ON MARCH 25, 2024 BY PHOTOMOTOMAN WAWAIN MOTORCYCLING
And why is this So Important to Harley-Davidson?
Harley-Davidson has a problem, which in some ways is more unique to Harley-Davidson than it is to other motorcycle manufacturers in that only 34.95% of its sales occur outside North America.
Why is this consequential to Harley-Davidson? Because while 65.05% of Harley-Davidson’s sales were in North America, the market for motorcycles is not. Global motorcycle sales in 2023 amounted to 18.5 million motorcycles. To put Harley-Davidson’s total sales figures in perspective, it sold less than 1% of those motorcycles or 0.88%.
While other manufacturers have been marketing their products where sales mostly occur, Harley has been stagnant or worse, non-existent in those massive markets. The other issue that makes the situation even more dire is that Harley-Davidson’s sales continue to fall (16.9% in 2023) while globally, motorcycle sales continue to increase (4.4%).
If we look at ‘where’ motorcycles are being sold, it clearly illustrates the size of the problem that Harley-Davidson faces, and why tariffs and trade embargoes do not work in Harley-Davidson’s favour. Last year, Harley-Davidson sold a total of 26,953 motorcycles in the Asia Pacific region, and only 27,005 motorcycles in Europe. They sold even less, or 2,923 motorcycles in Latin America.
https://worldpopulationreview.com/countries/india-population
To put into perspective how insignificant these totals are in relation to future growth, market penetration and ultimately corporate survival, — let’s look at where the market is now.
“Statista estimates that 550 thousand motorcycles will be sold in the United States over the next year leading to $6.24 billion in revenue. That of course is for all manufacturers, foreign and domestic. China alone exported $12 billion dollars worth of motorcycles last year, — over a quarter of all worldwide motorcycle exports. Germany exported $3.3 billion worth of motorcycles. Japan exported $3.2 billion worth of motorcycles and Thailand exported $3.0 billion. By comparison, Harley-Davidson only moved 1.7% of the world’s motorcycles. The question is why?
In Asia, motorcycles are popular both in rural areas and in big cities. With traffic gridlocked across Asia, motorcycles “provide a freedom of movement often not found in gridlocked traffic. This is especially true in cities in China, Japan and Thailand…these roads are perfect for motorcycles.” I might add that the infrastructure is improving all the time.
https://worldpopulationreview.com/country-rankings/motorcycles-by-country
In North America, climate, road conditions and economic factors favour the purchase of cars, even trucks, while in Asia it favours the purchase of two- and three-wheel vehicles. Add into that equation the problem of emissions and global warming, and you have a push, from governments and consumers, to but zero or low emission transportation options.
Asian, and in the last ten years, European manufacturers quickly recognized the massive opportunity that the financial growth in China, India and in Asia generally offered to established companies with sound financials, good prices and great reliability. It wasn’t long before all the major Japanese manufacturers had inked deals with Chinese, Indian, Thailand, Vietnam and other Asian motorcycle producing countries. European manufacturers, like BMW and KTM, quickly followed suit.
Meanwhile in America, trade wars and internal political infighting created negative conditions to exports and to the possible creation of agreements with foreign manufacturers. On top of this, American manufacturers were myopic and insular in their thinking. This led to a number of significant problems for Harley-Davidson, which have not applied to its competition.
First, foreign manufacturers have had access to massive markets where sales were increasing dramatically, while in North America, motorcycle sales were either stagnant or decreasing. Second, these primarily Japanese manufacturers had the ability, infrastructure, trained employees and production capacity to quickly scale their operation to the new market demand, thereby effectively penetrating the market in those rapidly growing areas of trade. Third, Japanese and then European manufacturers already had trading relationships and trade agreements in place that made a quick transition possible.
Meanwhile, in America, production was slowing, plants were closing, the U.S. Federal government under Trump, was becoming insular in its thinking and unwilling to open American markets without trade restrictions.
All of these factors combined to create significant problems for American manufacturers.
And then COVID hit.
One of the worst possible situations that could occur was if globalization and the global supply network was disrupted. Covid did exactly that, and the economic downturn and dislocations created circumstances that saw either retrenchment, or in the worst situations, insolvency for some companies. Markets fell and global sales plummeted.
Harley-Davidson, for these and all the additional factors associated with its cost structure, demographic and style of product was to be more heavily impacted than any foreign motorcycle producing corporation. By ignoring the foreign market, and by the political failure of one administration in particular, Harley-Davidson saw its fortunes fail.
Ten years too late to make the necessary inroads into Asia, China and India, Harley-Davidson is now entering into agreements with foreign motorcycle producing companies. However, those companies have leverage over Harley-Davidson now. By producing for Harley-Davidson where they are not only already entrenched in the market, but able to reap the rewards of actually producing the finished product for Harley-Davidson, they reap most of the reward. Harley-Davidson will only take a small portion of the profits, assuming of course that buyers in those countries even choose to buy Harley at a higher price, instead of Hero, Niu, CFMoto, TVS, Bajaj, etc. etc.
Statista states that revenue in the motorcycles market is projected to reach $145 billion in 2024 globally, with an annual growth rate of 3.07%, resulting in a projected market volume of $164.2 billion by 2028.
https://www.statista.com/outlook/mmo/motorcycles/worldwide
As noted in previous articles here, sales in North America are projected to remain flat or possibly decline in the coming year. What it suggests is that for Harley-Davidson to survive, it needs to make inroads, not just in North America, where its market is shrinking, but globally where the real market is expanding and growing rapidly.
Harley-Davidson’s future hangs in the balance. After more than 10 years of continuous decline, Harley-Davidson has very little time to turn this around for all those foreign motorcycle manufacturers are now coming to North America in waves. They are specifically tailoring their sales to the future demographic in North America, that want a cheaper, more reliable, faster, operationally cost-effective motorcycle product, that is already being manufactured in foreign countries, like China, India and soon, Mexico, the Philippines, Thailand and Vietnam.
Can Harley-Davidson make that shift effectively? I suppose we will all witness that outcome over the next few years.
Ciao…
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