Harley dealers turn to discounts

Milwaukee Journal Sentinel ^ | June 25, 2007 | RICK BARRETT

[BraveMan]

Harley-Davidson motorcycle dealers who have charged premium prices for bikes are easing back on the throttle as sales slow and customers wait for Harley's 2008 product lineup that's being announced in July.

American consumers are spending less in certain areas, including motorcycles, boats and all-terrain vehicles, Craig Kennison, a Robert W. Baird & Co. analyst, said Monday.

To assess current trends, Kennison recently surveyed 40 Harley dealers in the U.S. and Canada.

What he found was retail demand was weaker than expected. More bikes were selling below the manufacturer's suggested retail price, and dealers were discounting 2007 models to clear them out before the 2008 models arrive.

Among the surveyed dealers, sales were soft in April but improved in May and June. Nearly half of the dealers said new bike sales were flat (11%) or down (38%) April through June.

Some dealers are worried that the supply of Harleys is outpacing the demand, creating unhealthy competition among dealers, Kennison wrote in a report issued Monday.

"There is plenty of business for everyone. Unfortunately, many dealers have started discounting," one survey respondent wrote in Kennison's report.

For years, many motorcycle dealerships charged more than the manufacturer's suggested retail price for popular Harley models such as Softails and Road Kings. Some bikes were in such short supply that if one customer walked away, another would pay a premium to avoid waiting months for a new motorcycle.

But those days may largely be gone as many potential Harley riders refuse to pay over the manufacturer's suggested retail price for a motorcycle. In one survey, by Harley-Davidson, more than 80% of the people interested in owning a Harley said that having to pay more than the MSRP was a reason they would not buy a bike.

A buyer's market

Some Harley shoppers no longer have the patience for waiting lists, either. That's especially true for first-time buyers, who make up about 50% of the company's customers.

Higher dealer inventories give buyers more pricing leverage.

It's normal for Harley dealers to discount year-end motorcycles. Fifty-three percent of the dealers Kennison surveyed said new bikes were selling below the manufacturer's suggested retail price, up from 27% in March.

Dealers have stepped up promotions that include discounts, rebates and 2.99%-interest financing.

A supply glut could force Harley to reduce motorcycle production, a move that would hurt the company's earnings.

Kennison said a production cut could reduce Harley's 2008 earnings-per-share from his current expectation of $4.64 to between $4.20 and $4.40.

But high inventory levels, coupled with higher interest rates, could be bad chemistry for the dealers.

"Almost anything that's financed now has been suffering from rising interest rates. I personally wonder to what extent the subprime credit issues are affecting some Harley buyers," Kennison said.

Speculation about what bikes Harley will introduce for 2008, or model makeovers, is already in full swing.

Some possibilities include a V-Rod touring bike, a chopper-style motorcycle, a sport bike or three-wheeler, according to the dealers in Kennison's survey.

Harley recently filed for a patent for a three-wheeled motorcycle similar to the Bombardier Spyder.

The Bombardier trike has two wheels in the front and one in the back.

Some industry watchers have speculated that Harley might be interested in acquiring Ducati, an Italian motorcycle manufacturer.

Twenty-nine percent of the dealers in Kennison's survey said they would support such a move.

The average age of a Ducati buyer is 35, which is slightly more than 10 years younger than the average Harley buyer.

Last Friday, rumors surfaced on various Web sites that Honda Motor Co. was interested in acquiring Harley, boosting shares of the Milwaukee company but hardly having any impact on Honda's share price.

Monday, a Honda spokesman said the rumors were unfounded and that Honda was not negotiating to buy Harley.

A merger between Harley and Honda would be highly unlikely for regulatory reasons, since combined the two companies would capture 65% of the heavyweight motorcycle market.

In addition, a merger might spur a backlash by U.S. buyers upset about Harley being owned by a Japanese company, said Edward Aaron, analyst with RBC Capital Markets, in Boston.

Harley shares fell 3% Monday to close at $60.64.

[JDoutrider]

Harley made a BIG investment with Porsche on that Vrod motor... That investment is going to be showing up in the coming years (2010 is when those enviromental rules will force Harley to cut emmisions by HALF!) They will be finally forced to make their motors water cooled!

Those duel cam motors their foisting on the RUB crowd today are nothing short of a rip off!

Even Harley Davidson is saying the tappets are only good for

30K miles! And, by 2010 there will be no more push rod motors made!

Most motorheads in the know are getting rich changing the chain drive on those cams to gear drives...! It's a shame a guy buys a $20,000.00 motorcycle that may last only 40-50K! IF that cam chain takes a dump, you will be money ahead by just buying a new motor...that "dump" will seize a motor right quick!

If you check prices at the local HD Dealership, you'll see they have raised prices on new oil pumps as well! Seems the pumps in all those new 92 inchers is a piece of clinton as well!

But my Evo just keeps on hummin down the boulevard...

