3,10, 70 and 62: All you need to predict Harley’s (and BMW and Polaris) ten-year future

As we’ve been discussing in the comments the average age of certain motorcycle manufacturers, clubs and associations and rights groups. According to industry sources it’s about 47 give or take a couple years.  Jim, one of my readers, pointed out, “Mid 40′s is close to the sweet spot for luxury manufacturers in general and what is BMW and HD if not luxury brands?”

This is true…In fact, the peak earning years have been from 35-54. But that is the problem:

Harley-Davidson says its median age was 47 in 2008.[i] That lends the impression that half of all Harley owners are older and half are younger than 47.

As Jim points out, Harley, BMW and Polaris have made billions off of those in the sweet spot for more than a decade. So if 47 really is the median age for Harley owners (and somewhere in the ballpark for BMW and Victory (made by Polaris) owners and motorcycling was something like RVs or luxury cars all would be very well. But it’s not–especially because of 3, 10, 70 and 62:

3: For most of the past 100 years, motorcycling has been about 2% of all road vehicles.  But then, beginning in the early 1990s,  76-78 million Boomers came into the sweet spot years–their 40s. This generation was better off financially than any generation before them and it appeared as though a greater than average number of people decided to ride motorcycles–particularly  customs/cruisers and tourers–Harley and Polaris’ stock-in-trade.

As these Boomers moved through the 1990s, motorcycle sales grew every year by at least 10% over the previous year and, at the end 3% of all registered vehicles on the road were motorcycles.

In 2006, motorcycle sales peaked–and the last of the Boomers turned 42–and turned 46 this year–just about Harley’s median age, but also moving towards the end of the sweet spot years.

So let’s go back to Harley’s “median.” The median means half the ages are older and half younger and can appear that there’s equal numbers of people with each age on both sides of the median. But that’s not the way it works–more owners share some ages than others.

Since we know–by H-D’s own account–that it’s had a very difficult time attracting younger riders, it’s very unlikely (as in snowball’s chance) that half of all Harley owners are younger than 47. There’s good reason to suspect less than one-third of Harley owners are under 47:

According to a January, 2008 Reuters article by Emily Kaiser “Economy faces bigger bust without Boomers” pointed out, two-thirds of all Boomers were already 50 and older. The heavy concentration of Boomer Harley owners and the Motor Company’s inability to attract a strong young market suggests that a significant portion of Harley riders may already be closer to age spots than the sweet spot and a great many of them moving out of the sweet spot even without the recession.  In fact, chances are they’re even older than analysts have suspected.

Even if there had not been a recession–nor lingering Recession Fear–sales will fall off quickly as the Hog passes out of the python–in fact, ten years from now perhaps two-thirds of current Harley owners will be over 60 and well out of the sweet spot.

That elevated 3% is merely a bubble and the overall market for motorcycles will shrink as the smaller Gen X and Millenials grow into their generations’ sweet spots. Iow, the motorcycle market will not recover in the next ten years because there’s simply not a big enough general society base to support it–unlike the Boomers.

And, specifically, it won’t recover for the luxury brands unless, of course, Harley, BMW and Polaris find a way to attract large numbers of 35 and under riders. Yet Harley–for one–has spent nothing on R&D and has cut marketing to almost nothing. Selling Buell and MV Augusta also showed a horrendous lack of vision or understanding of the modern motorcycle market.

And that brings us to the next number–

10: Industry research has found the average rider buys a new motorcycle about every ten years.  This is the pattern the recession most affected. Though the effect on motorcycle purchases is unknown,  study done in 2009 found that 59 percent of new car buyers planned to keep their cars more than four years. That number was up from 45 percent just one year previous–a 14% change. Since motorcycles are a discretionary purchase, it’s likely the percentage is much higher.

The question is–how long will the Boomer Harley owners delay to buy? Because they are growing older, after all. In 2010 the first Boomers turned 64, and that brings us to the next and most important number:

70: The age at which most motorcyclists retire or severely limit their riding. And this is what makes motorcycling a special case compared to, say, an automobile. For example, the average (not median) age for a Mercedes-Benz is 63.6 years-old and about 45% of RV owners are over 55. Iow, unlike many other high-ticket items, motorcycling has a shorter shelf life.

62: Industry research has found  riders buy their last new bike around age 62. This fits then both with the perhaps unconscious belief they will quit riding at about 70 years old and with the 10-year rule. Two things about this:

The purchase window is smaller than many might suspect since it has a relatively young 62 year term limit.  If two-thirds of Harley’s market is over 50 and they buy their last bike before they’re 63, there isn’t much time left to sell a lot of bikes.

