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| barrons.com |
Article thanks to Matt Posky and thetruthaboutcars.com. Links provided:
June 20, 2018 If you think car enthusiasts are a dying breed, you should take a look at motorcyclists. The two-wheeled industry is in serious trouble. A total failure in marketing occurred over the past decade. New riders aren’t coming in fast enough to replace the glut of Baby Boomers rapidly aging out of the market, and there’s a looming paranoia that self-driving vehicles could push bikes off the road entirely.
In 2017, U.S. motorcycle sales were down 11 percent, and no company was hit harder than Harley-Davidson. The brand has the oldest consumer base and has repeatedly failed at recruiting younger riders. While it builds a fine product, it’s not one that appeals to millennials. This generational cohort proved hesitant to engage in motorcycling as a pastime — a situation not helped by having less disposable income than Generation X or the Boomers did at the same stage in their lives. Young women are also poised to start out-earning young men, and few brands have successfully tapped into the female demographic.
Harley attempted to solve this problem by offering some of the least expensive models in decades, but it wasn’t enough. Millennials just aren’t as interested in motorcycles, especially not high-end examples. So the company reverted to its roots and began building bicycles again.
While the brand has always emphasized its engines, there was a period shortly after World War I when the company also manufactured pedal-powered two-wheelers. However, the era wasn’t long or illustrious enough to make it an ardent part of its heritage. In fact, those bicycles only existed as a way to introduce new riders to the brand.
It was a marketing tactic, and it’s easy to see the new bikes as following a similar strategy. According to the Milwaukee Journal Sentinel, the brand has begun producing hand-built tribute bicycles that match the Model 7-17 Standard manufactured in 1917. Displayed and sold at the Harley-Davidson Museum, they’ll run for roughly $4,200 apiece.
As a company, Harley remains largely obsessed with its past. The replica bicycles are no different in that respect, though they do offer an opportunity for Harley to reach out to the younger demographic the company needs to solidify its future. The first bicycle goes on display at the museum this Thursday and the Wisconsin Bike Fed has scheduled a group ride that afternoon. Anyone who shows up on the museum under pedal power will receive a discount on the museum entrance fee.
Harley-Davidson cut 800 jobs earlier this year and suffered a 12 percent sales loss in the first quarter of 2018, so this isn’t going to turn the tide. Still, it’s a start. Motorcycle manufacturers focused on their existing consumer base for far too long. They need fresh blood and oversized, expensive models aren’t going to bring those buyers in. Nobody starts riding at 40 and few adults under 23 can rationalize the purchase of a $9,000 (or higher) motorcycle anymore.
Japanese companies seem to understand this, and it’s reflected in the small, easily accessible models pouring out of that country. A decade ago, most companies had just one bike under 250cc for novice riders. The next step up was a big one and usually represented something that was twice the size and power — and a quite a bit more expensive.
Things are different now. Suzuki, for example, offers several models at or below 250cc and $4,500. They come in wide away of styles, too. There’s the retro-inspired TU250X, sporting GSX250R, dirt-friendly VanVan 200, and well-rounded GW250. Honda did the same by offering North America even smaller/cheaper models like the funky little Monkey, historic Super Cub, and microscopic Grom. But it has also added a few 300cc units to round out its new-rider program.
Yamaha and Kawasaki followed suit to varying degrees — and so has Harley-Davidson, only to a much lesser extent. HD’s smallest offering is a 500cc standard with an MSRP of $6,899.
However, a lot of the damage has been done. Motorcycle manufacturers spent over a decade chasing bigger bikes and older, more affluent customers. They aren’t going to be able to recoup the older millennials they lost along the way. This is a cautionary tale for automakers that are doing the same thing.
The average new car transaction price in the United States was above $35,000 last year. If you take the average price from 1970 and adjust for inflation, that number should be around $23,500. If you’re curious, the ATP of a new vehicle in 1980 would be about $22,800 in today’s dollars. But things start to get expensive after that, so why does it seem like we’re only feeling the pinch now?
Baby Boomers could more easily afford elevated auto prices because they earned so much. Millennials cannot. The median household incomes for the latter generation are 20 percent lower than Boomers at the same stages in life. It’s definitely a contributing factor to the industry’s current sales slump, and could be a sign of dire times ahead.
That is, of course, unless autonomous vehicles totally reshape the market. Automakers seem poised to dive into big data and self-driving taxi services as a replacement to traditional ownership. If that goes to plan, they’ll earn a sizable chunk of change from selling your personal information, advertising, and charging you per-trip transaction fees. You’ll be their slave, but at least they won’t have to account for selling cars young people couldn’t afford.
If the brave new world they’re promising takes longer than expected or doesn’t pan out, we just might see the industry kicking itself for alienating an entire generation of consumers — just like the motorcycle business is now.
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