Harley Davidson, one of the most iconic American motorbike brand, can simply be called “THE JACK OF ALL ROADS”. Just as the bikes are made such that they can manage every kind of roads, likewise, the company has also traversed different king of terrains in its 116 years old journey, some were like steep hills marking its uprise while some were like Indian roads (full of potholes) which slowed down its speed.
This article aims to cover the entire journey of Harley Davidson through a 3W1H (Where, When, What, How) analysis.
HOW IS THE CURRENT SCENARIO
The sales of HARLEY DAVIDSON declined in 2019 due to which company saw a drop in revenue and the profit, though better than expected, eroded nearly 20% for the struggling manufacturer.
Following are some of the key points:-
- Harley-Davidson’s second-quarter earnings per share of $1.23 exceed projections by 3 cents.
- Revenue missed estimates $1.43 billion, versus $1.44 billion expected by Refinitiv.
- The company reports $195.6 million in net income during the second quarter, versus $242.3 million a year earlier, a nearly 20% drop.
- Operating margins have also shrunk. It now expects operating margin as a percent of the revenue of about 6% to 7% this year, dropping from the 8% to 9% estimated earlier in the year.
- Harley said the declines were driven by weakness in developed international markets.
- In Asia and the Pacific, Harley has seen motorcycle retail sales drop by 4,165 units from 2016 to 2018. The region’s largest motorcycle market — India — has also seen the company’s sales fall 21.6% from 3,690 units in 2016 to 2,676 units sold in the first quarter of 2019.
The current scenario for HARLEY DAVIDSON is similar to Indian roads being full of potholes or obstacles. There are myriads of factors that prevent Harley Davidson form attaining the lost greatness which it enjoyed in its initial years.
THE TARIFF WAR
The tariff war started by President Trump has taken its toll on Harley Davidson and forced it to shift its production facility out of US costing jobs to many Americans.
In March 2018, Trump imposed a 25% tariff on steel and 10% on aluminum imported from the European Union. Even if Harley-Davidson only used U.S.-produced steel, the prices it paid would be higher, as domestic producers could raise prices. In retaliation, the EU increased the tariffs on motorcycles from 6% to 31% on June 22 (which added $2,200 to the average cost of a Harley-Davidson), and a few days later Harley-Davidson announced that it would be moving some production out of the U.S. to avoid the higher tariffs.
Ageing Baby Boomers
Baby boomer is a term used to describe a person who was born between 1946 and 1964. It represents nearly 20% of the American public (around 68.70 million). Baby boomers made the
They made a huge customer segment for Harley Davidson motorbikes. However, the ageing of this sect of customers has led to a downfall in sales.
Millennials refer to persons reaching their young adulthood in the 21st century. They form the second largest population of American demographics (around 82.22 million). These young populations are not riding as much as was expected.
Environmental consciousness is one reason some of this generation eschews motorcycles and even cars in lieu of Uber or public transportation, right up there is the fact that many simply can’t afford to buy and maintain motorized vehicles.
Further, they are the most risk-averse generation. According to a 2014 study by The Brookings Institution, 52% of Millennials have the majority of their money in cash, whereas other generations have 23% of their money in cash.
As one can imagine, many Millennials are recent college graduates, and this status typically comes with a hefty amount of student loans and other financial setbacks and thus purchasing a motorbike and that too Harley Davidson where most models are costlier than a cheap car is a far goal for them.
WHERE DID HARLEY BEGIN ITS JOURNEY
HARLEY DAVIDSON was founded out of a small shed in 1903 by William S. Harley and brothers Arthur and Walter Davidson in Milwaukee, Wisconsin, USA.
The Motor Company produces traditional cruiser motorcycles utilizing air-cooled V-Twin engines. In fact, the first of its bikes were actually bicycles fitted with engines.
When Harley Davidson produced and sold their first motorcycle in 1903, they were one of many small motorcycle marques springing up across the United States. And one of the main competitors which challenge it even today is the first motorbike company of America called “the Indian Motorcycle company”.(However, the roots of the company do not find any link-up with India. “Indian” is the colloquial name of Native Americans as it is said that Indians were the first residents of North America and thus the name of the company).
