Should Harley-Davidson Start Panicking?

As the end of the year arrives , it may be time to panic for the legendary Milwaukee motorcycle manufacturer, Harley-Davidson (NYSE: HOG). As the Motley Fool reports, analysts at UBS research firm say their checks show the decline in motorcycle sales for Harley-Davidson is accelerating.

The analysists forecast a double-digit drop for the full year, and since the last quarter is typically the slowest one, the decline is inevitable. It just becomes a question of how bad it will be.

Every quarter but one for the past four years, Harley-Davidson has reported a decline in sales. It’s not all Harley-Davidson’s fault because the entire motorcycle industry is feeling a massive sales drop. However, as the industry leader with over 50% share of the entire market, the Milwaukee company has been hit the hardest.

International Market Issues

Harley-Davidson has been very clear about placing its bets on foreign markets when it comes to future company growth. Their goal is for international sales to become half of their overall sales volume and they put a lot of emphasis on India as the key country to make this happen.

Many of the new bikes Harley will be releasing during the upcoming years will be for the Indian market. However, right now the company is feeling a competitive pressure from India’s leading motorcycle manufacturer, Royal Enfield, which introduced two new models recently, called the Interceptor and the Continental.

Royal Enfield Interceptor 650 & Continental GT 650
Image: Motoroids

These two models are aggressively challenging what has been Harley’s most sold and most popular bike on the market, the Street 750.

Harley Davidson Street 750
Image: Srkcycles

Harley-Davidson has a plant in India that produces motorcycles for markets outside of North America and even though initial reports from this year indicate sales were going strong, the release of new Royal Enfield motorcycles may have drastically changed that since H-D is marking down prices by as much as 15%. This is beyond just the amount of discounts because, as we all know, Harley-Davidson hardly ever runs any promotions. Instead, they usually prefer to protect their brand value along with their profit margins by keeping their prices premium.

Royal Enfield isn’t stopping at the Indian market either. It is also taking on Harley in the U.S. with these two new models. And while Royal Enfield believes smaller-displacement motorcycles are key to better sales, Harley is placing its bets into bringing a high-performing electric motorcycle into the market, and that might be a tough sell to the already established biker crowd.

Harley-Davidson does want to sell smaller motorcycles in the U.S. too, but it may be a few years before buyers can see them since the company is wagering a lot of its prestige on electric bike development.

Source: The Motley Fool