That is if they even get to that last bike purchase. If they have delayed or will delay buying the second-to-last bike because of the recession or Recession Fear too long, they may not buy another new bike when they retire–if they retire after the hit to their investments and home prices. Iow, sales may slump even farther because of the recession and its aftermath.

This suggests that over the next 10 years, Harley may not only lose up to tw0-thirds of its base, it may continue to lose last bike sales if riders 55-57 continue to delay purchasing that 10 year motorcycle now. Short of reinvention and new market appeal, it’s almost certain that sales of customs/cruisers and tourers will continue to plummet regardless of the overall American economy.

Nor does hope rest on the perhaps one-third of Harley owners who are under 47. According to an 11/09/2010  article on AOL’s DailyFinance “Baby Boomers Are No Longer Luxury Retailing’s Future“, “Even as generation X hits the peak earning ages of 35 to 54, the cohort is too small to support the [luxury] market on its own.” According to Unity Marketing president Pam Danzinger. “Gen X-ers are merely a hiccup. . .we have to wait for the millennials,” says Danziger. Those 25- to 34-year-olds have the appetite for luxury, but not the cash — at least not yet.”

As we see in the chart, Gen X is significantly smaller than the Boomers–and the Millenials, which are also smaller than the Boomers.

But not only do Gen X and Millenials prefer sport bikes, they don’t value status symbols or conspicuous consumption as their Harley/Polaris/BMW elders, according to Danzinger.

“Danziger calls the new luxury shopper a “tempered pragmatist,” who gets power from being a smart consumer and focuses on superior quality and performance. That means retailers will have to adjust their value message to give consumers a reason to pay the prices they ask, she says, adding: “We have to stop selling the sizzle and go back to selling the steak.”

Marketing to Gen X and Millenials will require a great deal more than revamping HOG rallies and livening up club meetings. The young already have an extensive, intimate and immediate social network through social media, the internet and informal bike nights, track days and so forth. The new motorcycling is heavily supported through images in both advertising/marketing and entertainment even in peripheral ways.  For example, FedEx co-markets with Ducati in a current commercial and the cable television show, Covert Affairs, features an animation of a rider on a sport-type motorcyclist even though no character rode any bike in the first season.

But it will require more than marketing–it’s just as much style that’s required. BMW has been trying to adapt its line to appeal to Gen X and the Millenials for several years. Only time will tell if they can take the frugality chic lessons the recession offers and continue to rebrand itself. However Polaris and Harley have shown no inkling that they are even aware that motorcycling is moving on without them.

With only about ten years left, there isn’t much time for Harley and Polaris to find a way to reinvent their brands into something that has more steak than sizzle.

P. S. Just to mention the little fry–custom builders better figure out how to make marvels out of sport bikes if they want to survive as well.

The recession has only hastened the sea change in motorcycling; it did not create it. The under 40 rider has a different sensibility and sense of style, different priorities. They are tempered pragmatists that don’t buy into the drink-n-ride sociability, don’t see helmets and gear as social commentary.


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16 Comments on “3,10, 70 and 62: All you need to predict Harley’s (and BMW and Polaris) ten-year future”

  1. Jim Says:

    Wendy, good analysis. It should be noted that this reflects the North American and the European markets and doesn’t address the economic growth in Asia. I expect that the brands with strong equity will gain enough new business in Asia to show growth in units, till the demographics turn in the favor of motorcycle manufacturers.

    Regarding the historical 2% of vehicles sold being MC, any data available that shows Millennials buying MC at that pace. The longer term danger being that that generation never will care to ride.

  2. wmoon Says:

    Jim, Thanks. But I disagree with your comments on Asia. H-D is a brand that does not translate beyond the USA (and to a degree Canada). You may not be familiar with power/weight restrictions in some Asian countries that would keep even Sportsters out of city limits. In almost all countries the cost of a Harley (we can forget about Polaris having much overseas cachet) would limit them to the uppermost economic class and in these countries riding is not just primarily transportation, it’s transportation that’s associated with the lower classes. Until it becomes cool to be declasse, those who buy a Harley (like Kim Jong-il) is just aping American status and the goal of the lower class is to buy a car–not a more expensive motorcycle. You may also remember that Japan has a very strong “outlaw” image of its own–the bōsōzoku–and doesn’t need the Harley version. They ride sport bikes, btw.

    H-D has so far fooled investors by emphasizing double digit international growth however the most bikes H-D ever shipped overseas in one quarter was in the 2Q 2008–and that was under 29,000. That’s the entire world–including Canada which sells more Harleys than another country than the USA. It’s easy to rack up huge percentage changes when numbers are small, small changes are significant. So, for perspective, that quarter H-D shipped domestically almost 26,000 touring bikes–not to mention the customs and Sportsters.

