Goldman Sachs analysts recently wrote to clients that although Harley-Davidson (HOG 0.61%) sales are likely to fall in the fourth quarter, investors could expect them to rebound in 2018. Because dealers will have cleaned out their old inventory, they'll be prepared to move the bike maker's newest models into their showrooms.

As much as the investment banker is likely right that sales will fall this quarter -- Harley-Davidson itself has been far too optimistic about its prospects -- it's undoubtedly just as wrong about the bike maker's chances for improvement next year. There's nothing to suggest things will change with the new year.

Harley-Davidson Sport Glide

Image source: Harley-Davidson.

Darkest before the dawn

Sales and shipments of motorcycles are at their lowest point since the Great Recession. Goldman Sachs says Harley has been tightfisted with its new bikes, a situation that's left dealers with inventory that's some 70% to 80% below where it normally would be. While that's reportedly helped with pricing, both with the existing bikes and at auction, where discounted prices have hurt motorcycle sales, it's seen as contributing to what may be another harsh quarter.

The investment bank, however, sees this as an opportunity. Presumably with less carryover from prior-year models, Harley will do better when the 2018 units hit the dealer floor. And there is at least some cause to be hopeful on that strategy.

The new bikes it's unveiled so far, like the recently revealed Sport Glide, are bikes at the top of the industry: sleek, stylish, filled with technological wizardry and big, throaty new engines. But that's always been a hallmark of Harley-Davidson, and it's also part of the problem. These new bikes, even those at the low end, are still very expensive. When the rest of the industry is engaged in a heavy discounting program, Harley's insistence on holding the line helps its profit margins, but moves fewer bikes.

Rival Polaris Industries has participated in the discounting, and its Indian Motorcycle brand routinely records double-digit sales growth quarter after quarter, with no apparent dilution in the brand's value. And recently Royal Enfield made a beachhead in the U.S. with plans to aggressively tackle the midtier motorcycle market, one that it believes -- with some good reason, too -- has been neglected by the major manufacturers.

Still registering a decline

Although Harley has said it wants to bring some 2 million new riders into the fold over the next few years, it's not an easy proposition to induce them to pay the kind of prices the bike maker is asking.

That's why a midtier bike or even an entry-level dirt bike would make good sense for Harley-Davidson. Unfortunately, the company is proving to be intransigent on the issue and is determined to stay the course, and that's led it into the predicament it currently faces, with almost four straight years of falling sales.

Harley-Davidson has a 53% share of the 601-cubic-centimeter-and-above segment of the motorcycle industry, but the number of new bikes being bought in this class is rapidly declining. Last quarter, year-to-date new registrations of such motorcycles fell 7.5% in the U.S. to less than 244,000 units, but third-quarter registrations were actually down more than 9%, indicating that the decline in sales is accelerating.

Chart of quarterly motorcycle registrations

Data source: Harley-Davidson quarterly SEC filings. Chart by author.

The big-bike maker expects it will be shipping some 50,000 or so motorcycles to dealers this quarter as it anticipates replenishing dealer inventories, so it might be able to make its otherwise ambitious annual goal of delivering almost 250,000 bikes, but sales aren't necessarily going to follow. With many analysts forecasting that 2018 will be the year the economy falls back into recession, it hardly seems the time to suggest that sales of big, expensive motorcycles will suddenly rebound.

There will come a point when Harley-Davidson and the industry do reach a bottom, and can begin the process of growth once more. But next year doesn't look like when it's going to happen.