Harley-Davidson 2020 global outlook is very negative with sales projected down by one fourth of the previous year. Following the first quarter -16%, the manufacturer will again be severely hit by Covid19 effects, considering US, Europe and China, the virus most hit areas, are the largest for the manufacturer.
First Quarter 2020 Global Sales declined 16%
Following years of decline the start of 2020 was finally positive, with global sales grew up 1.5% after the first two months of the year projecting the Q1 2020 to be the first positive after 12th consecutive falls.
Unfortunately, in March Covid19 hits severely several markets, including USA, Canada, China, Brazil and Europe pushing the quarter to end with 40.150 sales (-16.2%)
In USA sales declined 15.7% at 23.701 units. Canada lost over 20% and Latam (not including Mexico) lost 14.0%. In Europe sales declined 42.9% while in ASIA, China lost 81% and Japan was flat. India lost 83%. Perspectives for the Q2 and not better at all.
Harley-Davidson global 2020 outlook
The Outlook for the 2020 is of course negative. Harley-Davidson will pay the still high sales concentration in USA, in our view on the podium of the three countries paying the highest economic tribute the the covid19 pandemy in this and in the next year.
Europe is the second region for Harley-davidson and the Q2 huge sales fall will be progressively recovered with a 2021 outlook in strong recovery.
In Asia HD is weak and in South America the pandemy will hurt all players as nothing else did before.
In this environment, Harley-Davidson risks to be further hit by the “American first” trick headed pursued by the current President.
Actual projection for the entire 2020 global sales is for 160.000 units, down one fourth of the previous year achievement and the 11th decline in a string.
Bye bye Matt!
At the end of February, the company announced the CEO Matt Levatich, stepped down, after a 26-year career at Harley-Davidson – including five years as CEO in which the company lost more than half its market value. Chairman Jochen Zeitz was named temporary CEO.
Levatich’s tenure came at a time when many manufacturers were tested by mounting tensions between the U.S. and its biggest trading partners. The Harley CEO went from being one of the first company leaders to be welcomed to the White House in early 2017 to contending with angry tweets about closing a U.S. factory and adding production overseas to avoid tariffs.
Those extra costs dented profits at the company, which had pinned its near-term turnaround hopes on growth in international markets. After Harley announced in June 2018 that it would shift some production out of the U.S. to sidestep tariffs imposed by the European Union in retaliation for U.S. levies on imported aluminum and steel, President Trump attacked the company for months — even threatening to back a boycott of the company’s bikes.
Harley went ahead with plans to ship motorcycles to Europe and China from a new factory in Thailand, which allowed it to mitigate almost all of a $100 million cost burden from the tariffs on U.S.-made bikes. This was part of an effort to get half of its revenue from outside the U.S. by 2027, but that promised growth hasn’t come fast enough to offset the drag from the steady decline in sales in its home market.
Global registrations in 2019 were the worst in this decade
Harley-Davidson global registrations declined in the 2018 for the fourth year in a row at 218.400 units posting the worst performance in this decade, down 4.6% from the previous year.
North America still represents 61% of total sales. Last year Harley has lost 5.2 in the USA and 7.7% in Canada, while have been steady in Mexico.
Sales are heavily declining in the Indian Region (India, Pakistan, Sri Lanka) with sales fallen down 26.6%. Following the positive 2018 and despite the positive market mood, sales in EU28 have been almost negative, with a 7% annual decline.
Harley Davidson was founded in 1903 in Milwaukee, by 22 year-old man, William S. Harley and by his childhood friend Arthur Davidson. By 1920, Harley-Davidson was the largest motorcycle manufacturer in the world, with 28.189 machines produced and dealers in 67 countries.
In the long life of the company a dark period was between the 1969 and the 1981 when it was under the control of American Machine and Foundry (AMF). The re-launch started in the 1981 when AMF sold the company to a group of 13 investors led by Vaughn Beals and Willie G. Davidson for $80 million and the production was transformed using the just-in-time system, while the company was helped in the domestic market by high tariff raised against Japanese brands.
In the following years the company was transformed from an old fashioned slow-motorcycles producer to the American icon and the use of old style engines and traditional components changed from a weakness – compared to Japanese top of art technologies – to the strength, becoming a real business case in the global marketing. More than a bike, Harley-Davidson become a seller of a life style and become one of the most powerful icon of American freedom concept all around the World.
The first stone of this global brand strategy was based in 1983, creating the Harley Owners Group (HOG) to build on the loyalty of Harley-Davidson enthusiasts as a means to promote a lifestyle alongside its products. The HOG also opened new revenue streams for the company, with the production of tie-in merchandise offered to club members, numbering more than one million.
The iper customization and the sales of an entire world of accessories helped to develop revenues and margin around each single Harley bike travelling on the road and the traditional sound of the pot-pot old Harley engines was registered as a trademark, rather than be considered – as it was – an old style and obsolete technology.
The triumph of the myth was on June 1, 2008 when the Harley-Davidson Museum was inaugurated in a 12.000 m2 space and after over US$ 75 million investment.
However, in that day the crisis was already like a ghost behind the lights of the success. Indeed, the progressive aging of Harley customers did not find a solution while the new generation bikers grew up more under the myth of speed and technology and the American company started to lose terrain in the domestic market, while the grew of middle-high class people in new countries, helped to partially balance the domestic sales lost with export.
Production & Distribution
Harley-Davidson manufactures its motorcycles at three US factories in York (Pennsylvania), Milwaukee, and Kansas City.
Since 1998 the first Harley-Davidson factory outside the US was opened in Manaus, Brazil, taking advantage of the free economic zone there. The location was positioned to sell motorcycles in the Latin America market, which actually represents the 4.5% of global Harley-Davidson sales (including Mexico, supplied from US).
In 2011 Harley-Davidson established a subsidiary in India, in Gurgaon, near Delhi, producing and distributing in the country, with moderate success. Actually India represents only 0.9% of global company sales. From India vehicles are exported in China and in the large ASEAN region.
A key success of the development of Harley-Davidson brand strategy was the creation of Stores. Actually in the World there are 1.498 Harley-Davidson stores across the world, 698 are in the United States, followed by Europe’s with over 500 and then Asia with 276.