What sounds like a jet engine, goes from zero to 60 in four seconds, and uses 220 VAC for fuel? It's the new LiveWire electric bike, now under development by the iconic American motorcycle maker Harley-Davidson (NYSE:HOG).
Instead of sipping gasoline, a regenerative electric motor will rely on the flow of electrons from a lithium-ion battery, similar technology to what are in the 787 Dreamliner aircraft and many electric cars today.
The new bike is not yet on the market, and so far Harley is only planning a barnstorming tour to show off a prototype at dealerships around the country.
Electric motorcycles are not really new. There are a few out there produced by smaller manufacturers so the Hog maker will have a little catching up to do.
What does all of this mean for investors of Harley-Davidson, and such rivals as Yamaha Motor (NASDAQOTH:YAMHF)?
High on the hog for now
Harley-Davidson dominates the industry right now, especially in the U.S., and has been reporting growth in shipments, revenue, and EPS even though it only sells large (> 600 cc), on-street machines. However, some estimates indicate that Harley's domestic market share growth will flatline as competition heats up so the company might need a new strategy for the future.
Enter the LiveWire
The new bike probably won't be bought up in large numbers by the typical Harley customer; the long-haired, middle-aged, tattooed man, and ridden on the open road. Instead, the company would likely be targeting a new demographic: a hip, more environmentally conscious millennial, quite possibly a woman, who would drive the LiveWire in urban areas.
Harley has to overcome technical and marketing problems in order for the bike to be viable in the marketplace:
- The max range of the prototype is about 50 miles between charges. A charge requires about 3.5 hours, and that will probably need to be improved upon, even if the machine will only be used in the city.
- Convincing a new type of rider, maybe one that has never ridden on a "big" bike, might involve some sort of "hearts-and-minds" campaign, and possibly a new training program to be developed.
- If the company wants to try to sell to the average Hog rider, a 49-year-old white male, it will have to convince him of the legitimacy of the new technology features. Right now, he likes that throaty growl that he can get from a gasoline-powered bike.
- Harley will have to price the LiveWire correctly in order for it to appeal to a younger, likely less-affluent buyer.
However, the company is thinking ahead and using innovation in a typically stodgy industry to plan for future sales to a new type of customer. Shareholders could benefit if the Hog maker improves upon the prototype and develops a successful marketing campaign.
Yamaha is also developing an electric bike, the PES1, which will be intended for the sporty end of the market and available in 2016.
There is not much credible performance and business information available on the PES1 yet. Yamaha would probably go after the same demographic that Harley is targeting with the LiveWire, based upon research that indicates the market is tilting toward a younger rider that would rather go green. Harley-Davidson could have some competition out there if this new market ever materializes.
The iconic motorcycle maker, Harley-Davidson, is investigating the feasibility of producing an electric bike. If the new machine ever gets to production it would likely be targeted toward a new type of rider. Instead of a middle-aged man riding in the open countryside, you might see a young upstart tooling around the city on a LiveWire. Innovation in the motorcycle industry will be good for investors.