The #1 Threat to Harley-Davidson – Part 2: Shack, Shambles, and Success

Last week I denounced the belief that Indian is the #1 threat to Harley-Davidson. Their market share is too small, and their brand strength isn’t yet strong enough to be an immediate threat. This week I’m continuing the four part series on Harley-Davidson’s biggest threat by looking back upon their history.

Using books, historical sources and archives, I’ll show you what Harley has achieved, what they’ve (just barely) managed to survive, and just how strong the bond between America and her favorite motorcycle brand really is.

If you missed last week’s post, check out the video above for a summary.

After watching the video, or checking out last week’s article, some of you might be thinking, “This wouldn’t be the first time the biggest player in the game ignored an up-and-comer and ended up losing big.”  And we’ve certainly seen that before. Does anyone remember this clown?

Will Harley-Davidson be the Blockbuster Video of motorcycling? Not likely, and most certainly not because of Indian, or at least, not yet.

If you’re still curious about Harley’s take on Indian, or about the format of this four part series, read the Part 1 full article here.

Article Summary Video

The Ship Too Big to Sink

“Stable is the new growth.” It was a common phrase in the motorcycle industry between 2009 and 2014. “If only we could get stable again.” It took a half decade for motorcycling to come out of the recession. I worked for Harley-Davidson during this time. It’s no secret that times were tough. Shares in Harley-Davidson sold for $42.80 in September 2008 (NYSE: HOG), by March of 2009, they were selling for $8.33 each.

But there was no way the ship was going down. Sure, there might be an oil leak, but this was Harley-Davidson. Oil leaks happen! We’re talking about the industry’s top selling brand of motorcycles. Surely, the ship was too big to sink… right? Maybe it’s time we explore the storied past of Harley-Davidson. Maybe before we get into Harley’s biggest threat and what they’re doing about it, we should look at what Harley-Davidson is, and what else the brand has overcome.

For better or for worse, Harley-Davidson’s history has led it to the position the company finds itself in today.

Building American Motors, Built an American Icon

Motorcycles, and the Harley-Davidson Motor Company specifically, go hand in hand with Americana. Since Harley-Davidson’s inception in a Milwaukee shed over 100 years ago, the brand has been through it all.

Fun Facts:

Harley-Davidson was around in World War I, providing motorcycles with machine guns mounted in sidecars to the US Military[1]. By the time the Great Depression started, Harley-Davidson was already the largest motorcycle manufacturer in the world[2]. When World War II started, the company sold over 60,000 motorcycles to the American and Russian armies[3]. But that’s only the beginning of Harley’s run as a symbol of ‘Merica.

Enmeshment into Americana

Much like Jeep, the Harley-Davidson brand became enmeshed in post-war American sentiment. In 1968, Harley-Davidson’s police line of vehicles was part of JFK’s motorcade on that fateful morning[4]. In 1969, Peter Fonda, Dennis Hopper, and Jack Nicholson “went looking for America” on a pair of Harley-Davidsons in the cult classic, Easy Rider. To underline the connection between brand and country, one of those Harleys was aptly named Captain America[5].

And I won’t even get into Marlon Brando’s 1953 flick, The Wild One, or the Hells Angels being reported on in LIFE Magazine in 1965, or the entire biker counter-culture.

But the road was long for Harley-Davidson, and almost too much…

Not unlike the Ford Motor Company, Harley-Davidson has weathered the storms of the last century as well. The Great Depression nearly ruined Harley-Davidson, leaving it one of only two American motorcycle manufacturers to survive (Wilson, Hugo (1993). “The World’s Motorcycles: America”. The Ultimate Motorcycle Book. London: Dorling Kindersley. p. 17. ISBN 0-7513-0043-8).

The purchase of Harley-Davidson by American Machine Foundry (AMF) in 1969, and the backlash of the resulting layoffs led to another dark era for the Motor Company in the 1970s. Not only were the bikes expensive, but they were also inferior in handling, performance, and overall fit and finish versus Japanese competitors. Sales declined to such an extent that the company nearly went bankrupt[6]).

By 2000, even the police started abandoning the Motor Company. Many departments reported issues with their vehicles at high speed, which is suspected of having led to the death of one officer. Police departments abandoned Harley-Davidson in favor of more expensive options from BMW, citing safety as an important factor [7]. You can check out more details on a review by the Michigan State Police here.

A decade later, bad luck came once more. In 2009, the recession saw the value of many premium brands dropping significantly. Mercedes-Benz, Porsche, and Harley-Davidson’s brands all dropped, with Harley taking a 43% drop[8].

And the hundred year story has lead us to where we are today

Harley-Davidson has always been a survivor, right? Or at least, Harley-Davidson has always been too enmeshed in America and Americana to ever, completely, fail, permanently… Right?

The thing is, people aren’t buying motorcycles as much as they have in the past. Motorcycles are now considered a luxury vehicle, something that people buy in addition to a car, and not as a stepping-stone to a car. Moreover, in the luxury vehicle market, manufacturers such as BMW, Audi, and Mercedes-Benz are seeing healthy sales increases, whereas Harley-Davidson has not[9].

The U.S. motorcycle market peaked in 2005-6, when high home values and easy credit conspired to help drive sales of 1.1 million new bikes. But following the banking crisis and economic meltdown of 2008, that number has fallen precipitously, to 450,000 total sales in 2011—a drop of nearly 60 percent.

It hurts, but manufacturers wonder if a new crop of small motorcycles might be the key to better sales.

  • Cycle World

To make matters worse, economic analysts have rightly identified a shift away from larger displacement motorcycles towards more efficient and beginner friendly small displacement ones[10], the likes of which Harley isn’t known for.  After being the king of the heavyweight bikes in America for decades, Harley-Davidson has finally been forced to make an about-face in the direction of the beginner segment. It’s come in the form of their Street family of bikes. These are just the kind of motorcycles that help to make motorcycling more accessible to the masses. But will it be enough? And what of Harley-Davidson’s true biggest threat?

Now you know what Harley-Davidson has achieved and survived so far. Stay tuned for Part 3 of the series, coming out next week, where I’ll finally tell you, in detail, what their biggest challenge is. After that, in Part 4, I’ll show you all of the things they’re doing to try to turn the ship around.

This was Part 2 of our 4-Part series, The #1 Threat To Harley-Davidson. If you’re interested in reading the full article as it comes out, please subscribe: