The Business Case for the Husqvarna Nuda

Not too different of an analysis from the one I did regarding the Ducati Diavel, the business case surrounding the Husqvarna Nuda is all about extending brand attributes, reaching new demographics, and putting more volume into sales figures. While I will reserve judgment on what the Nuda 900 is as a motorcycle for when A&R actually gets a chance to swing a leg over one, the positioning and reasoning behind Husqvarna’s first true-blooded street bike can be analyzed by us before the Nuda hits dealership floors early next year.

A Swedish brand based in Italy and owned by German company, there can be little wonder as to why Husqvarna suffers from an identity crisis. When the small, but eclectic, dirt bike manufacturer was brought into the folds of BMW, many loyal to the Husqvarna brand wondered and were concerned about what was in store for the company.

If brand loyalists were waiting for the first shoe to drop, then surely the release of the Husqvarna Nuda 900 & 900R is that moment. A departure from a history of motorcycles that like to get grime under their fingernails, the Nuda 900 represents Husqvarna’s attempt at a pure-street offering — a move both Husqvarna and BMW hope will pave the way for more street models, and thus more sales volume. The positioning and branding of the Nuda 900 is also especially interesting, as adding a street dimension to the Husqvarna name is certainly a new dynamic to the brand, but how to do so with parent company BMW looking over one’s shoulder is another affair all together.

The Numbers – The Tail of the Tape Doesn’t Lie
If we’re to start anywhere with an analysis of Husqvarna, it has to be at the brand’s sales figures. The BMW Group just released its results for August 2011, confirming a trend that has been occurring at Husqvarna for as long as I have followed the company in detail. Selling 335 units worldwide last month, Husqvarna is nearly 14% off its sales marks from last year (BMW Motorrad is up roughly 4% for anyone interested). Looking at the year as a whole is even less inspiring, as Husqvarna has sold only 4,729 units in 2011, including the month of August. Two-thirds of the way through the year, and Husqvarna is down 21% from last year’s figures, and if we prorated out that sales pace for the rest of the year, the Swedish brand could be projected to sell only 7,000 or so motorcycles for 2011 — roughly the same number BMW Motorrad sold last month alone.

To call Husqvarna an under-performing brand would in itself be an understatement after looking at these figures. While BMW doesn’t break its financials down by brand or division, it would be safe to say that with a global presence of only 7,000 yearly units, Husqvarna as a brand would not survive outside of the confines of a company like BMW, which in-turn creates a double-edged sword of how to treat the company.

Though BMW has made a name for itself with the adventure-spirited GS-line of motorcycles, some of the best-selling large-displacement motorcycles worldwide, the German company has been content to have Husqvarna be its true off-road motorcycle option. Sure BMW has had the oddball dirt bike in its line-up from time to time, but the poor sales and reception of those machines only bolsters the notion that consumers don’t think “BMW” when they are looking for a two-stroke or four-stroke mud-pounding, jump-taking, died in the wool dirt bike. Undoubtedly purchasing Husqvarna was a turn-key solution to this problem, meaning the Swedish brand has wasted away in Italy, filling in as the little Dutch boy for BMW’s product offering gaps in the off-road segments.

Corporate Development – Business Speak for “Death by Drowning”
The issues of corporate development are those near and dear to my heart, as before starting a lucrative career as a motorcycle blogger, I saw myself working for large corporations, helping them mange smaller corporations they had acquired, or new ventures they were internally trying to foster. Certainly beyond the scope of this article, and far more than anyone would want to read on the subject, let me simply just say that the concepts behind good corporate development practices are intricate, and rarely performed well by large clumsy corporations. Perhaps the best example of this in the motorcycle industry is Harley-Davidson, as the American company stifled the potential of Buell, and just made a plain mockery of things through its ownership of MV Agusta (much to the benefit of the Castiglioni clan).

Conversely, the BMW Group as a whole gets a fairly good grade from me on its management of different brands and corporate development, as the German company has done a stellar job of fitting the pieces of its acquisition puzzle together, especially on the automotive side of things with the Mini brand. Distinct, purposeful, and wholly separate from the BMW brand, Mini had carved out a nice niche for itself, while staying remarkably unique and “un-German” in its branding and positioning.

Mini, like Husqvarna, fills a need for BMW. Creating an affordable mico-car offering in a variety of markets, at the time of its inception, Mini could go where BMW was unwilling to venture (of course BMW has the 1-Series now, and that’s changing things a bit). BMW’s strategy at the time of its acquisitions of Mini and Husqvarna was to find brands who already had a strong foot-hold in demographics and segments BMW wanted to enter. The key difference between Mini and Husqvarna of course is the simple fact that the Mini brand took off as a lifestyle representation, causing the subsidiary to sell roughly 178,000 units so far this year — a figure that accounts for over 16% of the BMW Group’s total car sales this year, while conversely Husqvarna dirt bike sales don’t even account for 6% of the total motorcycles sold in the BMW group for 2011.

Husqvarna has failed in many regards to become something closer to a lifestyle purchase, and the point of this diatribe is to make a case for the fact that part of Husqvarna’s failure as an independent brand was because of its positioning as a dependency to its parent company. BWM Motorrad did not set out to make Husqvarna into the next BMW only different, but instead it purchased Husqvarna to have the company serve as a means for BMW to go somewhere where the BMW brand could not. Rarely in corporate development do you see companies purchased with the purpose of letting the acquisition company continue with its status quo, and thus this creates conflict in this business space.

Looking for Husqvarna to only serve BMW’s dirt bike needs, the German company sealed the fate of its Italian subsidiary, causing Husqvarna to forever remain static in its space making dirt bikes for the wealthy and racing-minded. Now with the bottom falling-out on the dirt bike market, noise and emission standards ever reducing the trails and parks where dirt bikes can go play, and the simple fact that dirt bikes sales come from consumer discretionary purchases (i.e. “wants” not “needs”), Husqvarna has been spinning in this down-economy like a mud-clut on a knobby tire.

Paradigm Shift – Add Five Points to Your B-School Bingo
There is some good to come from the financial pressure of the recession though, as it has forced otherwise well-performing companies to take a hard look at their internal affairs and make improvements. No doubt there was a bean-counter (more likely a team legume-enumerators) that did the math on Husqvarna’s unprofitable nature, which caused the debate on what to do with the subsidiary brand at the higher levels of BMW Motorrad. Surely one of the points made at these debates was the fact that with good corporate development, comes good brand management, and lastly that subsidiary brands in the same markets have to remain distinct and unique from each other in order not to cannibalize sales from one another. And this is where the paradigm in BMW Group’s corporate development strategy shifted for the better.

Forgive me a moment as I talk cars again, and circle back to the BMW 1-Series. Not only is BMW venturing into new waters with its smaller car offering, but we see now too that Mini is offering larger cars, including an “SUV” no less. As these two brands venture towards each other in segment offerings, conventional corporate development procedures would sound a plethora of alarms, as surely you could not have two brands under one roof competing in the same space. If this example seems entirely ridiculous to you, then good…it should. After all, the customer who buys a Mini Cooper is a very different person all together, not only in income, age, sex, as a BMW 1-Series buyer, but that Mini purchaser is buying his/her Mini Cooper for entirely different reasons than a BMW buyer, most importantly because of lifestyle elements centering around the two brands.

The Germans understand the idea that they can have two distinct brands operate in similar spaces, because buyers are not only looking for an x,y,z list of characteristics in their vehicles (these being the variables that define the segment), but also looking for the brands to resonate with them personally. With one brand emphasizing the fun and quirky nature of life, and the other offering the exclusivity and performance in automobiles, the BMW Group has successfully found a way to position two unique and diverse brands under one roof — an act that has been very profitable for the German company I might add.

If you haven’t caught the parallel yet, I’ll tell you the same shift is occurring inside BMW Motorrad. While BMW caters to the Long-Way Around crowd and other demographics, Husqvarna is being lined up to serve as the counter-point to those movements. While BMW riders can discharge themselves from their neck ties & desk jobs, and play adventurer on the weekend (or at least have the allusions they could undertake such adventures if they chose to), Husqvarna seems to be building a brand that’s never worn a neck tie or had a desk job in its life. With the Husqvarna Nuda 900, a serious (or unserious) new ethos is emerging from the Husqvarna brand, and it is an interesting take on the comparative stiffness found around the BMW brand.

Not Your Father’s BMW
It is very telling that Husqvarna’s first modern street bike is a glorified hooligan machine. Part of the reasoning behind this maneuver is that it plays to Husqvarna’s past with supermotards (after all the Nuda 900 is basically one big supermoto machine), which is the logical point of extension from the company’s current model line-up to full-blown street machines. I won’t re-hash how this idea works, instead read my business analysis on the Ducati Diavel, as it shows the game plan on how a motorcycle company should move into new market segments via progressive steps and current offerings.

Product offering extensions aside, the other part of the reasoning behind Husqvarna’s choice of machinery is because it is the antithesis to what the BMW motorcycle brand stands for many consumers. If BMW is prim and proper, Husqvarna is anything but. While there are pragmatic and grounded reasons for using the BMW power plant in the Nuda 900, like that fact it is a known quantity, it brings some BMW reliability to the table, and it decreases development lead times significantly — the idea that Husqvarna uses a BMW lump for the Nuda 900 more importantly is a romantic message that the Swedish brand is doing something entirely different than the Germans, but with the same basic building blocks.

We know that the Nuda 900 & Nuda 900R aren’t the only new models coming down the pipe from Husqvarna, as the Swedish brand has already shown sketches of an electric motorcycle aimed towards the new-rider segment in Europe. WIth these changes afoot, it is clear that there is a substantial metamorphosis underway at the Italian company, and so far the messaging has been both edgy and aggressive (or at least tried to be) — two elements that are clearly carrying over into Husqvarna’s new motorcycle designs.

Those changes are a clear indication of where BMW plans on taking the subsidiary company from an outward perspective; but internally, make no mistake that BMW hopes that Husqvarna’s expansion into the street-side of the industry, with a unique branding experience, pays off with more than several thousand units per year (this takes us back, full-circle, to the numbers side of this analysis). It’s rare that we get to see the re-birthing of sorts of a motorcycle brand, but with the global recession we’ve seen several come to light. Buell, Husqvarna, MV Agusta, Ducati, and even just recently Indian. If what I’ve described here is the game plan for Husqvarna, then the coming months and years will be its implementation. It should be interesting to see if BMW and Husqvarna call successfully execute this idea, so far I’ve seen signs suggesting it could go either way.