CEO says Harley not abandoning core in pursuit of new riders

Some of the concept motorcycles Harley-Davidson unveiled Monday as part of its accelerated growth strategy almost look as they could be a powered offering from Trek Bicycle or at least the product of a sport bike manufacturer, not the Milwaukee-based heavyweight motorcycle maker.

In the pursuit of up to an additional $1.5 billion in annual revenue, Harley plans to expand its offerings to more segments and markets by adding additional price points, engine displacements and riding styles to its offerings.

But Matt Levatich, Harley-Davidson president and chief executive officer, told analysts the company is not abandoning its core riders in the process.

“In no way, shape or form are we running away from what we’re known for,” he said.

Harley does plan to launch its first electric motorcycle in August 2019 and will launch a new 500 to 1250 cc platform to launch another 16 models in the middleweight segment in 2020 thru 2022. Those new models will include the Pan America, an adventure touring motorcycle and nine streetfighter models.

Levatich said Harley will also continue investing in its touring and cruiser models, adding new features to improve rider safety, performance, connectivity and infotainment offerings.

“This plan is directed at both the base business and bringing new customers in,” said John Olin, Harley chief financial officer.

Harley’s base business, however, has been challenged for the last several years as baby boomers begin to retire, used motorcycles flood the market and competition increased. Motorcycle and related product revenue has declined nearly $653 million, almost 12 percent, from 2014 to 2017. Shipments of motorcycles in the U.S. declined 29,101, almost 17 percent over the same period.

Olin said Harley accounted for those challenges in setting its targets for increased revenue and operating income.

“We continue to expect significant headwinds in the U.S. market,” Olin said.

He pointed out the company has an opportunity to create significant revenue growth with the introduction of LiveWire since an electric motorcycle likely won’t take away from sales of other bikes and could also bring new buyers to the company.

Olin added that Harley previously said it would bring an electric bike to market when the travel range met customer expectations and it could be commercialized profitably.

“That time is right now,” he said.

Beyond LiveWire, Harley plans to introduce two to five more electric models in 2021 and 2022. Some of those concepts almost resemble bicycles. Levatich has said the electric motorcycles will be easier to ride than a bike.

Harley also sees potential for 250 to 500 cc motorcycle sales in India and plans to introduce one or two models by 2020. The engines have a smaller displacement than nearly all of Harley’s existing models, but are larger than typical motorcycles in the country and target an emerging middle class. The company is targeting 1 to 4 percent market share and plans to announce a strategic partnership to manufacture the motorcycles.

The introduction of more middleweight models, particularly the streetfighter sport bike, will bring Harley into more competitive segments. Levatich acknowledged Harley will likely “have to exceed what the competition is doing” to gain a foothold. He said the company also plans to continue seeking a premium price.

“I think it is risky to think that motorcyclists aren’t open-minded about other products and other brands,” Levatich said. “In particular, in our research, they’re very enthusiastic about what Harley-Davidson can do in some of these really fun motorcycle segments and they want us to bring it. We’re emboldened by that.”

Entering new segments is intended to help bring new groups of riders to the Harley brand, particularly as populations increasingly shift toward urban areas. Levatich said Harley’s dealers will need to do work over time “to be more inclined, welcoming, accepting and encouraging of these new and different kinds of riders when we arrive with these new and different kinds of products.”

Levatich also expressed skepticism that the culture of riding Harley-Davidson motorcycles would need to be different among the different groups the company is seeking to attract.

“What we do know about riding and about our brand is it’s very much about community,” he said. “It will manifest itself differently, but the spirit of community and camaraderie is absolutely at the core in every one of the segments that we’re looking at.”