Saj Karsan

Is Harley-Davidson Losing Market Share On Purpose?

Hi Mallarde,

If you don't believe the market share numbers Grant and I are referring to, I encourage you to look it up rather than simply believing it's wrong. Let us know if you interpret the stats you find differently than we do.

Is Harley-Davidson Losing Market Share On Purpose?

Hi Grant,

You are right that HOG buyers are getting older. As a result, Harley has been heavily shifting marketing spend towards younger riders (a couple of examples I've noticed personally is they advertise on digg and Ultimate Fighting), but of course there is no guarantee that they will be successful.

But I think it's important to consider the price of this company. Surely there is a price for which you would buy this company (e.g. if the whole company was on sale for $1, would you buy it?). To me, the stock price has taken into account all the negativity you mentioned and then some.

Hi Joseph,

If you look at Harley's margins, you can see that they have a lot of room to cut prices and still make a profit. But rather than produce bikes to capacity, they've actually cut production to maintain price levels. This causes each bike to cost more to produce (fixed costs spread over few bikes). Therefore, what the CEO means by operating for the long term has to do with brand positioning. They'd rather remain a premium product priced at a level that many can't afford, rather than grabbing short term profits now (by filling production capacity and selling more bikes for cheaper) but losing that premium status.

Is Harley-Davidson Losing Market Share On Purpose?

Hi Grant,

Thanks for pointing that out. On Harley's conference call, the growth in the rest of the industry was attributed to the competition cutting prices and offering generous financing.

Is Harley-Davidson Losing Market Share On Purpose?

My fault, you are right Fujimo, 650cc+

Is Harley-Davidson Losing Market Share On Purpose?

Hi Craigla, the dealer financing is probably not a huge problem, as the financing is secured against new bikes on the floor, and those can be re-allocated among dealers. Consumer financing is where you are seeing more stringent requirements now and where recovery prices are below the value of the loans in some cases. It certainly is a concern that they are holding these loans on the balance sheet. They *could* sell them though, but they don't feel they're getting a price in the credit markets worthy of the sale, which is why they keep them. I do worry about these bloated, somewhat uncertain assets though.

Hi Mallarde, Harley defines its market as engine displacements of 1250cc and up, so that's the market share I'm referring to. You are right, this doesn't include all bikes. Regarding the drop in units, I would agree with you that part of this is the fact that they probably don't want to take on risky loans, but its clear they have cut production, whereas they could have taken on the strategy of keeping production where it was and taking on these riskier loans to move product.

Harley Davidson Reducing Dealer Inventories - A Positive Sign

I don't know the exact answer to that Fujimo, but based on some HDFS and A/R numbers of Harley's, it would appear pretty flexible. I would guess that most if not all bikes on the floor are fully financed (with a less than market interest rate).

Harley Davidson Reducing Dealer Inventories - A Positive Sign

Hi Joseph, that's a good point. We should see one more quarter of dealer inventory draw-downs, followed by an increase in Q4. I'd be interested to re-visit this topic at the end of the year to make a better comparison to the situation at the end of 2003.