Harley-Davidson’s progressive new CEO Jochen Zeitz made two big announcements last week: A separate new division was opening within the company to focus purely on electric motorcycles, and Q4 2020 saw a dramatic drop in revenue.
The latter is certainly a problem, but the former is the solution.
There’s no doubt about it; Harley-Davidson is facing a demographic problem. A large chunk of its target market is aging out of motorcycles.
Sure, there are still dudes in their 30s buying Harley-Davidson motorcycles. I know several. But their numbers aren’t inspiring.
It’s not a full-blown crisis for H-D yet, but it’s a real problem.
The conventional wisdom among Harley’s target market has been that the solution is easy: build more heavy cruiser bikes.
But there’s a reason that Harley’s current riders don’t make the business decisions. That old way of thinking just isn’t cutting it anymore. And now the company realizes it.
Harley-Davidson made its name and its image building loud, heavyweight motorcycles that packed as much bravado as they did cubic inches. But as the number of riders seeking those cubic inches drops off, so have Harley’s revenue figures.
Instead, a new wave of younger riders is embracing a new type of motorcycle: electric motorcycles. The new breed of electric motorcycles packs as much power and performance as the old gas-powered bikes (and often more), yet offers lower maintenance, lower operating costs and isn’t a contributing factor to this planet going to hell in a handbasket. All good things!
Sales numbers for e-motorcycles aren’t even close to gas bikes yet; I won’t claim they are. Gas motorcycles still outsell electric motorcycles in the US by a large margin. But a look at the trend lines shows the margin is shrinking, and it’s shrinking even faster for Harley-Davidson’s aging target market.
And thus the answer is simple. If we fast-forward a few years and Harley-Davidson doesn’t have any electric motorcycles to offer new riders, it won’t sell motorcycles. Period.
That’s not me being hyperbolic. It’s a simple statement of fact. The issue isn’t just that gas bike sales are declining. Many countries and even US states are outlawing the sale of gas-powered vehicles entirely in the near future – a trend that is all but guaranteed to expand. While some of these bans only cover four-wheeled vehicles, motorcycles and scooters are bound to eventually be included as well.
Combining legislative hurdles and the general downturn in revenue, H-D’s gas bike sales are not going to recover to levels seen in the glory days of the early 2000s. But when it comes to electric motorcycle sales, on the other hand, the only way to go is up.
And thus Harley-Davidson made two smart moves last week with the announcement of the company’s new five-year strategic plan, The Hardwire. The company is doubling down on its core cruiser motorcycle designs and is opening a new separate division within the company to focus on electric motorcycle development.
The first part of the plan makes sense, even if I’m not a gas bike fan. Harley’s gas bike sales are still dominating, even if they are trending downwards. Before the rest of Harley’s old-school market dies off, the company needs to squeeze out as much cash from them as they can. Harley-Davidson simply won’t have enough electric motorcycles in its lineup in the next few years to rely on electrons over hydrocarbons.
Financially speaking, Harley’s gas bikes are a delaying action. They can buy the company time while more resources are directed at developing new electric motorcycles.
The LiveWire was a great first entry, and it did exactly what Harley-Davidson intended: It proved that H-D can build a world-class electric motorcycle. That’s the whole point of a halo product – not to sell in huge numbers but rather to demonstrate a company’s expertise in the area. In a surprising turn of events, the LiveWire actually ended up selling better than just about anyone had predicted, becoming the number-one-selling electric motorcycle in the US.
Even so, very few millennials can find $30K in their wallets for the LiveWire. But now that H-D is doubling down on electric motorcycles, the LiveWire can finally receive its baby brothers in the form of lower-cost follow-on electric motorcycles from H-D.
The company already has very attractive light electric motorcycle designs on paper. With the introduction of a new electric motorcycle division within the company, H-D can now focus on bringing those designs to life.
Not everyone will support Harley’s growing electric motorcycle ambitions. We’ll still hear the anti-electric grumblings of some life-long Harley riders returning to pick up an H-D Tri Glide, figuring that a Harley tricycle still beats a mobility scooter. But if Harley is to succeed, then it won’t be with the help of its existing aging market – not in the long run. It will be because the company made the bold decision to expand into new markets with new motorcycles that new riders will actually want to buy.
That’s the direction that H-D’s progressive new CEO is now taking the company.
And it’s not simply the right direction. Franky, it’s the only direction.
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Author: Micah Toll
Source: Electrek
