Unfortunately for Harley-Davidson (NYSE:HOG), there’s no way it can capitalize
motorcycles. Although it means there will be one less American-made motorcycle on
the market, which ought to bolster the made-in-America motorcycle king, its rival’s
move to focus instead on its fabulously successful Indian Motorcycle nameplate means
Harley is going to have an even harder time selling its bikes.
A losing proposition
Few would argue Polaris didn’t make the right move. Despite 18 years on the market, Victory
hardly made a dent in the consciousness of bike riders. Growth was negligible, and the
brand had accumulated losses of $100 million for Polaris. With an industry in the midst of a
downturn, pouring more resources into Victory was not feasible, certainly not when Polaris
has the Indian brand that could benefit further from the additional investments that will be
thrown at it.
Because Indian has made swift inroads into Harley’s market share, quickly jumping into second
place in the short span of years since the nameplate was bought out of bankruptcy, having even
greater resources available to it could see larger swaths of the market fall into its camp.
As Harley-Davidson’s fourth-quarter earnings show, that’s a distinct possibility. While the bike
maker finally snapped a two-year losing streak of falling quarterly sales in the U.S., the gains
weren’t anything special. Revenue rose 0.1% over 2015, as it sold exactly 33 more bikes in the
period than a year ago.
At least it didn’t try to fudge the shipment numbers this time around. Unlike the last two years
in a row — when it pushed out more motorcycles onto dealer lots in the fourth quarter than were
warranted, to be able to say it made its full-year shipment forecasts — this year Harley just
wouldn’t have been able to justify the big spike needed to make even the low end of its forecast.
In the end, shipments fell 12%.
That means Harley-Davidson missed its guidance for the year. Where it had said it was confident
it would ship between 264,000 and 269,000 motorcycles in 2016, it ended up shipping a little
over 262,000 bikes.
Harley maintains that it grew its market share in motorcycles 601 cubic centimeters and larger,
though that’s seemingly hard to square with the results. Its motorcycle sales were largely flat for
the period, and for the year they’re down 1.6% worldwide, while bike makers such as Honda
Motors (NYSE:HMC) say their unit sales have consistently risen in successive quarters. And
Polaris itself just reported that Indian brand sales jumped more than 20% in the fourth quarter,
continuing the double-digit (and sometimes triple-digit) gains it has notched since relaunching
The problem, of course, is in how one defines the market. Harley talks about bikes of 601 cc and
above, Polaris references those 900 cc and over; and Honda doesn’t discuss market share at all,
but then its bikes run the gamut from 49 cc models, such as its CRF50F trail bike, to cruisers
such as the 1832 cc Gold Wing F6B. With both Harley and Polaris claiming market-share gains,
the losers are likely to be Honda, Suzuki, BMW, and other imports.