Regular readers of Asphalt & Rubber will have noticed by now that I like to talk about what is going on with motorcycling in emerging markets like India, Southeast Asia, Brazil, etc. The fact of the matter is that it is these markets, not North America or Europe, that are going to serve as the future for the motorcycle industry, and the sooner us westerners get used to that idea, the better. For an industry built around and defined by the rebellious archetypes portrayed by James Dean, Marlon Brando, and Steve McQueen, the reality is that motorcyclists as a whole are conservative by nature, and resistant to change…especially in the United States.
We like our bikes loud, our helmets off, and bikes built by real blue-collar ‘mericans. Our skin prickles at the thought of manufacturing outside the borders of our blessed Union, and every time a company opens a factory in India, Southeast Asia, or South America, we talk about the outsourcing of American labor, the downfall of our economy, or something equally hyperbolic.
This has been the same broken record that has been played for the better part of the past 100 years, and has re-manifests itself each decade to address the next perceived threat to our domestic economy. While there is much to say about the shifting of America’s GDP from manufacturing to service industries, the real germane subject for discussion here centers around the idea that all too often Chicken Little rears his head when an American company opens a factory outside of the United States.
Such is the case with Harley-Davidson, which setup manufacturing in India back in 2011. Contrary to belief that the sky was falling, the Bar & Shield brand was not getting ready to massively outsource its production abroad (though it was heavily re-negotiating with its unionized labor force), but instead very deliberately and wisely chose to bypass India’s extraordinarily high tariffs by building and assembling its Indian market bikes locally. This move allowed Harley-Davidson to competitively and reasonably price its motorcycle in the Indian market, which in turn helped the brand expand its presence in one of the largest motorcycle markets in the world.
While this plan so far has proved to be fruitful for Harley-Davidson, the recent news that Harley Davidson India CEO Anoop Prakash has confirmed that H-D will not be making a sub-800cc bike specifically for the Indian market shows a misstep for Harley-Davidson with its international strategy, especially as it pertains to the major growth markets for motorcycling. I have written before about the corner Harley-Davidson has painted itself into, and that one part of the solution to that problem involves expanding its product line-up into adjacent niche markets, i.e. building café racer and scrambler models.
Domestically, these models make sense from a brand bridging point-of-view, and would capitalize on a growing market segment that has all the trappings of the ideal Harley-Davidson customer: large amounts of disposable income, personalities with a counter-culture nature, an affinity to buying $100 jeans, and an average age that is under 40. Watching the numerous super-niche motorcycle manufacturers fill this void, it still begs the question as to why Harley-Davidson hasn’t seen an opportunity with the hipster movement that is percolating in motorcycle culture, but maybe that is asking too much from a brand that hasn’t truly thought outside of the box in over 50 years.
The move, or the lack of any movement as the case may be, is costing Harley-Davidson abroad as well though. A quick look at the displacement sizes that dominate some of the most lucrative markets internationally, and one will realize that large displacement motorcycles are not the name of the game — even 500cc bikes are considered on the excessive side in these markets. To be successful in emerging markets, Harley-Davidson cannot afford to ignore the demographic that is seeking 500cc or less in its motorcycles.
The beauty of the situation is that by building models specifically for markets like India, Southeast Asia, and South America, Harley-Davidson would also be left with the ideal learner’s model in its line-up — something that has been missing from H-D since the crushing of the Buell Blast (if you can call that an appropriate stepping-stone to the Harley-Davidson brand).
As if there was any doubt to the truth of hypothesis I am proposing, one only has to look to KTM/Bajaj for confirmation. Partnering with India’s second-largest motorcycle brand (which also owns 47% of European brand, and is now the world’s third-largest motorcycle manufacturer), KTM has brought to market the KTM 125 Duke, with 200cc & 350cc iterations available and coming to market as well. The KTM 125 Duke was built with emerging markets in mind, and it has been a huge success for the company, and for bonus points, the Baby Duke has been a hit in Europe as well — selling as the have-to-own learner’s bike in the European market.