[BraveMan]

The prices of the Jukeboxes, Popcorn Poppers, Wine Cooler Fridges & Dart Boards keep going up, so they must be talking about the motorcycles.

[postaldave]

“Why is it that Ducati can build essentially the same style motor for over thirty years and everybody hails it as a positive thing, yet when HD sticks with the V-Twin they’re considered by the detractors as ‘stone-age’”

that one is EASY, ducati can WIN a race with their engine. it’s not just their engine that keeps improving, ducati improves their frame and shocks and everything else. you really want to compare a harley to a ducati? granted harley has made some improvements but in the end everything but the vrod is still in stuck in the 50s.

[Poser]

I’ve got a Y2K Electra-Glide that’s getting up in mileage. I’m not planning on buying another HD soon because the MSRP is too high.

I’m looking for a V-Strom 1000 with a few farkles and will keep the E-Glide for longer trips.

[doorgunner69]

Why is it that Ducati can build essentially the same style motor for over thirty years and everybody hails it as a positive thing, yet when HD sticks with the V-Twin they're considered by the detractors as 'stone-age'?

Could it be that Ducati produces about three times the power for similar displacements?

And saying the are the same style motor is bogus. Like saying a 50's Pontiac V-8 is the same style as a Formula 1 Cosworth V-8. Ducati has evolved, HD is mired in "tradition", not entirely their fault.

[BraveMan]

The Motor Company's version of the Monster:

[StarfireIV]

Did you see that youtube video about the guy who crashed his $39,000.00 dresser. It looked like he sort of forgot that there is a reason the term “highway pegs” is kind of self-explanatory.

[zipper]

Why is it that Ducati can build essentially the same style motor for over thirty years and everybody hails it as a positive thing, yet when HD sticks with the V-Twin they're considered by the detractors as 'stone-age'? Is it simply their success on the racetrack in their own specialized class?

Because IT IS a positive thing. So is desmodromic valve actuation. But Ducati also builds fours -- who's leading MotoGP right now? Who builds the only MotoGP bike that goes over 200 mph at the track (not an L-twin, it's a four-cylinder)? Who has won most of the World Superbike titles for the last 15 years (with L-twins)?

Racing is everything in the world of performance machines -- racing improves the breed. And it spills over into other bikes too -- witness the Hypermotard, ST4, Monster, the retro Paul Smart replica, et. al.

[woofie]

[StarfireIV]

Is that real, or is it a mock up. It’s not a bad looker as compared to the overstretched, overpriced, trailer queens these days.

[BraveMan]

If I understand the responses correctly, the appeal of the Ducatis rests primarily on their racetrack prowess and their high horsepower levels (for the sake of argument we’ll gloss over the subjective Italian exotica appeal for the moment).

This being the case (and correct me if I am wrong), how exactly does does this translate into being a better motorcycle for use on the street where speed limits are ubiquitous and haybales & gravel runoffs noticeably absent?

The compromises in design that make a motorcycle excel on the racetrack also detract from it’s performance in the real world we live in. Highly stressed, high horsepower engines require higher maintenance, suffer less longevity and get poorer mileage. Tractability is sacrificed for higher output. Exceptionally powerful braking systems suited for the racetrack become a dangerous liability in the street where sand, oil, mottled pavement and greasy intersections limit the transfer of that single finger squeeze braking to the ground. The “pin you in place” ergonomics so well suited for the thrust and parry out on the circuit translate into agonizing discomfort after a mere 100 miles on the street. Rapier quick steering suited for the road course morphs into fatigue inducing nervousness and twitchiness out on the highways of Wide America. Because nobody ever carries anything with them on the racetrack, the street legal counterparts require you to use a backpack should you need to carry anything that won’t fit in your shirt pocket.

Buying (and living with) a street motorcycle solely on the basis of it's racetrack counterpart's performance seems, to me anyway, yet another definition of poseurism. GP boy-racer wannabees deriding Harley riders as posers seems awfully myopic and dripping in irony.

If you are fortunate to be able to have more than one ride in your stable, then I can understand the desire for such specialization and the compromises that go with it. After all, you're not stuck riding the same animal all the time. Or, if the only riding you do is bonzai runs down the nearest twisty road, having a motorcycle specially suited for the activity makes sense. However, when the importance shifts from the machine to the ride itself, you begin to look at things differently. The gee whiz technocracy begins to lose it's appeal, especially when forced to live with all 'great' racing attributes so ill suited for the street.

. . .

[MarkL]

Many of the Ducatis happen to be amazingly well balanced motorcycles. Due to their design, they are extremely tractable and have lots of torque at low RPM, compared to most 4 cylinders, especially the high strung repli-racers.

