Haven't we seen all this before?
Polaris Industries (NYSE:PII) just released a new midsize bike with a black-matte finish that seems awfully similar to the Dark Custom line of Harley-Davidson (NYSE:HOG) bikes. So if imitation is the sincerest form of flattery, should Harley be feeling full of itself?
No, not really. The new Indian Chief Dark Horse isn't a simple ripoff of Harley's styling, but rather a highly engineered and well-thought-out line for those experienced with the brand. And by going for the gritty, retro style and making it highly customizable, Polaris is taking the Indian nameplate in a new direction that could be seen as aimed at the heart of Harley's core customer.
The dark heart of Polaris
The Dark Horse features the Chief's powerful 111-cubic-inch Thunder Stroke engine, electronic cruise control, keyless ignition, and ABS braking. It is Indian's sixth new model since Polaris purchased the company in 2011, and it will allow owners to imbue the vehicle with their own personality through 40 aftermarket accessories, including "ape hanger" handlebars, air cleaners, and black fender trim.
Polaris now has all the price points covered. The Chieftain is the brand's big premium-priced bike, whereas last year's Scout covers the entry-level rider, yet both have lines reminiscent of classic Indian styling. At under $17,000, the Dark Horse goes after the red meat of the midprice market while also diverging from its historic heritage. The blacked-out coloring may seem a bit derivative, but it looks fresh here if for no other reason than the raw, stripped-down feel of the big bike it straddles.
For that reason, Harley-Davidson needs to keep at least one eye on its smaller rival. Its sales remain more than 20% below their 2006 peak, and while it is successfully reaching out to new riders with its Street 500 and 750 models, Harley's core customers are not buying its bikes in the numbers they used to.
Fourth-quarter sales fell 1.6% in the U.S. and revenues were essentially flat at $1.2 billion, but it had to ship a lot of bikes out to dealer lots just to make its lowered guidance numbers. Harley still has its die-hard enthusiasts, but a lot of its customers are migrating to its rivals.
Polaris is getting it right with Indian
In fact, a lot of those customers might just be buying Indian bikes. Polaris Industries' fourth-quarter motorcycle sales surged 50% to $103 million, almost wholly a result of the Indian nameplate, which was the fastest-growing motorcycle brand last year, with retail sales soaring 250%. Polaris now has 118 North American Indian dealers and it has aggressive plans to expand that number as its share of the big-bike market rises to 5%.
Of course, that's just a smidgen of what Harley owns -- it has a better than 50% share -- and Polaris still needs to prove it can satisfy existing retail demand.
Still shooting itself in the foot
Despite the growth, capacity constraints caused it to fall well short of internal sales targets last quarter, and it admits such problems will keep it from meeting demand throughout at least the first quarter. More problematic may be sliding demand for its Victory motorcycles, which suffered a 12% drop in sales in the fourth quarter and were down by single-digit amounts for the full year.
Still, Polaris' timing is right for introducing this new Indian model. Although Harley-Davidson blamed its loss of market share on the absence of the popular Road Glide -- a model it has since reintroduced -- Harley is suffering from progressively slower sales and shipments that don't show signs of reversing.
A chance to make a difference
In short, the Indian Dark Horse is an exciting new bike from Polaris Industries. If it can get over the growing pains associated with reintroducing the Indian brand to a market that obviously was looking for a Harley alternative, it can continue building on the momentum it's gained and the tailwind pushing it forward.
That doesn't mean Harley is in any danger of being dethroned as the king of the big bikes, simply because there's a culture and mentality that clings to the Harley-Davidson brand. That won't change, but Polaris Industries' raw, stripped-down Indian Chief Dark Horse hopes to develop a mystique all its own.
Its appearance does more than just flatter the vanity of the market leader: It represents a muscular challenge that ratchets up the level of excitement and competition in an otherwise staid motorcycle niche.
Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.