Soon KTM will bring the smaller Duke design to the US market, in a 350cc capacity, where it will go head-to-head with the extremely well-selling Kawasaki Ninja 250R and Honda CBR250R. I suspect the bike will be a game-changer in the small-displacement market here in the United States, as it marks a motorcycle that appeals to both new and veteran motorcyclists. With the smaller Dukes representing a huge portion of KTM’s total units sold, and significantly lining the company’s bottom line with coin, I am still looking for a reasonable answer from Harley-Davidson as to why it hasn’t followed suit.
The answer to that inquiry probably involves the words “brand” and “dilution” which not only represents a fundamental, though common, misconception of how brand management actually works, but again signals how Harley-Davidson has become hostage to the brand it so carefully has created. Without a change, Harley-Davidson’s decline is assured, though it will be a slow and painful cancerous process of attrition in its core demographic — not withstanding another economic downturn, as the last one nearly bankrupted the Milwaukee brand.
While Wandell and his team have trimmed the fat from Harley-Davidson, and rebuilt the company to maintain its form under more realistic market conditions, there needs to be a move from management that puts the American brand on a trajectory that has actual long-term potential. For the past four years I have heard rumors of Harley’s true learner bike, yet nothing has come to fruition. Just as the company’s foray into electric motorcycles seems to be a only a move to appease shareholders (“Is Harley-Davidson pursuing alternate drivetrain possibilities? Yes. Ok, check the box then”), so too are its smaller-displacement segment product designs.
Since my previous writings have already made their rounds in the Harley-Davidson boardroom, I will leave this final message to management: prove me wrong.
Source: IndianCarsBikes
Well put. I’m a motorcyclist in India and for me, it was pleasantly shocking to see that a proper KTM with truly world-class tech and great service backup was suddenly within reach for $80 a month with interest! I didn’t wait a second to pick it up for myself. That’s affordable as heck! Now I’m not saying that HD should make a 250 but why can’t they make a 400/500 twin that’s priced in the same bracket as an entry-level hatch ie 3 lakhs? Make a cafe racer, a bobber and a street tracker on the same chassis – adapt, improvise, keep up with the times.
Huskie is going to do it for BMW, KTM already is, Triumph is going into that class, so the Big HD might as well catch up and make me an goddam affordable Harley!
Perhaps one day, your “I told you so!”, will do the rounds in the HD boardroom. (Perhaps it won’t if it’s too late).
Good post.
Never mind India, with the extortionate motorcycle insurance for bigger bikes in Canada, we could really really use some selection in the sub-500cc market.
Well said Aneesh… :-)
Jensen: don’t forget that you’re talking about the manufacturer who at the first sign of trouble sells / kills any innovative product and defaults to a range of cruisers indistinguishable from any of it’s output from the last quarter of a century. Imagine a H-D branded tracker with a mid sized single or twin cylinder motor in XR colours on the streets of Mumbai (or the coast roads of Kerala). How cool would that be?
@ Aneesh: Hi mate! I’ve seen from blogs like Pipeburn that there is a thriving motorcycle scene in India and small businesses and individuals are creating imaginative, practical and great looking specials using donor bikes that real people can afford (as much as anyone can afford a bike as well as eating and paying the rent, etc!). Mebbe if Harley get around to making a tracker / cafe / scrambler over there then you’ll consider sending a container full of them into Europe!
Jonathan, I would have closed Buell and sold MV too, given the same circumstance. A better company would have handled Buell better from the get-go, and never bought MV.
Yes Jensen, the whole MV thing reeked of facepalm from the get-go. But I wonder why (given that Harley is for instance steeped in racing heritage) have the Bar and Shield been so afraid of anything that didn’t involve black paint, show chrome, hand-tooled leather whatnots and goatee beards? The baby boomers are getting old now and in any case the home market is subject to further legislation / financial pressures and whatnot. Perhaps it’s stubbornness, or maybe it’s too much of a step into the unknown. Or maybe the Aermacchi then Cagiva soap operas just gives them the shudders. Understandable, I suppose – but faint heart never won fair lady!
