2014 Indian Chief Classic Looks to Dominate Harley-Davidson

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"With the 2014 Indian Chief Vintage, Polaris has done an admirable job of combining the classic and contemporary."
-- MotorcycleUSA

"[I]t took the Indian design and engineering team at Polaris a mere 27 months to create from the ground up these all-new Chiefs ... a mind-blower. And after riding them, it feels like a miracle."
-- Cycle World

"The Chief arrives as a true Harley-Davidson fighter." 
-- Motor Trend

Motorcycle enthusiasts have been showering praise upon Polaris Industries' (NYSE: PII  ) revived Indian brand. For shareholders who were shaken by last week's post-earnings sell-off, that's a nice change of pace. But does Indian -- or Polaris -- deserve the praise? Can Indian make Polaris a real rival to industry heavyweight Harley-Davidson (NYSE: HOG  ) ?

The Wall Street Journal thinks so. Reviewing the 2014 model year Indian Chief recently, WSJ automotive reporter Dan Neil called Polaris' new bike "fantastic" and "a great overland bike."

Polaris' new Indian Chief Classic. Source: Polaris.

With its a 68.1-inch wheelbase underlying a 103.5-inch bike, Neil describes the Indian Chief as "joyously enormous" -- nearly 9 full inches longer than a comparable Harley Softail, and better suited for long treks.

The Chief features a two-cylinder, 1.8-liter engine, and sipping from a topped-off 5.5 gallon fuel tank, it churns out an estimated 35 miles per gallon (combined mileage). So its larger size should be a comfort on trips that can stretch 190 miles between fill-ups.

Granted, that's not as great fuel economy as the Harley offers. But if Indian may not be as "green" as Harley, it does have other advantages. Neil calls the "sound" of the engine on the new Indian Chief "superb." And Motorcycle-USA agrees: "Power-wise, it's just got a whole lot more motor ... than the Heritage Softail."

Indian Chief gets your motor running as it heads out on the highway. Source: Polaris.

It's good to know that Polaris has the engine growl factor in hand. And the company has done fine work on the rest of the bike, too, helping to bringing America's oldest motorcycle brand into the 21st century. Paired with such 20th-century de rigeurs as a leather seat and a mirror-chromed steel headlamp are up-to-the-minute high-tech features such as standard ABS, cruise control, LED lighting, and keyless ignition.

Quality on a budget
Bikers won't have to break the bank to board Polaris' new ride. Despite producing a vastly improved product, Polaris is selling its 2014 Indian Chief for an MSRP up to 28% less than what Indian's 2013 models cost -- just $18,999. That's competitive with the Heritage Softail.

Relative to the rest of Polaris' lineup -- and in particular, its Victory brand -- the Indian Chief costs about as much as a Victory Cross Country -- but has a lot more style. It does, however, cost more than any of the Victory Cruisers. But for Polaris shareholders, that mightn't be such a bad thing.

Profit's the name of the game
Polaris has put a lot of effort into reviving the Indian brand, and making these bikes worth buying. It's worth asking, therefore, whether this effort will pay off. How much might a successful Indian brand earn for Polaris?

Right now, Harley outearns Polaris, generating a 12.4% net profit margin to Polaris' 9.9%. Polaris makes most of its money on ATVs and snowmobiles, though, and those vehicles appear to earn lower margins. Could a shift to selling more motorcycles, and more expensive motorcycles, and stealing market share from Harley, help Polaris boost profits?

Polaris doesn't break out the profitability of its various vehicle segments, reporting only companywide profit margins. But it does appear that boosting the value of the bikes it sells -- and selling more of them -- could mean even bigger things for its bikes division. Arctic Cat (NASDAQ: ACAT  ) -- Polaris' archrival in snowmobiles and ATVs -- gets only about a 20% gross margin on its products. In contrast, Polaris earns 28.5% gross margins by selling snowmobiles, ATVs, and a few motorcycles.

Polaris' margins have been growing, too, as the company has generated more and more of its revenues from motorcycle sales over the past few years. So while not ironclad, the argument that selling more motorcycles, rather than other vehicles, might be a profitable shift for Polaris does appear to hold water.

Foolish takeaway
Polaris' redesigned Indian Chief Classic is still a new bike, and its sales success untested. It's early in the game to predict that the company will ride away with all of Harley's profits packed into Polaris' saddlebags. But like the sun glinting off the fender of a shiny new Indian Chief, I'd say Polaris' prospects look bright.

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Indian Chief could drive Polaris' profits. Source: Polaris.

Read/Post Comments (8) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 10, 2013, at 11:02 AM, YavapaiJM wrote:

    The new Indians are gorgeous bikes and it feels good being a lifelong enthusiast to see them back on the road. I love the classic Indian style which was not only preserved but enhanced, it seems, by the parent company Polaris. There will be competition for Harley-Davidson and the metric cruisers. Competition is good for the consumer! More Americans sharing two-wheeled freedoms is good for the National spirit and our environment at multiple levels. Hat's off to the new Indian motorcycles.

  • Report this Comment On November 10, 2013, at 11:06 AM, 123456789001 wrote:

    The Black Hole of Calcutta.

  • Report this Comment On November 10, 2013, at 1:43 PM, UncleRob wrote:

    Indian Motorcycles are really beautiful, but can you really call them 'Indian'? They went out of business about 50 years ago, were revived about 15 years ago for a couple of years and now this is a re-try. Though they claim to be the oldest brand, they are not the oldest continuous brand. These huge engines (111 cu inch) only produce around 75 horsepower. There is no real competitive aftermarket for the horsepower increase to match the engine. This means you will have to wait for at least a couple of years for the aftermarket to catch up. Then, you will wind up spending thousands to make your bike perform like you want. I ride an 11 year old Harley with around 94 Hp. I have spent all of the money over the years and don't want to start over. I would love to have an Indian and considered selling my HD and getting one, but the changeover would be too expensive and I don't have that many riding years left.

  • Report this Comment On November 10, 2013, at 5:31 PM, TMFDitty wrote:

    "I would love to have an Indian and considered selling my HD and getting one..."

    Which reminds me:

  • Report this Comment On November 10, 2013, at 10:56 PM, harleyrodeorider wrote:

    But they are made by a snomobile and ATV manufacturer! LoL Guess if you want to go off road, that works...hahaaaaaaa Silly people. Harley Davidson is not just a bike....It's a lifestyle. LEARN IT! and respect!

  • Report this Comment On November 11, 2013, at 12:33 PM, BloviationNation wrote:

    @harleyroderider - Gee, are all HD riders so cerebrally challenged? You realize of course that Harley has made snowmobiles, ATVs and minibikes. Should I consider that before purchasing a Harley? Actually, considering how poorly Harley made these other vehicles one would probably not want to consider their track record if they were seriously considering buying one of their motorcycles. Google, research, educate yourself, then try to REMEMBER IT! Although most HD owners have found ways to avoid it, at some point you have respect an education.

  • Report this Comment On November 12, 2013, at 1:08 AM, elhen wrote:

    If you want a show bike buy a Harley. If you want something to ride buy a Victory. If you want a show bike and something to ride buy an Indian

  • Report this Comment On November 28, 2014, at 8:05 PM, t120r69 wrote:

    Some were born to lead and some were born to follow. Both bikes have a long American history which makes them both special. The competition is great for everyone, even the HD crowd might learn something.

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