line of American sport bikes that appeal to a young, diverse group of riders who demand the ultimate in performance and handling.”
Buells certainly appeal to some riders, but it isn’t to those “who demand the ultimate in performance and handling.” Yamaha R1 buyers aren’t even looking at Buells.
What’s going on here? Harley’s response might be “Why mess with success?” After all, they are selling lots of bikes and making a huge profit on each bike sale. The problem with this thinking is that it will ultimately lead to disaster. Harley’s customers are aging rapidly. The average Harley customer is older than the average sport bike buyer and, if Harley is to survive and thrive, they must appeal to a younger group of riders.
Harley realizes this, of course, and is developing a strategy to deal with it. My guess is that Harley is pouring lots of money into research and development of a new line of sport bikes, probably to be sold under the Buell brand name. If Harley isn’t doing this, or something similar, then they have their head buried in the sand.
The motorcycle business, like every other business, is cyclical – motorcycles come into fashion and fall out of fashion. Right now, cruisers are hot – just look at the phenomenal growth of Harley out of financial ruin in the early eighties – but, as sure as the sun will set this evening, cruisers will peak in popularity and then decline. Will Harley be ready for this? Or will it simply see its market share, sales and profits erode – perhaps as quickly as they rose. Only time will tell, but here’s hoping Harley starts to diversify its product line with some interesting, modern designs filled with cutting edge technology.