Enjoyed the article Jensen. You hit all the important points.
The management culture at Harley is the company’s true weak point. They just can’t admit that they don’t know what to do with the future of HD. They’ve literally pigion-holed themselves into a stereotype, and now don’t know what to do.
It’s sad, but do I feel sorry for them? Hell no! HD has rested on it’s laurels for waaay too long. How many effin’ Sportster models does it take before everyone realizes you just don’t know what to do with yourselves anymore?!? They invested millions on a V-Rod engine that was Erik Buell”s baby, only to panic in the end because THEY DIDN’T HAVE FAITH IN THEIR OWN PRODUCT. They then make it too heavy for Buell to care about anyways, and slot it in a “new generation of Harley” or so we were told. Then instead of slowly putting the engine in other models to get a whole new generation of riders a new idea of what a “Harley” is, they baulked and instead we get 20 different versions of the same freakin’ bike. No one ever thought to put that engine in, say, one of their 1,000 pound cruisers?!?
Instead we get a “trim the fat” mentality from a bunch of people who don’t even know which direction to take their own iconic brand.
Trim the fat? Try to turn that fat into muscle instead you morons…
Without a change, Harley-Davidson’s decline is assured a slow and painful cancerous process of attrition http://t.co/bpTzAAFH #motorcycle
I, for one, would love to see H-D come out with modern takes on the XLCR in 250, 400 and 650cc. Alas, “Good luck with that” immediately comes to mind.
I think the problem is that HD doesn’t want to roll out a new model that wouldn’t be coming to the US. The 883 is already seen as the girl-harley, so I think they are having a tough time figuring out what their pitch would be to make it sell.
For anyone who thinks that H-D making smaller displacement bikes would lead to brand dilution, two things:
1. You don’t know H-D history.
2. You’ve never heard of Mercedes-Benz and how they make vehicles ranging from the A-Class to delivery vans to the SLR McLaren. No American company has been blessed so much and squandered so much at the same time.
I take some satisfaction in seeing H-D struggle for what they did to Excelsior-Henderson though.
[For anyone who thinks that H-D making smaller displacement bikes would lead to brand dilution, two things:
1. You don’t know H-D history].
GP 250cc championships ’74, ’75, ’76?
Disclaimer: I own a Harley Sportster and I like it.
I understand Harley’s concern about “Brand Dilution”. Realistically they only continue to exist because of their “bad-ass” “rebel without a cause” image.
However, if HD is genuinely worried about “Brand Dilution” they need to stop selling teddy bears and women’s underwear with the HD logo plastered all over it.
HD fully understands their history; more than anything else, they are afraid of the response from their consumers if they were to “dilute” the brand.
How could anyone pose as a bad-boy in a pirate costume if HD made a <500cc bike? Years of single-minded marketing has resulted in HD digging their own grave. Don't get me wrong, I know and have ridden with plenty of genuine bad-asses on HDs, but for the most part, they're still riding panheads et al. The vast majority of new buyers seem to be wannabe bikers who have bought into the "mystique". Soon enough, they'll be trading in their XCHLRVWUGs for walkers and RVs, and I, in my now 50's with 40+ yrs riding, will still be on my Triumph, the OTHER 100+ yr old company that actually has a brain.
I am always entertained by the fact that the only competitive HD is the one built by AMC; the XR750. I’m less impressed with the idea that anything under 500cc is a “learner’s bike.” KR used to roam the Spanish mountains looking for squids to demolish with his stock RZ350. Sooner or later, we’re going to see liter bikes that can barely return large sedan mileage standards become ancient and useless history. I have no expectation of HD’s survival in a post-cheap oil world. And, the Baby Boomers are not getting olde. We are old.
