Harley-Davidson’s shifting focus toward the electric vehicle market may drive the motorcycle company’s future growth. According to Forbes, motorcycle manufacturer Harley-Davidson is focusing on the electric vehicles market to sustain operations and deliver long-term value to investors.
Harley has suffered significant financial blows in recent years. Although the manufacturer has a strong presence in Europe and Japan, Harley commands up to 50% of the motorcycle market in the United States.
That command has caused the weakness in the U.S. motorcycle market to directly impact the Harley stock, which has fallen 19% since early 2018.
What’s more, Harley has downgraded its profit outlook for the fiscal year 2018. Harley expects its profit margin to range between 9% to 10%.
The weakness of the American motorcycle market stems from several factors. The first is the slowed demand for motorcycles.
Motorcycles were popular among baby boomers because they provided an attractive, alternative lifestyle before settling down.
Now that baby boomers are aging out of the target market for motorcycles, younger Americans in Generations X and Y aren’t picking up where the demand left off.
The motorcycle market dropped first with Gen X because there simply wasn’t enough of an audience. When baby boomers phased out of the motorcycle market, there were 9 million fewer consumers present in Generation X.
Generation Y is the largest population since the baby boomer generation. But while the numbers are there for the motorcycle market to take advantage of, the demand isn’t there.
Motorcycle companies have attempted different marketing tactics to get millennials interested in motorcycles. Products with signage have proven to increase sales by 20% compared to products without signage.
But millennials simply can’t afford to invest in motorcycles when they’re already struggling to invest in a car or home.
The current tariff war is another factor that has negatively impacted the motorcycle industry. Due to the 25% tariff on steel, Harley-Davidson expects a $45 to $55 million cost.
To offset these declining sales, Harley-Davidson has started to produce its motorcycles in international markets to take control of its costs. The manufacturer has also started to tap into the electric vehicle market because of the growing demand for environmentally friendly vehicles.
Electric bikes have also become fairly popular. As of right now, there are twice as many bikes as there are motor vehicles because of their low cost and ease of transport.
Harley plans to cover the electric motorcycle market and has started preparations for a utility scooter, dirt bike, and an electric-assist bicycle. The motorcycle manufacturer will invest between $150 to $180 million in the development of electric vehicles.
