Harley-Davidson's touring and cruiser bikes have long been its bread-and-butter profit centers, but a new class of riders is changing the heavy bike industry. Image source: Pixabay.

For years, the typical rider sitting astride some Harley-Davidson (NYSE:HOG) iron was an affluent middle-aged white male, buying the motorcycle manufacturer's touring and cruiser bikes. That rider is still the key to the motorcycle manufacturer's success, as those big bikes give Harley a fat profit, but there's a new rider today -- young, urban, even female -- that's proving to be more important to the bike maker, and though Harley has had success marketing to this demographic, it risks having the competition steal them away.

Still the king of the road

Harley-Davidson still owns the big bike market. Across all demographics, whether it's the core 35-and-older, white male demographic, or what it bills as its new outreach customer, Harley has a dominating hold on market share.

Overall, it owns half of the market for motorcycles 601 cubic centimeters and above, but it has a better than 55% share of the core customer demographic while its nearest competitor has slightly more than a 6% share. And when you break down the components of its outreach customer, it looks like it has little to fear there as well.

Data source: Harley-Davidson.

According to the Motorcycle Industry Council, while the average owner under age 40 has declined slightly over the past decade from 42% of the total to 37%, those who are 25 to 34 years of age have grown from 17% to 21% of all owners. Women also now account for 14% of the motorcycle owning population compared to 6% in 2003. And they aren't looking for those big baggers Harley sells, but rather smaller, more maneuverable runabouts.

To its credit, Harley-Davidson realized it needed motorcycles to appeal to this demographic and its Street 500 and 750s, as well as the stripped down, blacked out look of its Dark Custom line was targeted right at these riders. You can see how the introduction in the Street bikes helped kick-start sagging Sportster sales.

Data source: Harley-Davidson annual SEC filings.

Yet Harley's hold on this demographic might be threatened by the rise of Indian Motorcycle, the legendary bike brand resurrected out of bankruptcy in 2013 by Polaris Industries (NYSE:PII).

David and Goliath

With just a couple of bikes initially that harkened back to its heritage, but also took aim at the core Harley buyer, Polaris began introducing bikes across all styles and prices that challenge its rival's dominance. From the Indian Chief Classic, the first production bike of the new company, to the Chieftain and Roadmaster, these were touring and cruiser bikes that appealed to Harley's biggest bike buying group, and it's no coincidence that Harley-Davidson sales have fallen for eight straight quarters since Indian Motorcycle came roaring back to life.

Shipments have declined 16% since 2004, dropping from more than 317,000 to over 266,000 bikes last year.

Data source: Harley-Davidson quarterly SEC filings.

Shifting gears

When Polaris introduced the Indian Scout, however, it was a sign the bike maker was going after Harley's outreach customer as well. Now that it's added to the lineup the Scout Sixty and the Victory Octane -- Polaris's other big bike nameplate -- it indicates Polaris is willing to amp up the competition to siphon off even more outreach riders.

In its third quarter earnings report, Harley-Davidson reported sales growth of its Sportster and Street bikes stalled, falling more than 13% from last year to 11,330 units. Admittedly, the third quarter is a relatively slow one for Harley, and category unit shipments are still running ahead of last year. But the decline coincides with a big jump in sales of Indian Scouts and Scout Sixtys, which Polaris said it is "selling disproportionately more of." 

Image source: Victory Motorcycles.

It's true Harley produces exponentially more bikes than Polaris, and Indian sales started from a much smaller point so any growth is going to be magnified. But when Harley is seeing sales fall and Indian is regularly reporting double- and triple-digit growth rates, it indicates bike buyers are migrating from one nameplate to another.

Polaris Industries appears to be winning their affections at the moment, which could be troublesome for Harley-Davidson because it's a race to attract the next generation of new bike buyers and it's one the motorcycle giant can't afford to lose.