Having ridden a number of different Ducatis over the years, they handle beautifully, seemingly combining power, braking, a certain level of “nimble-ness” while keeping a level of stability that inspires confidence (with the exception of very low speeds, Ducatis are known for a lack of steering lock, which seems to be a cause of most dropped bikes at less than 5 mph). The design combination makes for an extremely fun ride, even if you’re NOT exceeding the speed limit (by much! :-) )

And then there’s the sound... a 90 degree V twin (referred to as an “L Twin” due to the “lay-down” position of the front cylinder) makes for a really amazing sound. When you open it up, it sounds remarkably like a big V-8! And then there’s the styling.

Mark

[doorgunner69]

For brevity: no one rides at 100% on the street, the object is pleasure in controlling a superbly designed machine, so you comment "Highly stressed, high horsepower engines require higher maintenance, suffer less longevity and get poorer mileage." is bogus. The choice is sort of, do you want to drive a 50's DeSoto, or a '06 Z06 Corvette? Both get you down the road, which is more fun? One is track capable, one is not, does not make either one unsuitable on the street.

I know HD is not all that bad. I wait to see if the XR1200 Sportster is going to be made. My sportbike days are over, but I still want a nimble machine and one that actually performs like a motorcycle should.

[Dinsdale]

Baby boomers are getting old.

Simple as that.

Invest in adult diaper companies not motorcycles.

[BraveMan]

Thank you for your reasoned response. My attraction to the latest crop of Ducatis is on a more visceral level, never having ridden one. To me, they're so different, so Italian.

I can appreciate the unique engine design more because it's years of service give it a pedigree that appeals to me. The quality and workmanship found in the marque elevate the bikes to rolling works of art IMHO, a quality inherent in certain motorcycles that is sadly lost to many posters on this forum.

You've helped answer the one thing I've always wondered, are they the Real Deal? Is there substance behind the style? Can you actually live with them or are they simply interesting diversions for jaded magazine editors, filled with annoying characteristics waiting to pop up when the infatuation subsides? It's almost impossible to determine a motorcycle's true character from a short demo ride.

I'd love to have one (probably a Hypermotard) at my beck and call, though my desire to stay out of divorce court prevents me from purchasing one (for now).

[MarkL]

I know exactly what you mean... I wanted a Ducati since I saw a Mike Hailwood Replica back in the early 1980s. I love the way they look, the way they sound, and the way you feel riding it.

I agree with you regarding the mechanical aspects: Although technology has given us valve springs capable of very high RPM operation, the "cool factor" of the desmo valve train was just one of the things that drew me into it.

The fact that you've got a big twin that can rev up to more than 8500 rpm is another cool thing. And the sound of the dry clutch is yet another thing that adds to the viceral "fun factor."

There are different levels of "sport" in the bikes... The 916 series may be one of the most beautiful bikes ever made, and one of the best performing, but frankly I just don't fit on the things. The 999 and 1098 might be better, but then I'm perfectly happy on my 1996 900 Supersport. I'd love a Monster, or an ST2, and the Elephants were a blast to ride.

Mark

[MarkL]

BTW, get to know your Ducati dealer, and try getting a test ride.

I belive that Ducati now offers test rides, but when I was shopping for a bike, they didn’t. However, my dealer asked me if I had ever ridden a Ducati, I said, no, and he threw me the keys to his personal Elephant! Every Ducati dealer I’ve ever met has been top notch, and a terrific guy.

Mark

[postaldave]

that was a wonderful response but i think you might have missed the point.

the question posed was “what is different about harley then ducati being they are doing the same thing, via building the same engine they have always built.”

that is simple not true.

first:
the simple fact still remains that ducati is putting out more horsepower today then harley does and ducati is doing it with a smaller engine.
ducati 1098
http://www.popularmechanics.com/blogs/automotive_news/4202699.html
harley softail

that is 50% less engine putting out twice the horsepower of a stock HD.

second: ducati wins races, the only point of this is that THEIR improvements do in fact work. harley ONLY does well in ama drag racing with and that is with the V-rod, not their air cooled engines. i love my 1972 BMW with an air cooled engine but that was built almost 40 years agao.

i wasn’t saying harley sucks or this is better then that. i was pointing out that to compare prehistoric design of the air cooled engine by harley to a modern ducati engine is ignorant at best.

[Melas]

The choice is sort of, do you want to drive a 50's DeSoto, or a '06 Z06 Corvette?

Excellent analogy and one that sport bike guys don't get. I don't like sports cars, never have. Speed is simply not my thing. My car of choice (mileage aside) would be something along the lines of a '73 Lincoln Town Car or maybe something modern like an Escalade.

[doorgunner69]

I don't like sports cars, never have. Speed is simply not my thing.

Have to admit to being a recovering (with many lapses) speed addict. Partly why, if I get another bike, it will not be a sportbike, but one that I can enjoy at "somewhat sane" velocities. Used to love borrowing my buddie's old XLCH in the 60's, and hope HD comes up with a modern sport version without the ridiculous 16' back tire and decent fork/brakes. Not for speed, just so I do not feel like riding a fashion statement, an honest motorcycle like the old XLCH.