A TOUR OF the modernist building of the Harley-Davidson museum in Milwaukee helps to explain why the midwestern maker of motorcycles has iconic status, but also why it is struggling. Nearly all the visitors are white, middle-aged men, some clad in leather and heavily tattooed, others dressed conservatively. Harley is the quintessential baby-boomer brand but its customers are slowing down.
The firm has been losing sales at home for eight consecutive quarters with the latest being no exception. Sales in America plunged by a tenth in the three months ending at the end of December compared with the same period a year earlier, it said this week. The total cost of tariffs (those imposed specifically on its bikes by the European Union and China, and also those levied by America on imports of steel and aluminium, its main materials), together with restructuring costs, wiped out its profits.
The 116-year-old business has been through tough times before. It almost went under in 1981 when America was in recession and Japanese makers of motorcycles dumped unsold inventory onto the American market at extremely low prices. Then a group of employees bought the company, persuaded the government to impose tariffs on Japanese bikes, improved the quality of its wares and returned to the heavy retro look of the 1940s. That did the trick for baby boomers who flocked in droves to the expensive toys cleverly marketed as a symbol of freedom, individualism and adventure on America’s scenic roads.
Now tariffs are the enemy: the company expects their cost to rise to $120m this year. Matt Levatich, Harley’s boss, stoked President Donald Trump’s ire when he announced in June his plans to move production of motorcycles destined for the European market out of America to avoid new EU duties. Some attribute recent poor sales to Mr Trump’s tweet in August supporting a boycott of the firm. But, “most Harley enthusiasts don’t care,” says Steven Levin, a surgeon from Chicago who has owned a succession of Harleys since college.
Harley’s other challenge is to win over millennials, women and non-white buyers. Last year Mr Levatich unveiled a five-year plan centred on the introduction of 16 new motorcycle models such as Livewire electric bikes, and increasing Harley’s appeal in international markets.
Dealers are counting on the new models to be more affordable, and attractive to a wider audience. Harley may suffer from the quality of its older wares. Sales of used bikes are outpacing those of new ones by three to one (a decade ago it was the other way around). But while old bikes, and Harley accessories and clothing sold in specialist shops and on Amazon are selling well, they won’t compensate for the damage done to the hogs by tariffs and youthful disinterest.
This post was originally posted at https://www.economist.com/business/2019/02/02/harley-davidson-brought-low-by-tariffs-and-demographics.