CHICAGO (Reuters) – Harley-Davidson Inc ( HOG.N ) invests in electric motorcycles to attract the next generation of younger and more environmentally conscious cyclists to reverse declining US sales.
Harley-Davidson's new electric motorcycle, LiveWire, is shown in this award photo published by Harley-Davidson. Harley-Davidson Motor Company / Handout via REUTERS
But when Harley sends its first "LiveWire" bikes ̵[ads1]1; priced at $ 29,799 – to dealers, there is little evidence that the 116-year-old brand is catching up with new youngsters customers.
The problem lies most in the price of this “super-premium” product. The bike costs almost as much as a Tesla Model 3, and aims at a market that doesn't really exist: young, "green" and wealthy first-time bikers.
The elegant sports bike has been available for pre-order in the United States since January. However, the bulk of the orders come from existing and old riders, according to interviews with 40 of the 150 dealers nationwide who carry the bike this year.
Dealers Reuters spoke to account for just over a quarter of LiveWire dealers and are spread across Wisconsin, Illinois, Indiana, Ohio, Michigan, California, Nevada, New Jersey and New York.
For years, Harley has failed to increase sales in the United States, and the top market accounted for more than half of motorcycles sold. As the tattooed, baby-boomer base ages, the Milwaukee-based company is finding it challenging to ask for new customers.
In 2018, Harley had the steepest sales decline in four years in the United States. U.S. sales fall again this year.
(Graphic overview of Harley's US retail sales: here)
The share price of heavy motorcycle has fallen by 42% over the last five years. In comparison, the S&P 500 index has. SPP received 47%.
When CEO Matt Levatich announced the launch of LiveWire last year, his hope was that it was easy to ride motorcycles without gears or clutch that would help attract young and environmentally conscious city riders.
In an interview with Reuters in February 2018, Levatich said the bike would help solve Harley's demographic problem.
"It's more about the next century than the last century," he said at the time.
The pre-orders, so far, have defied those hopes, according to the dealers.
"It's appealing to a demographic that's already riding," said Gennaro Sepe, sales manager at a Harley dealership in Chicago. His shop has received four pre-orders for the bike. All of them are from existing riders.
Harley declined to comment on LiveWire advance bookings.
The motorcycle manufacturer is not the only company investing in battery-powered transportation.
Tighter emissions regulations in Europe, China and the United States are forcing car companies to switch to electrified models. A survey of US Millennial Motorcyclists, published in February by the Motorcycle Industry Council, found 69% of cyclists interested in electric motorcycles.
Harley's dealers said they are getting inquiries from young customers, but are struggling to sell them for sale. One important reason: LiveWire's retail price.
"Interest is very high," said a sales manager in a New Jersey-based dealership, who declined to be named because he did not have permission to speak to the media. "But once you get prices, interest is thrown out the window."
Over half of young students in America, who Harley rides for battery-powered bikes, are college student salts that involve an average repayment of $ 200. at $ 300 per month.
Harley also offers no discounts or incentives to push sales, the dealers said.
In an interview with CNBC TV in May, Levatich called LiveWire "one of the best designed products on the market" and said it was worth the price.
Gary Jon Prough, general sales manager at a dealership in Countryside, Illinois, said that the vast majority of millennials can't afford the bike, as LiveWire targets young and wealthy customers with revenues over $ 100,000 a year.
TESLA & # 39; S WAY
To increase sales, Prough and other dealers expect Harley to go to Tesla Inc ( TSLA.O ): launch less expensive battery-powered cars after creating a buzz with premium model.
Tesla's first electric car cost over $ 100,000, but prices fell with subsequent models. Model 3 now comes with a base price of $ 35,000 and helped lift vehicle deliveries to a record level in the last quarter.
Traditional Harley Davidson establishment bikes cost about $ 6,900.
The motorcycle manufacturer plans to produce another four electrified models in the mid-power, low-power, e-bikes and children's two-wheeler segments by 2022.
But unlike Tesla, Harley does not enjoy true first-mover advantage.
California-based Zero Motorcycles already sells electric bikes in the United States with retail prices ranging from $ 8,500 to $ 21,000. The ultimate bike – SR / F – is similar to LiveWire, but costs almost $ 9,000 less.
Bob Clark, a dealer for Zero's Chicago bikes, says he has not yet sold an SR / F to riders under the age of 35. All three electric bikes he sold to young riders this year were in the $ 10,000 price range.
"Young riders are environmentally conscious but are also very price sensitive," Clark said.
It's not just prices. LiveWire's limited selection also hinders sales.
The bike can travel 235 km in the city or 95 miles in combined city and highway riding per charge. A regular household outlet can provide a nightly charge, while Level 3 high-speed chargers stationed at Harley dealers will fully charge the bike in 60 minutes.
This makes LiveWire less effective for long trips, and limits the appeal among riders who prefer touring.
Seven Harley dealers told Reuters that they have not even bothered to order the bike, which would require investment in a Level 3 charging station and staff training.
An Ohio-based dealer, who originally signed up for LiveWire, said he was retiring at the last minute, as he wasn't sure of the bike's demand in his area.
A delay in LiveWire's arrival in stores has left dealers in the Midwest and East Coast with barely a month to aggressively push the bike before the snow season begins. Winter generally means a break for motorcycle sales.
When dealers started taking pre-orders, delivery was expected in August, but was later moved to September. On September 30, dealers waited for Reuters to still talk to the first bike.
In a Twitter post on October 2, Harley said the bikes are starting to arrive at authorized dealers. The tweet also had a photo of the first LiveWire "rolled off the line" in York, Pennsylvania, in late September.
With demand quite limited, dealers said, Harley has decided to keep supplies tight to protect the bike's brand value and prevent any price-reducing pressure. The dealers said they all expect to receive less than 10 LiveWires this year.
James Hardiman, a Wedbush Securities analyst, estimates that Harley would sell between 400 and 1600 LiveWires in the first year. That's not even 1% of the 228,051 bicycles it sold worldwide last year.
"This will largely be a rounding error absolutely this year and even next year," Hardiman said.
Reporting by Rajesh Kumar Singh in Chicago; Editing by Caroline Stauffer and Matthew Lewis