Harley-Davidson is having a rough year. Earlier this week, the Milwaukee motorcycle brand was downgraded from “outperform” to “market perform” by investment firm Alliance Bernstein in a note to investors according to CNBC. This came upon a dip in overall sales of 1.6 percent and US sales tumbling 3.9 percent compared to last year.
"Our data suggests the younger Gen Y [Millennial] population is adopting motorcycling at a far lower rate than prior generations," Alliance Bernstein analyst David Beckel said in the note. "Gen Y's are aging into the important 'pre-family' cohort of riders and Boomers are increasingly handing over their keys to the smaller Gen X population."
It's hard to argue that Millennials are slow to adopt motorcycling, but does Harley-Davidson, specifically, have a Millennial problem? We’ll dig into that in a minute, but first, let’s look at what Morgan Stanley analyst Kimberly Greenberger told Business Insider;
"I think we have got a very significant psychological scar from this great recession. One in every five households at the time were severely negatively impacted by that event. And, if you think about the children in that house and how the length and depth of that recession really impacted people, I think you have an entire generation with permanently changed spending habits."
There’s no doubt that growing up in a recession has impacted the spending habits of Millennials, but that doesn’t tell the whole story of why young people aren't interested in Harley. The truth is, Harley-Davidson is a luxury brand cleverly disguised as a blue-collar, workin’ man’s brand. It’s a name synonymous with regular, working-class folk, but have you seen the prices of these things? Harley-Davidson is in the same price range as BMW and Ducati, two brands with a public perception of being expensive toys for the upper-class. We’re (fellow Millennial speaking) a generation famous for not having any money, so are any analysts really scratching their heads wondering why we don’t want to spend $20 grand on a motorcycle?
Even for people in their twenties who can afford a nice bike, what do you think a Millennial would rather ride? A big, loud, slow, chrome Harley-Davidson or a sleek, sporty, high-tech Ducati? Hell, take a look at the local competition for Harley. Indian has been killing it lately with bikes like the new Scout, a quality, all-American cruiser that looks like it might appeal to someone born after the Nixon administration. It’s a bike that looks markedly different and more modern than what Indian was producing 40 years ago, a claim that Harley-Davidson cannot make about their bread and butter.
Granted, Harley-Davidson does make some decent, affordable bikes in their Street lineup. But they still have that stigma - which is backed up by most of their current lineup - of putting heritage before innovation and that’s turning Millennials off to their brand. In the sub-$10,000 motorcycle market, Harley can’t compete in terms of bang-for-the-buck with the likes of Triumph, Ducati, and the Japanese big four that’s been cashing in on cheap Harley alternatives since the 1980s. You should have seen my Millennial friend’s face light up when I told him you can buy a brand new Ducati for well under $10,000.
This all reminds me of a fascinating story Bob Lutz told about the Chrysler Imperial in an interview with Popular Mechanics. “That was the source of one of the major arguments Lee Iacocca and I had,” Lutz said of the Imperial. He said Iacocca showed him the car and asked what he thought. Lutz responded saying it looked “aesthetically, 10 years old the day it comes out” and went on to criticize the vinyl roof, the fake wire wheels, and the opera windows. Shocked, Iacocca responded saying “you might not like it because you’re too young, but by the time you’re 65, you’ll like a car like that.” What Lutz says next applied to the Imperial then and it applies to Harley-Davidson now. “I won’t because my generation admires high-end European cars. You like [the Imperial] because when you were 40-years-old, that’s what American luxury cars looked like.”
Lutz was right about the Imperial and it was a massive flop. Harley can’t sit around and wait for Millennials to get older hoping we’ll suddenly like their bikes when we hit 40-years-old. We don’t like them now and we still won’t like them when we’re old unless a major brand overhaul takes place.