Even with all of the recalls Polaris Industries (PII 8.68%) has suffered in 2016, it remains in the forefront of many of the powersports vehicle markets it serves. Its RZR side-by-side has a market share double all other competitors combined, while the Ranger utility vehicle has twice the share of its nearest competitor. Yet it's the industry where it actually trails the market leader by a substantial amount in which it has seen its best performance.

The three that started the renaissance of the Indian Motorcycle brand for Polaris Industries. Image source: Indian Motorcycle.

Big bikes have been big bucks

Motorcycles have been the bright spot for Polaris in a year dimmed by numerous and repeated product recalls for fire hazards it seemingly can't get under control. Sales of its big Indian Motorcycle and Victory bikes, as well as its three-wheeled Slingshot, rose 23% across the first nine months of 2016 despite the market for motorcycles 900 cubic centimeters and above falling by high single-digit percentages. Industry leader Harley-Davidson (HOG 7.85%) also suffered a near-2% decline in worldwide sales and an almost-5% drop in sales in the U.S.

The motorcycle market is changing. The big bike market has been defined for decades by Harley's core customer of middle-aged white males, but today's bike buyer is younger, more urban, and even female.

Image source: Indian Motorcycle.

The Motorcycle Industry Council says motorcycle owners aged 25 to 34 have grown from 17% to 21% over the past decade while women now account for 14% of the motorcycle-owning population compared to 6% in 2003. Make no mistake, Harley-Davidson is still the market share leader across all demographics, but these new riders are buying fewer of its motorcycles, and that has given competitors like Polaris Industries an opportunity to make inroads they haven't been able to achieve beforehand.

Shifting into gear with Indian

The turning point for Polaris came with its purchase out of bankruptcy of the Indian Motorcycle brand in 2011. Although it has sold its big block Victory bikes for nearly 20 years, they were never able to gain much traction and have always been little more than a minor contribution to Polaris' overall powersports business.

Indian changed all of that, and though several other owners had tried to resurrect the brand, none was as effective as Polaris at tapping into its storied history, which extends further back than even Harley-Davidson. It wasn't until Polaris reintroduced a new line of bikes that harkened back to that heritage, starting with the Indian Chief Classic, which had the iconic lines and styling of its vintage forebears, that the nameplate caught on with bike buyers again.

The excitement for the bikes hasn't really let up. Polaris has achieved double- and triple-digit percentage growth every year since the bikes returned to the market, which explains how it has managed to take large swaths of market share from Harley. For example, where Harley said its sales had managed to improve finally last September, Polaris noted that both Indian and Victory grew more than twice as fast in that period. It will be reporting fourth-quarter earnings soon and has forecast that Indian share gains and retail growth will continue, with retail sales expected to be up in the high teens to over 20%.

Image source: Flickr via BigAshB.

Big-ticket purchases slowing

Still, the motorcycle industry is slowing, and the impact of that will eventually hit Indian, too. It's already overwhelmed Victory, as Polaris just announced it will cease making the bikes to focus on Indian and Slingshot. Despite recent gains the brand has made, they've come about through too much of a struggle and have largely been a losing proposition.

Nonetheless, it was a surprise decision since it had recently introduced the Victory Octane, which was well received and targeted at those new motorcycle demographics that Harley has been counting on to pick up sales. But the Indian Scout and Scout Sixty are also aimed at new riders, or those new to the Indian nameplate, and Polaris is smart to focus its resources on the areas where it's already winning.

The powersports vehicle maker hasn't given any indication that it's gotten a handle on these recalls yet -- it issued another one just this month -- and despite Indian suffering from one in December, the motorcycle business could continue to be Polaris Industries' best-performing business in 2017, just as it was last year.