    Can they show growth in units? Yes–but Wall Street would be wise to look at hard numbers quarter over quarter and year over year internationally rather than being tricked by seemingly huge changes in percentages.

    And it’s not the demographics that need to turn in favor of the manufacturers–it’s the manufacturers that need to turn to what turns on the market and respond with product they want. That’s what free market/capitalism is all about, isn’t it?

    There’s nothing done on Millenials that I know of or really Gen X here in the USA. A German study found that Gen X ridership is down there. However, there’s a great deal of popular culture support for riding here so there may be different results. I don’t know.

  3. Dave B Says:

    I know you don’t have a crystal ball but do you think HD can turn it around?

    HD Corporate forced the mom & pop HD dealerships out of business in favor of full-service dealerships. If HD folds, who’s going to service all those motorcycles? You can probably buy HD parts, accessories and clothes online but you need someone to fix the bikes. I’ve also seen some HD clothes sold in other retail stores.

  4. wmoon Says:

    Of course it’s possible to turn H-D around. Look at Ford and Apple–the death knell was sounded for those companies in the past and look at them now. What H-D needs now is the vision to see a way to reinvent the brand and the courage to carry it through and convince the dealers that THEIR future lies down that path, too. It’s happened before (think Snapple, Mountain Dew and Volkswagen, for examples).

    You certainly don’t need a dealership to get your bike fixed–there’s plenty of good mechanics out there. Nor do I think H-D will entirely fold. I think they will become a boutique brand and probably go private or be bought out by another corporation. It’s also possible that H-D will have to go the way of multi-brand dealerships.

  5. Maximus Says:

    Wendy, here’s a thought, but first, full disclosure. I own/ride a H-D motorcycle. What hurts H-D with any thoughts of expansion into new products over the years has been that very demographic that you describe. That client base has been and continues to be very vocal in their dislike for anything other than an a 100-hp air cooled V-twin motor with un-baffled pipes installed into an 800-lb. motorcycle. I have some first hand experience in this while affiliated with H-D in ’05. I watched in horror as the V-Rod, a technological marvel at the time, was panned by anyone with gray hair that rode a Fatboy or a Road King. And forget about Buell; they never had a chance. And while I do not know this for certain, I sense that the Motor Co. feels it cannot ignore their faithful and hope that younger riders will “graduate” to a full dresser as they age. But H-D just cannot ignore the current owners who do not like anything with two-wheels unless it comes out of Milwaukee.

  6. Gunslinger Says:

    After reading this and the earlier post the thought crossed my mind as to whether the demise of HD will be taught in the nation’s business schools just as it’s rise was.

  7. wmoon Says:

    if the execs/board don’t get their act together…

  8. wmoon Says:

    Maximus, Here’s an interesting article that has Harley’s Mark-Hans Richer (chief marketing officer) claiming the opposite–though offering no basis for that belief.
    http://blogs.forbes.com/melaniewells/2010/11/18/harley-davidson-cmo-crowdsourcing-ads-to-engage-a-new-audience/?partner=yahootix
    In the article, Richer says that H-D raised prices on the Sportster–H-D’s entry-level bike–during the recession (about $1,400). Richer seems to associate Sportsters with younger riders and that raising the price was a successful strategy and that H-D is successful at attracting younger riders in the recession, “We raised our lowest entry level price about $1,400 during the recession. Even as we were doing that, our share with young adults—a group people assume we don’t attract very well—went up 9 percentage points. In 2010 we sold more motorcycles to young adults than any of our competition in the U.S., which wasn’t true in 2006 or 2007.”

    First of all–it takes very few sales to result in a 9% jump when sales to that group are so low. So there’s that. Nor does he define what he means by “young adults”. It is generally applied to 16-24 year-olds. Since unemployment has been highest in that group (about 50% in 2009 and 2010), one wonders just who is buying the Sportsters for people in this age group.

    But Richer’s story seems a little weak when one considers the hard data: Sportster (on which the profit margin is the lowest) still are about 20% of the total shipments as they have been since 2007 (in fact, in 2007, they were 22% of the sales). Iow, far from raising prices not affecting sales, it would suggest it has. Also, since overall shipments have fallen so far from the worst year of the Great Recession, that even if sales to young adults have risen slightly, it’s certainly not been enough to even slow the bleeding. And, you notice, that Richer says nothing about the 25-39 range that (if they’re employed and feel secure) can afford the kinds of motorcycles where H-D really makes its money…

    But the most interesting part is his claim that Harley’s base welcomes and respects diversity among them. As a woman rider, I’ve had very mixed experiences. Some men were very welcoming to me and other women riders–but they were almost all non-Harley, sport/sport-tourer/dirt riders. I got a cool reception at best from Harley riders (not to mention some rather offensive reactions). Coming to Missouri and riding here was like stepping back 10 years in time. The overwhelming reaction by Harley riders and non-Riders was that it was a personal insult or threat to their masculinity that I rode a Harley. But, frankly, it wasn’t much better if I rode the Honda VFR. But that’s just my personal experience.

