Will Harley and Polaris Get Younger Riders in the Saddle? Looking into the Future for Cars, Motorcycles and More

Harley-Davidson may have surprised many analysts and investors with its Q4 2019 earnings report, but not the 7Park Data research team. 

Harley’s results fell short of analysts’ forecasts – just as our researchers predicted. How did they know? Because they had access to 7Park’s new Vehicle Sales data prior to Harley’s January 28th earnings call. Now, we’re putting that power into our customers’ hands. 

The dataset reflects daily consumer and commercial insurance policy activity – over 2.25 million policies in an average month – to offer unique insights into market share and sales growth for consumer and business vehicles, including new and used autos, motorcycles, heavy machinery, watercraft, recreational vehicles and mobile homes.

Focusing on markets important to Harley-Davidson and Polaris, the data shows softening in both the ORV and motorcycle markets, with stronger deceleration trends in the motorcycle category. Whether Harley-Davidson can reverse this trend depends on its ability to attract younger people and first-time riders to its Rider Academy.

The dataset allowed for early detection of weakness in domestic sales, which aligned with Harley’s reported sales of 19,785 units, a 5.1% YOY decline.

Harley’s biggest challenge is trying to reverse the long-running trend of falling ridership numbers nationwide, due largely to the shrinking of Harley’s core customer demographic of males aged 35-64. The Vehicle Sales data reveals that despite Harley’s ~ 50% market share position in the U.S., overall Harley motorcycle purchases have declined -8.4% CAGR (Compounded Annual Growth Rate) since 2015. Translation: Harley motorcycle purchases have fallen 30% over the past five years.

But that doesn’t mean the quiet hum of an electric motor will replace the trademark roar of Harley’s famous V-twin engine. When we analyze sales across all of Harley’s product lines, we see a shift away from its Sportster and Dyna models. But, not in the direction you might think.

Consumers are not gravitating to smaller models that are easier to ride than the traditional “Hogs”. Instead, just the opposite is true: it’s the big Touring motorcycles that are most popular. The graph below shows that Sportster/Dyna make up 8% of sales, compared to 17% in 2015. The Touring models now account for 52% of model sales compared to 46% in 2015. 

With the stock cut almost by half since 2015 and the new decade compounded by weak outlook, Harley executives are under tremendous pressure to turnaround the business. Management are confident they are implementing the right strategy and there are reasons for their optimism.

The Q4 2019 revenue decline was the smallest in the U.S. in the last 12 quarters. The company captured market share, and secured a net increase of 55,000 riders last year, more than double the number in 2018. Its Rider Academy is attracting consumers who do not identify as motorcycle enthusiasts, including women and millennials. Last year the company launched new models it believes will appeal to those first-time riders, including the all-electric LiveWire motorcycle.

With that said, 2020 will be an important year for Harley-Davidson as management implement strategies to grow its customer base, incentivize customers with new pricing options, and introduce new product offerings. Investors will benefit from 7Park’s insightful data, tracking real-time customer demand to judge the effectiveness of management’s turnaround strategy.

In contrast, Polaris Inc.’s stock rose sharply after the maker of ATVs, snowmobiles and motorcycles reported better-than-expected profits for Q4 2019. Sales for the quarter were up +7% from Q4 2018, led by strong pricing dynamics, mix shift toward more expensive side-by-side vehicles, and new product offerings that are attracting new riders. For instance, management are confident that newly launched Polaris Indian Challenger will be able to compete head-to-head with Harley’s and BMW’s strong position in touring motorcycles. 

However, Polaris is not immune to the continued decline in motorcycle ridership and ORV demand, and we will be able to monitor the company’s ORV and snowmobile sales in real time. Thus far in 2020, ORV/Snowmobile unit sales remain resilient when compared to the same period of 2019, up +4.5% year-over-year.

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