Electric motorcycles were supposed to supercharge Harley-Davidson's (HOG -2.24%) future, but slack sales short-circuited the growth hype and the business was spun off in September into the stand-alone LiveWire Group (LVWR 1.73%) via a reverse merger with a special purpose acquisition company (SPAC).
The original plan was for Harley to own just under three-quarters of the new company, but the original SPAC investors bailed on LiveWire, withdrawing hundreds of millions of dollars out of the SPAC's trust account as they preferred to take the cash instead of owning stock in the new business.
That scenario isn't necessarily unique, as SPAC investors often look to cash out immediately before a transaction is completed. However, the drain on capital forced Harley to pump more money into LiveWire, and now it owns almost the whole thing again.
Imagge source: Harley-Davidson.
Electric bike sales not revving up
LiveWire is not going to have an easy time as a public company or as an EV stock. Although it slashed the price of its flagship LiveWire One motorcycle to under $23,000 to make it more competitive with other electric bikes on the market, there is simply not enough demand for them to be a broadly viable alternative to gas-powered bikes.
Since its launch in 2019, LiveWire has sold fewer than 3,000 bikes in total worldwide. To put that in perspective, Harley-Davidson sold 49,600 motorcycles in the third quarter, or over 3,800 a week.
No one is expecting LiveWire to produce those kinds of numbers so soon, but even taking into account the impact the pandemic has had on demand, LiveWire is just spinning its tires by suggesting it will sell 1,000 motorcycles this year, 7,200 bikes next year, and 101,000 annually by 2030.
The market has its doubts, too. The stock is already down more than 30% since late September, and Harley-Davidson may eventually need to inject more cash into the business, which could have LiveWire folded back into the motorcycle company.
Bailing from the beginning
LiveWire was seeded with $100 million by Harley at the outset and $294 million that resulted from the combination, which included a $100 million investment from Taiwan-based motorcycle maker Kymco.
While the net proceeds were much lower than the $545 million originally planned, it should have been enough to get LiveWire up and running. However, the SPAC investors withdrew $368.1 million, leaving LiveWire critically short of cash, which necessitated Harley infusing the stock with an additional $100 million investment.
If sales don't materialize, and there's no reason to suspect something will spark bike riders to turn out en masse to buy them, LiveWire will find itself with mounting losses to cover. At the end of June LiveWire had $337 million in cash in the bank.
Kids' bikes may be the better bet
Although electric motorcycles are not a big seller, LiveWire's electric kids' bikes are. Year to date, LiveWire had revenue of $6.9 million from selling its motorcycles, but generated $18.2 million selling its StaCyc balance bikes.
There just might be more of a market for targeting kids with electric vehicles -- think of it as the two-wheeled version of the popular Power Wheels Barbie Jeep or Teslas for tots -- than for plug-in bikes for adults.
Without sufficient range and charging access points, not to mention long recharge times, it's still a hefty price for a basic commuter option. There are much cheaper options for those wanting to go the electric vehicle route. LiveWire, and possibly Harley-Davidson again very soon, will find that going electric isn't really the future of motorcycling and the stock will quickly reflect that.
