If there's one thing bikers know about Harley-Davidson, Inc. (NYSE: HOG) motorcycles, it's that they're big bikes. That's the reason they're called "hogs".
But higher sales and an apparent recovery from the collapse of the financial crisis, has Harley toying with the need to satisfy urban riders of motorcycles. The big-cc Softtails and Dynas might be fine for touring, but city maneuverability, even for a motorcycle, is apparently lacking.
Harley-Davidson Street 750. Source: Harley-Davidson
Enter two new lightweight bikes, the Harley Davidson Street 500 and the Harley Davidson Street 750, two runabout models Harley says is perfect for younger, urban riders. They'll also mark the first true lightweights Harley has made since the 1970s when it stopped selling the Sprint, a small 350cc bike, though it built the 250cc Aermacchi motorcycles until 1978 when they sold the line.
Because Harley has dominated the heavyweight bike category for so long, accounting for 57% of all the new heavyweight bike registrations last year, maybe the "hog farmer" thought the market was too mature to offer enough growth opportunities. While its entrance into the lightweight market will give it a chance to compete against Honda Motors (NYSE: HMC) , the leading lightweight bike maker, but one which sells across the full spectrum of sizes, on the surface there seem to be some problems with this thought process.
By Harley's own admission, heavyweight bikes are the most popular category of bikes, representing 62% of the total U.S. motorcycle market, and new registrations have been climbing at a fairly steady 4% rate for the past few years. Moreover, considering it's been a few decades since Harley last tried to tap this market, it's going to be going up against established players like Honda, Yamaha, Kawasaki, and Suzuki with no guarantee of success, despite its storied nameplate. Again, when you think of a Harley, a big 1,440cc engine is what comes to mind.
Even so, Harley has a history of proving the critics wrong. Back in 2001 when it introduced the V-Rod, it was roundly criticized as not being a sports bike maker, and while sales started slowly, it eventually became a big seller. And the liquid-cooled-engine technology the V-Rod pioneered for Harley will be advanced in the two new Street models.
Further, the motorcycle market is bigger than just the U.S., despite it being the most important market for heavyweight bikes -- in Europe, the share is much smaller. Touring bikes, for example, account for just 39% of the European heavyweight bike market, and whereas the number of new heavyweight registrations is on the rise in America, it's been steadily falling overseas, down 8% in 2012 and 3% in 2011.
That's why in addition to introducing the new Streets in the U.S., it will also be offering them for sale in India, Italy, and Brazil.
Still I don't think this is a clear-cut win for Harley. Polaris Industries (NYSE: PII) continues to see strong demand for its Victory and Indian heavyweight bikes, noting that the Victory's led its on-road vehicle division to post a 9% increase in international sales, including a 21% gain in the Asia Pacific and Latin America regions.
It's good to branch out, and Harley's V-Rod shows it can stick it to the critics, but that was a big bike. Here we're talking about going in the opposite direction, and that always raises the risk that the big-bike maker will leave a big burnout mark.
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