Harley-Davidson announces new growth plan

Harley-Davidson has announced a three-pronged growth plan to reach new markets with electric motorcycles and lighter models.

The strategy, called “More Roads to Harley-Davidson,” entails rolling out new products, adding retail options and implementing “a performance framework”  the company says will enhance the strength of its dealer network.

In a promotional video, a man’s voice says: “Some of the things we do are going to raise some eyebrows, because this is about inventing new ways to thrive in a new world. And we’re just getting started.”

This comes on the heels of Harley-Davidson announcing it would move some operations overseas in response to retaliatory tariffs from the European Union. Those tariffs were imposed by the EU after the United States set tariffs on steel and aluminum.

Harley bikes were taxed at 6 percent in Europe; that’s been raised to 31 percent with the new tariffs. That added to the strain the company was already feeling due to the 25 percent steel and aluminum tax on the U.S. side.

President Trump has been a critic of Harley’s decision. He tweeted in early July: “Now that Harley-Davidson is moving part of its operation out of the U.S., my Administration is working with other Motor Cycle companies who want to move into the U.S.”

Trump said the company’s customers aren’t happy, pointing out Harley sales fell about 7 percent in 2017.

According to a release from the company, the new strategy will require “significant investment to change the trajectory of the business globally,” and will be funded internally by “comprehensive cost reduction and reallocation of previously planned investment and resources.”

This plan aims to increase earnings, and and add more than $1 billion of incremental annual revenue in 2022 as compared to 2017.

“Alongside our existing loyal riders, we will lead the next revolution of two-wheeled freedom to inspire future riders who have yet to even think about the thrill of riding,” said Matt Levatich, president and chief executive officer for Harley-Davidson.

The new products announced with this plan include Harley’s first electric motorcycle, the LiveWire, which will launch in 2019. Per the release, the company plans to release other, similar models through 2022 “with lighter, smaller and even more accessible product options.”

Harley also announced a new middleweight platform with touring motorcycles that are planned for launch in 2020. And the company is developing smaller motorcycles in partnership with an Asian manufacturer that are intended for India and other Asian markets.

Harley says it’s working with e-commerce vendors to get its offerings in front of “millions of potential new customers.” It’s also planning urban storefronts — smaller than most existing retailers — to build brand recognition in urban populations and expand  apparel distribution.

As for its dealer network, Harley says its new performance framework will enable the best-performing dealers to “drive innovation and success.”  

Some of these changes are being made to respond to a shifting customer profile.

According to slides from a presentation for investors on the new strategy, Harley customers are fully embracing online retail options, with 70 percent of consumers shopping online regularly.

In the next five years, Harley expects 99 percent of consumer retail growth will come from online or digitally influenced sales.

As online sales have been taking over, consumer spending on “discretionary, premium” products like motorcycles in China, India and Southeast Asia has been on the rise as well. So too have motorcycle sales in the European market.

Harley has facilities in Brazil, Thailand and India to tap some of these emerging markets. However, motorcycles being built for the U.S. market will continue to be built in the United States, Levatitch confirmed in a recent CNBC interview.

–By Alex Moe