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Should Harley-Davidson Create a Separate E-Bike Company?

By Rich Duprey – Sep 16, 2019 at 8:10PM

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It would give all the new electric vehicles their own identity without all the baggage.

With the Harley-Davidson (HOG -1.10%) LiveWire electric motorcycle set to launch, and a bevy of other electric vehicles -- including dirt bikes, children's balance bikes, and actual bicycles -- on the horizon, investors will soon find out whether it can break into this decidedly different market.

There is reason to be skeptical, since the average person interested in this alternative means of travel would seem to be the polar opposite of the type of buyer Harley typically attracts for its gas-powered motorcycles. 

Although there is still substantial value in the Harley-Davidson name, it's not so certain it carries much weight with electric vehicle buyers. The bike maker might have been better off creating a completely separate company to market and sell its electric vehicles, offering a nameplate that doesn't have the same baggage Harley-Davidson carries. More importantly, there may still be time to do so.

Rider on a LiveWire motorcycle.

The LiveWire would have just as much cachet if it didn't come with the Harley-Davidson nameplate. Image source: Harley-Davidson.

What's in a name?

Harley is trying to serve two different masters. On the one hand are its core buyers, who are willing to pay a premium for its big, powerful motorcycles, and to revel in the history and mystique that comes with them. On the other, it is trying to appeal to new customers who have no ties to a company whose legacy products are arguably anathema to their sensibilities. 

Trying to reconcile the two groups may be impossible, because they are completely different. But it's a problem that a separate company could solve.

There are plenty of examples of companies doing this across all types of industries. Facebook operates Instagram, WhatsApp, and other businesses; Gap has Athleta, Banana Republic, and Old Navy (which is about to be spun off); Comcast operates NBCUniversal, Xfinity, and Sky; and General Motors has broken down its cars into Buick, Cadillac, Chevy, GMC, and so forth.

Harley-Davidson should likewise have separated its division to develop and sell its electric vehicles. While Harley would be the parent, there would have been a bit of autonomy with the strategic unit that could better appeal to the segment it's targeting.

By creating a new division with different branding, Harley can develop a level of street credibility with the electric bike community it doesn't necessarily have. Because it will be competing against companies that have a more organic pedigree within the electric vehicle industry, such as Zero Motorcycle and Lightning, shoehorning its own brand in will be more difficult.

Shining a light on a niche market

There is one benefit to Harley-Davidson entering the market: It will bring a lot more attention to electric two-wheeled vehicles. For all of the existing competition, it remains a small market.

In the More Roads to Harley strategy it released last year, Harley said the high-performance electric motorcycle segment that the LiveWire would target had potential for 50% compound annual growth, though fewer than 1,000 such bikes had been sold in the prior year across North America and Europe. In the mid-power segment, it had similar growth potential, but there were only 5,000 to 6,000 bikes sold, while the lightweight urban segment saw 1.8 million sold, but it was only growing 20% annually.

Still, by combining North America and Europe into the chart, Harley makes the market appear larger than it really is, particularly here in the U.S., where relatively very few electric bikes have been sold. Most sales are occurring in other countries.

That suggests the Harley nameplate could bring more attention here at home, but it might not translate into sales because of the baggage it also brings. A separate company with the same kind of marketing could achieve more, and it's not too late to do it.

A clean slate

Harley-Davidson wouldn't so much be hiding its ownership as allowing the electric vehicles to start fresh with their own identity. They wouldn't have to carry the legacy of the brand, both good and bad.

There's still the question of whether the ultra-premium prices it charges will be well received by the market, but the vehicles shouldn't have to be held back by their brand name, too.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

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