Fast forward more than a century and Harley Davidson brand is so rooted in American culture that the history of the company intertwines with the history of America itself. Note that this was the same year that Henry Ford founded the US auto giant Ford Motor Company. However, today’s other auto manufacturers such as Toyota and Volkswagen were founded much later in 1937.
WHEN AND WHY DID IT SEE UPRISE
The two world wars which shook the whole world to its roots played a pivotal role in the upliftment of the company.
Harley Davison churned out some 15000 motorbikes for US military during World War I. The upshot was that when the United States military was ready to make the largest deployment of motorcycles in its history during World War II, Harley-Davidson was the prime supplier. According to an estimate, around 63000 bikes were sold to US military. Company engineers worked tirelessly to design prototypes that could handle shore patrols in Europe, jungles in the Pacific Theater and desert sands in North Africa. Many of the new designs incorporated engineering gleaned from captured German BMW R71 motorcycles (captured from German military) of the Bavarian Motor Works. For three consecutive years, Harley Davidson received the prestigious Army/Navy ‘E’ Award for Excellence in Wartime Production.
When the Armistice was signed on November 11, 1918, the first American to enter vanquished Germany was Corporal Roy Holtz – he rode down the cobbled streets on a Harley-Davidson with a sidecar. Harleys were so ubiquitous as scout vehicles at the head of military convoys that they were often the first vehicles into towns and villages liberated across Europe by the Allies and came to be known as “Liberators.”
WHAT LED TO THE DOWNFALL
The story of downfall began when the founding family took the company public in 1965 and it was bought by AMF in 1969.
AMF provided stability and capital but there were mistakes. AMF built a new assembly plant for Harley-Davidson in York, Pennsylvania and invested heavily in an MRP production control system. These efforts added $1000 to the cost for each bike and AMF pressured Harley to increase production to compensate. Quality suffered and there were chronic shortages of parts. As many as 30 percents of the vehicles coming off the assembly line were incomplete. This, in turn, meant extra manpower searching for parts to finish the machines. Dealers sometimes had to complete the assembly or repairs.
Japanese competitors took advantage of the situation. In 1969 Harley had an 80% market share for super heavyweight machines but this dropped to 20% ten years later. A recession in 1981 reduced sales nation-wide and further reduced Harley’s market share. British motorcycles were driven from the market and Triumph collapsed.
AMF wanted out. A management team from Harley-Davidson arranged a leveraged buyout with the help of Citibank and took control in June of 1981. But, there were more problems to come.
The Japanese manufacturers unloaded their inventory and cut prices further. Then, Harley won an anti-dumping judgment from the International Trade Commission (ITC). Tariffs on Japanese bikes increased to 49.4% for five years. The Japanese response was to build more motorcycles in the U.S.
In 1984 Citibank became nervous about another recession and the coming end to increased tariffs. They made financing more difficult for Harley and it was clear they wanted out. Other banks followed Citibank’s lead and refused to finance. Just hours before bankruptcy, a private investor saw the potential in Harley and bought out Citibank’s financing at an $18 million loss to Citibank.
THE PATH AHEAD
Off late, the company has introduced various measures in order to increase its hold in the market:-
- Advancing market leadership in Touring and Cruiser segments by continuing to develop improved, more technologically-advanced Touring and Cruiser motorcycles that will keep existing Harley-Davidson riders engaged and riding longer.
- Developing more accessible, small-displacement (250cc to 500cc) motorcycles for Asia markets through a strategic alliance with a manufacturer in Asia. These new products are intended to fuel Harley-Davidson’s customer access and growth in some of the largest, fastest-growing markets in the world.
- Leading in the electrification of motorcycles by launching Harley-Davidson’s first electric motorcycle, LiveWire, in 2019 — the first in a broad, no-clutch “twist and go” portfolio of electric two-wheelers designed to establish the company as the leader in the electrification of motorcycles. LiveWire will be followed by additional models through 2022 to broaden the portfolio with lighter, smaller and even more accessible product options to inspire new riders with new ways to ride.
The new Harley Davidson Buy Back Program started by the Indian division of the company aims at buying back the Street Rods and Street 750s and helps one to get a new Softail model. The company will buy back the ‘Street’ model at the ex-showroom price if it is less than a year old and trade either the Street 750 or the Street Rod for one of the Softail models. Similarly, if Street 750 or the Street Rod is between 12 – 24 months old, the company will pay back up to 75 percent of the ex-showroom price.