The RZ350 was a two-stroke though, no? A bit different comparison in what’s now a four-stroke world.
Indeed, Jensen. I had a ’79 RD400F Daytona Special that I lovingly referred to as The Giant Killer. In the twisty bits, I had no problem keeping up with 750s with it. It wasn’t till a decent straight that I’d fall far behind only to have to dig deep and reel in my prey again. I don’t think there’s anything that quite fits that mold now. Ninja 400? Hardly. Sure it or the 650R will outpace it, but there be no throttle-only wheelies in sight with those mounts.
I think everyone is missing the point. Prakash said there will not be a sub 800cc bike developed SPECIFICALLY for the Indian market. You tell me what the wisest way to spend millions developing a new bike; design it for one market (India only) or for multiple markets (think global). I believe a sub-800cc is forth coming from HD and it will most likely be introduced in India first, but it would gradually go global in the following years depending on which markets showed the greatest potential for sales.
I believe it would be perfect karma for a company like Hero to buy HD when things go bad for HD. If anyone really thinks that HD is going to expand that quickly, you’re nuts. They would have to spend millions on new motor technology and chassis design while keeping it reasonably cheap, yeah right. They’re to busy working on the new set of chrome pipe covers for the next street glide to even care. The bikes have evolved over the years but never really changed. This another reason Mr. Erik Buell is in a perfct position to make the most of his partnership with Hero. If HD doesn’t crawl out of they’re primordial soup of a motorcycle fish bowl company, they won’t have much of anything left to expand to.
Harley Davidson is the motorcycling equivelant of the Amish. They decided the best way forward is to be frozen in time for reasons that do not make any sense to the rest of the world. The only problem is, like with the Amish, there are fewer and fewer of them.
Think of this–HD’s whole product line is supposed to evoke images of the 50′s. That was 60 years ago! That would be like people in the 1960′s designing bikes that looked like they came from turn of the century! haha. How stupid.
Also, Beeler you didn’t name all the rebellious archetypes. You forgot the Fonz.
Let’s look at this from a money perspective and from a HD perspective without throwing our own feelings about the brand in there. HD sells large cruisers. India has a lot of wealthy people living there as well as those who need basic transportation. India is the 6th largest provider of wealth in the world and it’s wealth per person has tripled in the last 10 years. There is a growing middle and upper class, side effect is the poor are getting poorer but that is another discussion. Now for HD to develop, market and sell a small displacement model in India and be competitive in the largest category of motorcycles sold there would take enormous amounts of money and R&D. For HD to take existing models, with existing tooling and 100 plus years of development into India and make profits on large margins, cheap labor and prestige recognition requires minimal funding, minimal R&D and they stand to be the only large displacement maker based in India. Seems like a really good plan. Kind of like the premium brands in the US ie: BMW with record growth. Rich people always have money.
HD put all its eggs in the “wild ones” image and bike. It’s their entire universe. The problem is that fewer and fewer people want that. The ones that do want that seem to be getting older and older. There will always be a market for a cruiser bike but not one that’s big enough to build your entire company around.
HD has no plan B.
HD doesn’t have a good strategy to bring new riders in and that spells trouble. However, if they had something to sell to the masses they could soldier on selling their big displacement niche bikes regardless.–which is the strategy of all the other brands (Ducati can thank the small displacement monster riders, Aprillia can thank its moped riders in the USA/Europe, Honda can thank the zillions of moped riders in Bangkok, etc…).
So, ultimately it is relevant that more and more people think the Harley image/bikes are dumb. The cruiser niche won’t go away so those riders can rejoice…just HD.-that’s the unfortunate thing.
In the latest issue of Cycle World there is a brief interview with Willie G. Davidson. His answers to a few of the presented questions about certain models and designs highlights HD’s very conservative nature, with being “careful” and “cautious” seeming to be the underlining theme.