Harley-Davidson Second Quarter Profits Tumble 19% Amid Ongoing Sales Slump

By Kali Kotoski

July 23, 2019—Shoehorned by international tariffs and declining demand in the United States market, Harley-Davidson sales continued to struggle in the second quarter despite the company boasting a record high of 3 million American riders and an aggressive pivot into fledgling Asian markets.

The Motor Company on Tuesday said that it delivered nearly 69,000 motorcycles for the quarter, a 5 percent decline compared to the same period last year. Overall sales including motorcycles, parts and merchandise fell 6 percent to $1.4 billion.

Worldwide retail sales decreased 8.4 percent in the second quarter, while U.S. and European Union sales dropped 8 percent and 12.5 percent, respectively.

Profits, although better than expected by Wall Street, eroded by 19 percent to $195.6 million last quarter despite the company attempting to trim costs by shifting some manufacturing to Thailand, where it is partially sheltered from tariffs in Asian markets.

The company said it recently received the necessary regulatory approval to ship Thailand-built motorcycles to the European Union, which will also reduce the tariffs Harley has to pay compared to manufacturing in the U.S. But this approval process took “considerably longer” than expected, the company said in its earnings statement.

Compounding the regulatory hurdles was a weaker-than-expected demand in Europe that ate into the company’s forecast, resulting in Harley slashing its expected shipments globally this year to between 212,000 to 217,000. In April, Harley said it expected to deliver between 217,000 to 222,000 bikes in 2019.

That forecast is significantly less than the one it gave early last year, which predicted 2019 deliveries to amount to 231,000 to 236,000 bikes for this year.

Moving some manufacturing to Thailand, however, has yielded positive results for sales in Southeast Asia which rose 77 percent in the second quarter.

“The decisions and investments we’re making, within a highly dynamic and competitive global marketplace, demonstrate our intense focus to build the next generation of riders and maximize shareholder value,” said Harley CEO Matt Levatich.

As part of the company’s 2027 More Roads to Harley-Davidson strategic growth plan, the company envisions building 2 million new riders in the U.S., growing international business to 50 percent of annual volume, and launching 100 new high impact motorcycles while doing so profitably and sustainably.

The company claimed that since 2001 ridership in the U.S. has been up every year, with an estimated 3 million U.S. riders in 2018.

“There are more riders on Harleys in the U.S. than at any point in our history, and the number of young riders continues to grow.  The strength of the Harley-Davidson brand, and bare-knuckle grit of this company and our global dealers, will continue to be leveraged and sharpened to make riding matter to more people,” said Levatich.

Other notable second-quarter developments include Harley’s announcement of a collaboration with China’s Qianjiang Motorcycle Company Limited to launch a smaller, more accessible 338cc motorcycle for China in 2020 with additional Asian markets to follow.

The company said it is on track for a late September delivery of its $30,000 all-electric LiveWire to 150 U.S. dealers and an additional 100 dealers in international markets. Analysts have predicted that up to 50 percent of initial LiveWire allocations currently have customer deposits on them.

“Dealers are installing public DC fast-charging stations and the company is working with global partners to support charging infrastructure development,” Harley said.

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