Here's Why Harley-Davidson Won't Mass-Produce an Electric Motorcycle

When Harley-Davidson (NYSE: HOG  ) introduced the liquid-cooled V-Rod in 2001, purists were aghast the bike maker was going over to the dark side with a racing-style bike, rather than staying with its big cruisers -- though the bike eventually became a big seller for them.

Now the iconic bike maker has unveiled a new prototype motorcycle that once again has avid Harley riders' leather in a bunch. Why? Because it's an electric motorcycle.

Can an electric bike get sales to hum? Source: Harley-Davidson.

Project LiveWire made its debut earlier this summer amid a lot of fanfare, but like the V-Rod before it, the e-bike is eschewing the traditional styling in favor once again of the racing-bike vibe. But whereas the V-Rod proved the naysayers wrong, don't expect Harley to mass-produce the e-bikes anytime soon -- or ever, for that matter.

It's understandable why Harley is toying with the idea of an electric bike, but reality might create some speed bumps. 

The graying of America
Harley's core customer is a middle-aged white male. The company notes that for six straight years it has sold more new on-road motorcycles in the U.S. to this group than any other bike maker, while in the premium 601cc-plus segment, Harley sold more than nine times as many new bikes to this core demographic than its nearest competitor.

Unfortunately, those buyers are aging now, and while they have money to spend, they have likely already bought their Harley or have reached an age where riding doesn't happen as often, which has had an impact on sales.

The financial crisis certainly played its part in slashing the number of bikes Harley shipped, but the trend of falling units began before the crisis hit. The number of units shipped peaked in 2006 at over 349,000 globally, and the turndown was evident both in the U.S. and internationally. Last year, even as it has come back well off its lows, shipments were still well below the peak, standing at almost 260,500 units.

Over the first six months of 2014, Harley has shipped over 172,000 motorcycles, or 8% more than last year, which if the run rate holds true would only put it at 281,000 for the year. However, we do know the back half of the year is the bike maker's weakest period. Harley might still dominate, but the customer who put it on top isn't its future.

Harley's still trying to get its motor running again. Data: Harley-Davison SEC filings.

The riders coming behind Harley's core customer are a very different breed, belonging to one or more of four categories: they're young -- 18 to 34 -- female, black, or Hispanic. You may have noticed Harley starting to cater to this new customer, what it calls its "outreach" customer.

Its 883 Super Low was introduced in 2011 to help beginning riders and women acclimate themselves to motorcycles. Last year's Street 500 and 750 models were targeted at young, urban riders. The V-Rod was for young males with a need for speed. An electric bike, with racing-style lines and Prius-like marketing roadshow, is geared more toward this new demographic.

"Loud pipes save lives"
The problem for Harley is the very thing that has sustained it for so long: its image. Forget mystique of the leather-clad Marlon Brando in The Wild Ones: Harley-Davidson bikes have a reputation for not only being big, but loud.

Many, if not most, Harley owners swap out their stock pipes for aftermarket ones that allow for the distinctive burble at idle and its full throaty roar when opening up the throttle.With an electric bike, since there is no internal combustion going on, there's no sound. Harley does its best to imbue the LiveWire with some energy by likening it to "a fighter jet on an aircraft carrier," but less exuberant views have compared it to "an oversized vacuum."

While that may have some appeal to the outreach customer, and as much as Harley says sales to them are rising faster than to its core customers -- at twice the rate, in fact -- it seems even those riders prefer the more traditional bikes to the sportier models.

Everything old is new again
Over the past two years, quarter unit shipments of its touring bikes have grown 15.5% on average, while its custom bikes -- which include the V-Rod, Dyna, Softail, and CVO models -- have grown less than 7%. Its Sportster and Street models are up less than 8% on average.

While the Sportster/Street group saw shipments 14% and 13% higher in the last two quarters, respectively, that encompasses the period immediately following the introduction of the Street 500 and 750. In the fourth quarter of 2013 they shipped just 6% more bikes from the year-ago period while they were down 26% in the third quarter.

Bigger is better. Data: Harley-Davidson SEC filings.

In fact, over time, custom and Sportster shipments have been fairly stable, rising and falling within a prescribed range depending on the season; it's Harley's bigger bikes that continue to move the needle higher.

There's no doubt Harley's LiveWire is cool, and because the power is instantly available to the rider, it can go from zero to 60 mph in just four seconds. But there's only a limited market for them. Here in the U.S., Zero Motorcycles, Terra Motors, and Mission Motors are all selling e-bikes today, just not many of them. Zero, which is is the industry leader, is expecting to sell just 2,400 bikes this year. 

There's no shake, rattle, and roll with the Project LiveWire, which goes from 0 to 60 in a zippy four seconds. Source: Harley-Davidson.

According to Navigant Research, expected global annual sales of e-motorcycles will grow from 1.2 million vehicles in 2014 to 1.4 million in 2023 -- but virtually all of that demand is concentrated in China, which accounts for 98% of worldwide sales. The real demand is in electric scooters, however, where Navigant forecasts annual sales will grow from 4.1 million to 4.6 million by 2023. Over the next decade, a cumulative 55 million e-bikes and scooters will be sold globally.

People didn't think Tesla could mass produce an all-electric car either, but motorcycles still have to overcome technological limitations. The Project LiveWire bike only has a range of about 50 miles and the battery takes three-and-a-half hours to charge. 

Right now, it's a prototype, and further research and development would likely improve all that. And Harley's entrance would certainly raise the industry's profile. Zero Motorcycles said that on the day Harley unveiled LiveWire, traffic to its website doubled.

