Are you surprised? We aren't.
Remember back in 2018 when Harley-Davidson made its big “More Roads to Harley” move? That’s when the most traditional of brands took us all by surprise by announcing that it would expand beyond its touring and cruiser comfort zones.
I’m not going to lie—at RideApart, we were all pretty stoked about that at the time. However, back then, we didn’t realize that the strategy was fundamentally flawed. Underneath all the razzle-dazzle of big statements such as “introduce 100 new motorcycles” and “build 2 million new Harley-Davidson riders in the U.S.”, the new plan failed to address the brand’s biggest issue: its image.
Harley is iconic, it’s expensive, and it caters to a mature audience. No number of streetfighters or electric bikes was going to magically change that. If anything, in retrospect, it almost made it look like Harley was trying a little too hard to stay relevant.
Who can blame the execs for trying to save a company that’s been gradually losing momentum since 2015? Truth be told, Harley does need to freshen things up and bring in a new demographic, but the changes needed to happen more than skin deep.
When all the big movements up top happened in spring 2020, then-interim CEO Jochen Zeitz wasted no time scrapping the More Roads strategy. He replaced it temporarily with new and ultra-conservative guidelines to set the tone while the team came up with something more long-term. That’s when Harley entered its Rewire era.
When I say conservative, I mean in comparison to 2018 Levatich’s ambitions. Under Zeitz’ leadership, the company refocused its energy on its top-performing products and markets, cut back on inventories and growth, and hunkered down until the end of the 2020 shitshow. It was going to be a rocky ride but at least, with the new direction, the damage would be limited and Harley would count its losses.
The Motor Company has now started its new five-year plan and announced its Q4 and full-year results for 2020. Somehow, people seem shocked that the last three months of the year performed so poorly. Either it should be surprising and I’m completely clueless—most sources I consulted didn’t specify exactly what made this so surprising. It’s either that or some financial analysts lack a bit of understanding of how the motorcycle industry works.
About the Q4 Loss
A lot of publications headlined Harley’s Q4 losses as being a “surprise” or “unexpected”. Was it really, though? I’m no financial whiz, I’ll never pretend to be, and I might be over-simplifying the math here, but, somehow, I expected things to go that way and I say that without any snark.
Consider this: Harley exited 39 markets in 2020. Even though they weren’t high-performing markets, that’s still a significant cut back on the number of bikes being moved. It also reduced its volumes to reduce inventory in order to increase the demand and make the bikes “more desirable”. It meant more bikes selling at full price, but also, ultimately, fewer bikes on the move.
Bike makers around the world were also forced into lockdown during the industry’s primetime, halting production and closing dealers just as a new riding season began. Add to that the very real fact that Harley is absent from the segments that thrived (even exploded) in 2020 such as dirt bikes, and things were bound to get ugly before they got better.
The second quarter (April to June), which would normally have been an important one for bike makers due to the return of the riding season, turned into a nightmare for Harley with $92M in losses and a 147 percent drop in net income over 2019.
As lockdowns rolled back and more people turned to new means of personal transportation, there was a real motorcycle boom that followed the disastrous spring and Harley greatly benefited from the spike, posting record numbers at the end of Q3 (July to September). Sales boosted 39 percent compared to the same period in 2019.
The way I see it, Q4 was almost like a limbo for the brand. Sure, the results were in the negative with $96M of losses, which is a lot of money, don’t get me wrong. However, this is the time of year when things naturally wind down for the industry as the riding season comes to an end for millions of riders. The lackluster performance could also have something to do with the big motorcycle show’s’ cancellation which likely resulted in a diminished exposure. Plus, Q4 2020 was 32 percent behind Q4 2019—Q2 was down 47 percent YOY during peak season, which is far scarier if you ask me.
That, combined with the brand’s complete absence from the fall's motorcycle launch circuit after it rescheduled its launches for the start of the year, and things were bound to drop after Q3. Harley kept a really low profile until 2021 rolled in. Without anything exciting to get people's attention, reeled-in ambitions, serious board room shuffling, and an overall bad year for most companies (unless you’re KTM), I’m not surprised that the last quarter of the year and the year as a whole ended up in the red.
About The Hardwire
When Harley announced it would reveal its new Hardwire strategy on February 2, 2021, I was hoping for a little something exciting, but wasn’t actually expecting anything revolutionary. In the end, we got a little bit of both, in my opinion.
The not-so-revolutionary part about the strategy is the company’s plan for the immediate future. For the next five years, the Motor Company will focus on and invest heavily in the segments it knows the best—cruisers, touring bikes, and trikes. That’s what Rewire did from March to December, 2020, that’s what The Hardwire will continue to do until 2025.
Also unsurprising is the company’s intention to expand its parallel markets that include parts and accessories, garments, and financial services. Who doesn’t like a good Harley t-shirt, anyway?
Where things get interesting is the part about the creation of a new division dedicated to the development of electric motorcycles. I reached out to Harley PR to find out more about what this decision represents for the company.
While PR didn’t elaborate on the specifics and told me that there are more announcements to come on the matter, they did say that the new division will get its own leadership team, dedicated to the development of electric motorcycles.
“The creation of a standalone division will allow full autonomy to EV development, freeing the business unit to behave with the same agility and speed as a tech startup,” Harley PR wrote. If done right, this could be a very cool and very important move for the company.
It also goes to show that Harley remains fully committed to the development of electric products, unlike certain publications suggested at the end of 2020 when the brand’s electric concepts disappeared from the site. With Jochen Zeitz as the new leader—who, by the way, was one of the LiveWire project’s biggest fan when it first started—it would have been surprising for Harley to drop all its electric ambitions. More surprising than ending 2020 with a loss.
I want to reiterate that finances aren’t my realm of expertise—motorcycles are (or so I like to tell myself). That being said, looking at all the things that were set in motion in 2020 for Harley, the year was bound to be rough.
Is it disappointing? Of course, it is, especially after Q3's promising results. Is it surprising? No, not when you understand the seasonality of motorcycles and the importance of exposure—two elements that played against the brand at the end of 2020.
On the bright side, we have the brand's first adventure bike to look forward to with the Pan America set to officially (and finally) debut on February 22. That alone won't save the brand, but again—if the company did things right with the Pan Am, this could be the start of something new. Harley's not out of the woods yet, but it's actively looking for the way out.