A convergence of bad signs has made your chances of walking into a Harley dealership and riding out on a new bike slimmer than ever.
In recent days the motor company and various financial geniuses have described the four problems that are sinking Harley-Davidson:
One Two, Three, Four
1. For years, Harley has been growing its market by selling to aging baby-boomers born before 1958. Most of the boomers have been first time motorcycle owners. Harley has been peddling its products, including overpriced “motorclothes” and accessories as nostalgia purchases. And, by definition, those sales are “discretionary.” So, in reality, a new motorcycle is not something you have to have. Especially, if you have never owned one before. On top of that, Harley has also been busily growing its market among foreign boomers in Europe and Asia where the dollar has been weak. But now the Euro and the Yen are also in the toilet.
2. During the same years, Harley has been raising its profit margins by raising its prices. Call this the American Chopperization of Harley. The most expensive Harley now lists for about $35,000. Sales tax, insurance and registration fees add about $5,000 to that. And adding a set of saddlebags, changing the exhaust, tuning the fuel injection or replacing it with a carburetor, adding a sissy bar or in some cases changing to a less ridiculous seat, and other minor customizations quickly add another $2,500 to $4,500.
3. The current “financial crisis” is making it harder for Harley to lend customers the money they usually need to borrow if they want to buy a new bike. The motor company holds the paper on more than half of all the new bikes it sells. And, as it becomes more expensive and difficult for Harley to borrow money it becomes more difficult for Harley to lend that money to you.
4. The same “financial crisis” is making it harder for Harley dealers to find the money Harley usually fronts them to pay for the bikes they are supposed to sell to you.
Maybe You Know This Woman
Not surprisingly, considering the hardest core segment of its market, Harley has been urging its customers to trust their loins and ignore their heads.
You know. You’re at a party at some biker club house. You see a woman there. You can’t stop looking at her. You know she is trouble but you have to have her. She is so pretty and intense. There is something almost hypnotic about her eyes.
Everything that happens next is like a dream. The convenience store. The fight with the clerk.
When you finally come to your senses you discover yourself weaving through traffic at 100 miles-an-hour. Your dream girl is sitting behind you holding you tight. And, the police are somewhere back behind her. And she is shouting in your ear. “What’s the matter with you!? Are you afraid? Why won’t you shoot back?”
Hoping to arouse its most loyal customers, those most likely to find themselves in the above scene, Harley-Davidson has been running an ad on the web that urges them to ignore the recession. “Screw it,” the ad commands like a blonde with crazy eyes. “Let’s ride.”
Unfortunately for Harley, the market segment most susceptible to that sort of argument already owns a bike. And so, the motor company announced last week that its net income was down 37 percent.