Capital is the Ficklest of Mistresses
My remarks last month, concerning the palpable disappointment that might reverberate around Wall Street if the second half of Harley's MY2024 model announcement and 2023 Q4 and Full Year Fiscals failed to live up to expectations, has been borne out.
I am writing this piece some three days after getting back from the excellent Drag Specialties and Parts Unlimited Parts and Dealer Expo at Louisville. The second part of Harley's MY2024 announcement had dropped, but as is often the case, this edition will have gone to press 10 days before the financials are disclosed.
Featured at length in this edition, the 'Louisville' show was very well attended, and as a bellwether for the year ahead, the sentiment was a great deal more positive than might have been expected.
Vendors and dealers alike appeared to be accepting of the variables that they are faced with and determined not to let fear and uncertainties shape their outcomes. There was more, newer product in evidence than in recent years - though still not quite yet a return to pre-pandemic levels of R&D creativity - but overall, the "trend data", emotional and practical, appeared to be headed in the right direction.
Which, regrettably, is less than can be said for Harley at this time.
Last month I was anticipating that the "Dawn of a Brand-New Era" that Harley had been pimping must mean, at the very least, that the VVT and larger displacements introduced with the CVOs last summer would now start to trickle down to the mainstream of the Touring platform. But alas, no, not yet.
I had also been hopeful that Harley would leverage the good start (in terms of industry reaction if not sales so far) that had greeted its long overdue entry into the ADV (aka 'Dual Sport') sector would see it respond to that sector's direction of travel with a lower displacement version of the Revolution Performance 1250. But alas, no, not yet.
"scarcity and desirability not intrinsically linked"
The 'newest' of the so-called new models, the CVO Road Glide ST, leverages its King Of The Baggers success, and likely justifies its CVO $38k price tag with a 127 horsepower, 145 ft lb torque High Output version of the 121" M-8. Though it will always remain a 'thing' with me that an 800 dry weight can conceivably represent a "reduced weight" version of any motorcycle, least of all a track-derived example of the breed.
Nonetheless, I am sure it will sell well, as will the CVO Pan America (despite its extra weight and less than stellar spec) and the "new" Street and Road Glide models will no doubt be well received too - despite being on the 117-inch M-8 and without VVT.
While in and of themselves they are unlikely to be available in large enough numbers to materially add to the showroom overstock problem that many dealers currently have, it would appear that the Harley board's Hardwire strategy of (initially) reducing inventory availability to increase scarcity and desirability (AKA price) has backfired so far.
Why anyone can think that those two strategies are automatic bed fellows was beyond me from the get-go. They can live in perfect harmony and drive each other towards a happy-valley balance sheet, but not because they are intrinsically linked or functions of each other.
Manufacturing has been littered with examples of scarcity not driving desirability, and of plentiful supply in fact driving desirability. Indeed, such outcomes are way more commonplace than the tricky play that Hardwire had committed Harley to, and its approach to that play has not proved to be convincing yet.
The day after the MY2024 announcement, the Harley share price was down at around $33.42, which is up from the 12-month low of £25.88 plumbed in October last year, but down (rather than up) on the immediate pre-announcement level, down on the $37,25 seen just after Christmas 2023 and still way off the 12-month high of $51.72 seen in January 2023.
New model range launches for a brand such as Harley need to be aspirational, inspirational and motivational, but to the outsiders that it needs to convert to insiders, it has been none of those things.
The launch video was, instead, superficial, shallow and patronizing. Harley is back to the absurd proposition that all you need in order to give your life purpose and value is to swipe your plastic or load up with debt.
It was as if Harley's view of its potential new customers are men and women who are unable to build their own storybook without the help of a lifestyle councillor. That they are incapable of making a rational and informed decision on product feature grounds. That rather than being an expression of individuality the brand now needs to be defined by groupthink. That its customers cannot be leaders, but only sheep. That is not clever, that is condescending.
Top-ticket CVO models may feed the balance sheet, but it is Royal Enfield 650s and Bullets, Ducati scramblers, Triumph triples, R nineTs, Honda Nakeds, KTM Dukes, Suzuki SV650s and Yamaha MTs and Ténéré 700s that are inspiring imaginations, driving desirability and feeding the riding souls and stories of the future-critical 21-35 YO cohort.
The reliance on used examples as the new brand entry-level was always destined to only ever be an interim solution to growing the next generations of customers. Maintaining a focus on $30 grand plus bikes simply reinforces the perception that Harley can only ever be an older rider's brand.
I realize that in the short-term, it was emissions compliance (especially in Europe) that drove the decision to can the EVO Sportsters, for example, but it was also cowardice. You're Harley-Davidson ffs, or at least you used to be! You should be engineering your way out of such corners.
A high price-point solution may suit investors, dealership groups and quarterly bonuses, but can never work for all potential customers. Capital is a very demanding mistress - they who live by the investment generally find themselves being skewered by the investor sooner or later.
