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
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