2009 Harley-Davidson MSRP Motorcycle Dealer Directory

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Harley dealers ride out recession

Motorcycle sales fall in winter, but not as much as expected

By Rick Barrett of the Journal Sentinel

Posted: Feb. 23, 2009 10:04 p.m.

It's been a long winter for some Harley-Davidson dealerships.

Battered by the economy, as well as the cold, they're praying for spring to come in a hurry.

Demand for Harleys was down 10% to 15% in January and early February compared with the same period a year ago, according to a survey of 72 dealerships by Robert W. Baird & Co.

The majority of surveyed dealers reported that credit conditions worsened as banks continued to tighten lending policies.

Harley dealers expect about a 10% drop in new motorcycle sales this year, although it could be closer to 23%, according to Baird analyst Craig Kennison.

Also, fewer bikes are selling at or above the suggested retail price.

Still, sales volumes for January and early February didn't fall as much as expected, according to Kennison, partially as the result of a promotion that guarantees the trade-in value of some Sportsters when traded for a more expensive bike.

Harley riders who either buy a new Sportster or trade in their recently purchased one will get the bike's original manufacturer's suggested retail price credited toward the purchase of a qualifying Harley Big Twin or VRSC motorcycle.

It's similar to previous promotions Harley has used to stimulate motorcycle sales through trade-ins.

For dealers, the down side is it cuts into profit margins - although Harley-Davidson helps cover their costs.

The program doesn't diminish the brand's value and reinforces used motorcycle prices, according to Kennison.

A few Harley dealerships have gone out of business this winter, including a family-owned dealership in Dubuque, Iowa, that had been in operation nearly 50 years.

Average dealer inventories were down about 19% from a year earlier, according to the Baird survey, but were still slightly higher than dealers wanted.

Locally, Harley dealers say they've weathered the economic downturn but are anxious for spring to breathe new life into bike sales.

"I think the biggest fear is that we aren't at the bottom of this recession yet," said Rob McDonald, sales manager at House of Harley-Davidson, on Layton Ave.

"There are a lot of people unaffected by the recession and are buying bikes, but there are some people hanging on to their motorcycle for another year or two."

Anniversary boost

Local dealers got a sales boost last summer from Harley's 105th anniversary bash that attracted tens of thousands of people.

"It was basically an extra month's worth of business in five days," McDonald said.

Sales are still strong at Milwaukee Harley-Davidson, said Chaz Hastings, who took over as majority owner of the dealership about a month ago.

"I don't know how to explain it, but our traffic is good and our service department is two weeks behind right now in getting work out before the riding season starts."

Many dealerships could do well this year in spite of the recession, said Todd Berlin, sales manager at Suburban Harley-Davidson, in Thiensville.

"In these economic times, I am not going to lose much sleep if we were off only about five bikes in December."

Monday, Harley shares closed at $10.31, down 51 cents. Over the past 52 weeks they've traded between $10.07 and $48.05.

While waiting for spring, Harley also is waiting for the economic stimulus package to unfold.

Included in the package was an amendment to provide purchasers of new cars, light-duty trucks and motorcycles a tax credit allowing a deduction of state sales or excise taxes.

Harley dealers turn to discounts

They report slower motorcycle sales as new lineup nears

By Rick Barrett of the Journal Sentinel

Posted: Jun. 26, 2007

Harley-Davidson motorcycle dealers who have charged premium prices for bikes are easing back on the throttle as sales slow and customers wait for Harley's 2008 product lineup that's being announced in July.

American consumers are spending less in certain areas, including motorcycles, boats and all-terrain vehicles, Craig Kennison, a Robert W. Baird & Co. analyst, said Monday.

To assess current trends, Kennison recently surveyed 40 Harley dealers in the U.S. and Canada.

What he found was retail demand was weaker than expected. More bikes were selling below the manufacturer's suggested retail price, and dealers were discounting 2007 models to clear them out before the 2008 models arrive.

Among the surveyed dealers, sales were soft in April but improved in May and June. Nearly half of the dealers said new bike sales were flat (11%) or down (38%) April through June.

Some dealers are worried that the supply of Harleys is outpacing the demand, creating unhealthy competition among dealers, Kennison wrote in a report issued Monday.

"There is plenty of business for everyone. Unfortunately, many dealers have started discounting," one survey respondent wrote in Kennison's report.

For years, many motorcycle dealerships charged more than the manufacturer's suggested retail price for popular Harley models such as Softails and Road Kings. Some bikes were in such short supply that if one customer walked away, another would pay a premium to avoid waiting months for a new motorcycle.

But those days may largely be gone as many potential Harley riders refuse to pay over the manufacturer's suggested retail price for a motorcycle. In one survey, by Harley-Davidson, more than 80% of the people interested in owning a Harley said that having to pay more than the MSRP was a reason they would not buy a bike.

A buyer's market

Some Harley shoppers no longer have the patience for waiting lists, either. That's especially true for first-time buyers, who make up about 50% of the company's customers.

Higher dealer inventories give buyers more pricing leverage.

It's normal for Harley dealers to discount year-end motorcycles. Fifty-three percent of the dealers Kennison surveyed said new bikes were selling below the manufacturer's suggested retail price, up from 27% in March.

Dealers have stepped up promotions that include discounts, rebates and 2.99%-interest financing.

A supply glut could force Harley to reduce motorcycle production, a move that would hurt the company's earnings.

Kennison said a production cut could reduce Harley's 2008 earnings-per-share from his current expectation of $4.64 to between $4.20 and $4.40.

But high inventory levels, coupled with higher interest rates, could be bad chemistry for the dealers.

"Almost anything that's financed now has been suffering from rising interest rates. I personally wonder to what extent the subprime credit issues are affecting some Harley buyers," Kennison said.

Speculation about what bikes Harley will introduce for 2008, or model makeovers, is already in full swing.

Some possibilities include a V-Rod touring bike, a chopper-style motorcycle, a sport bike or three-wheeler, according to the dealers in Kennison's survey.

Harley recently filed for a patent for a three-wheeled motorcycle similar to the Bombardier Spyder.

The Bombardier trike has two wheels in the front and one in the back.

Some industry watchers have speculated that Harley might be interested in acquiring Ducati, an Italian motorcycle manufacturer.

Twenty-nine percent of the dealers in Kennison's survey said they would support such a move.

The average age of a Ducati buyer is 35, which is slightly more than 10 years younger than the average Harley buyer.

Last Friday, rumors surfaced on various Web sites that Honda Motor Co. was interested in acquiring Harley, boosting shares of the Milwaukee company but hardly having any impact on Honda's share price.

Monday, a Honda spokesman said the rumors were unfounded and that Honda was not negotiating to buy Harley.

A merger between Harley and Honda would be highly unlikely for regulatory reasons, since combined the two companies would capture 65% of the heavyweight motorcycle market.In addition, a merger might spur a backlash by U.S. buyers upset about Harley being owned by a Japanese company, said Edward Aaron, analyst with RBC Capital Markets, in Boston.