Beyond the meager market for an electric motorcycle overall, a Harley-Davidson electric bike already seems like a nonstarter because its core customer and the so-called outreach ones both still buy into the aura and image of its loud and proud heritage. Both groups have proved they largely still want the traditional styling too, and for that reason a mass-produced Harley e-bike is a nonstarter.

As cool as it is, a Harley e-bike likely won't move far beyond the prototype phase. Source: Harley-Davidson.

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Read/Post Comments (9) | Recommend This Article (1)

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 September 01, 2014, at 11:46 AM, SupportTheSecond wrote:

    "Loud pipes save lives" Is just as stupid a all GoldWing riders die because their bikes as so quiet.

    A stock Harley is actually allot nicer to hear then the aftermarket open pipes that only tend to hurt our sport irritating neighbors and others.

    The failure of the electric bike wouldn't surprise me especially with the price they are likely going to charge for it. They are many other and proven options out there. Brammo, and Zero for two examples.

  • Report this Comment On September 01, 2014, at 1:50 PM, Ax1464 wrote:

    You immediately lost all motorcycle-related credibility by referring to the V-Rod as a "racing-style bike".

  • Report this Comment On September 01, 2014, at 1:53 PM, Ax1464 wrote:

    Also. In The Wild One, Marlon Brando rode a Triumph, not a Harley-Davidson. Lee Marvin rode a Harley.

  • Report this Comment On September 01, 2014, at 4:49 PM, FoolforBerky wrote:

    Both my wife and I will be test riding the LiveWire this coming Friday in Kansas City, Missouri at Worth H-D. We are both really looking forward to trying out the electric Harley. I would like to have an electric motorcycle and the silent sound at least to me is a big plus. We own two Harleys and two Buells so bikes are nothing new to us. Being able to ride around town and fueling up at home with electricity seems like it would be great to me. No oil changes, no gas stations, and probably way reduced maintenance is a big selling point. Sure, I'd keep the gas powered bikes for trips but for around town the electric would fit my needs and be ultimately more economical.

  • Report this Comment On September 01, 2014, at 6:37 PM, storyman41 wrote:

    Harley riding is not about motorcycles. It is about post-WWII sociology. Before Brando (who did not ride a Harley), Harleys were utilitarian vehicles. After his movie, Harleys came to represent a life style, camaraderie, self-identity and all that. Most of us already know that. Without chrome, noise, customization, smoke, tattoos, body jewelry, leather vests, etc., a Harley is just a manufactured product, a machine which drips oil after a short time. Money they have spent on an electric prototype has already been wasted.

  • Report this Comment On September 02, 2014, at 9:52 AM, ozark81 wrote:

    The low number of E-Bikes are due to it being a emerging market. Much like when motorcycles first came out. Expensive, limited area of use, and more novelty than practicality. Selling them now is cheap R&D. By the time the figure out the perfect setup the market will mature. Plus if HD don't get in now they will miss their chance when all the small makers are up and running. Playing catch up is never a wise move.

  • Report this Comment On September 02, 2014, at 3:13 PM, nudistone wrote:

    Here's Why Harley-Davidson "SHOULD" but Won't Mass-Produce an Electric Motorcycle!. Ok point made. Now think about this Harley....An ole' motorcycle well known for loud pipes goes to the 21st century in Super quiet super high tech motorcycle that sneaks up on the completion an blows em' away without them even knowing what happened that's our New Technology The New Project Livewire 0-60 on an electric cycle is KICKASS!!!!! Harley makers should stand tall! Be the leading example of the New future of Harley Mororbikes everywhere! Don't ya think?! Like my daddy use to say " It's not easy being a Trend Setter but somebodies got to do it" Dad. David Armstrong, Delray beach,Fl. An Electric bike owner for 12 yrs. Love it & No miracle ears either! lol !

  • Report this Comment On September 08, 2014, at 7:35 PM, PaulScott37 wrote:

    I ride a 2013 Zero S with an upgraded 660 amp controller. I can hit 60 in three seconds flat. I have yet to be beaten off the line by anybody. Gassers can't react nearly quickly enough. Those bikes, even the nicer Ducatis and such, still have to rev up, and a clutch needs to engage before forward momentum happens. They then need to change gears. While they are goofing around with all of that, I'm sprinting away without a sound.

    I consider my bike to be the ultimate commuter vehicle for large cities like LA. Lane splitting is a snap with a small, lightweight (350 lbs) bike. My range is 60-100 miles depending on how I ride, but you can get a Zero with a range of 170 miles if longer distances are needed.

    I can't say whether Harley will stay in the e-bike business, but if they don't they will go away as a viable company. That is guaranteed. All personal transportation will be electric in the not too distant future. The superiority of electric drive will see to that. Longer ranges and ubiquitous fast charging is all that's needed, and both of those things are happening now.

  • Report this Comment On September 09, 2014, at 11:15 AM, RickeyDale wrote:

    I am so tired of "Harley" and its thuggish image portrayed by middle aged men searching for meaning and acceptance in their pathetic mundane lives. Why are our police allowing these faux barbarians to assault us daily with their illegal noise.? Like the article stipulates, most Harley owners exchange their legal OEM exhaust for a noisy, in your face, illegal, exhaust mechanism. It's getting old and I, for one, am sick and tired of being assaulted every time I enter a local municipality to conduct my business. Harley, and your loud metric clones, please just go away and take the pathetic little "Sons of Anarchy" with you...America has had enough of your pathetic intrusion into our homes, our places of work and worship. Please, just go away!!!

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