  9. Maximus Says:

    Wendy, thanks for that information. My sense is that if H-D (the Motor Co., not it riders/customers) has been more receptive to any specific demographic it’s been due to the expanding role of female riders. The empowerment that comes from moving from the passenger pillion to the rider’s seat has been a smart focus for H-D. Case in point; the “Low” series of bikes. It seems that the female passengers of male H-D riders graduate to these models.

    I’m not in a position to dispute H-D’s assertion that they’re expanding in the younger demographic, but it does not make sense (intuitive and anecdotal). The young male riders I’ve run across over the years fancy far more performance and lower prices than the average Sporty, Dyna, or V-Rod can provide.

    Oh, and for those younger riders that do “graduate” to a heavyweight touring bike, some of H-D’s competitors are offering an interesting value proposition these days (again, more performance, lower price). Tougher roads ahead for the Motor Co.?

  10. wmoon Says:

    H-D has little understanding of what women want in a bike. Great–they have, what?, two low models? Geez, thanks SO much Harley! Sure there’s a lot of women who struggle with taller bikes (though so do a lot of average-sized and shorter men), but, as you say, it’s performance that counts for younger riders–and for women.

    It’s not just performance–it’s style. Look at commercials–find me one with a young rider (or woman rider) and a Harley-style motorcycle. For example the new T-Mobile (iirc) one with the beautiful young woman rider in pink and white leathers (gag) and a pink (gag) sport bike. Ducati in the FedEx cross-promotional, etc.

    Women have fought a very long time to overcome stereotypes that are associated with Harley-Davidson–you know the ones I mean. The kind of woman associated with Harleys in popular culture may be a man’s dream but most women I know aren’t into the bimbo in black leather look…

    And, I’m sure you didn’t mean it this way but plenty of women want to ride far more flexible and high-performance bikes (and heavyweight touring bikes) and not just “graduate” into the low riders. Many of us don’t even want a low rider…besides a low bike scrapes at even a tiny lean–which means you can’t ride it hard.

  11. Dave B Says:

    Hmmmm……We still talking about motorcycles?

  12. Maximus Says:

    You’re right; I didn’t mean it that way. What I saw during my brief in H-D sales was the female half of the rider/client end up on her own H-D. These are the folks that fall into the group mentioned earlier; the dyed in the wool Motor Co. fans that want Milwaukee in their garage. I suspect that MANY times, the females in question would have preferred anything other than a Harley. But, the male part of the team had something to say about that.

  13. wmoon Says:

    Dave, yes, we’re still talking about motorcycles–though you brought a smile to my face–and Maximus, I think you may be right but the thing is about women who ride because their man wants them to ride (and buy a Harley to ride) is that they usually don’t ride much or for long.

    Hmmm….I think I’m going to write about this…

  14. Dave B Says:

    Glad you had a good chuckle.

    As a MSF instructor, I’ve seen too many women take the class because the significant other wants or pushes them to ride. Some are into it but the majority aren’t. And I’ve seen some crashes and injuries because of it. And when the women are counseled out or fail, several times the significant other reads us or them the riot act.

    And if my memory serves me right, the signiicant other usually rode a HD.

  15. wmoon Says:

    Dave, I’ve heard the same story far too often from other instructors and program coordinators. And I know women like that as well…sigh.

  16. Bill Says:

    “Look at Ford and Apple” Chrysler under Iacocca would be a better example.

    “You may also remember that Japan has a very strong “outlaw” image of its own–the bōsōzoku–and doesn’t need the Harley version. They ride sport bikes, btw.”
    Actually, they start on scooters. Just saw some wannabe bozos today. Then, if they do go to true motorcycles and not the big scooter route, some opt for older Kawasaki KZs or something along those lines as its “traditional”. An old Z1 in great shape goes for up to 20K here. For the bozo, the most important aspect of the bike is being able to be heard by endlessly revving the engine.
    Just asked my (Japanese) GF if she believes they are dying out, and she believes they have been in decline.
    Glad to see you’re still writing Wendy. You’re always thought provoking and your work here is appreciated.


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