Jul. 12, 2010 – Significant changes pay off

For 60 years, Russian motorcycle manufacturer Ural was closed to the western world because of the country’s communist rule. Located near the Ural Mountain range, the facility was the largest motorcycle factory in Europe, producing about 130,000 units annually in addition to other goods.

Because of the closed borders, Ural motorcycles were one of the Russian citizens’ only inexpensive modes of transportation, thus the company dominated the market. That all came to a crashing halt in the early 1990s as the fall of the communists and the change in government allowed inexpensive foreign cars into the marketplace.

The crash was so sudden and so severe — 98 percent decrease in mere months — that it makes the industry’s U.S. 2009 new unit sales downturn of 37 percent seem ho-hum.

Since that devastating downturn, Ural Motorcycles has fought back to remain a presence, albeit a smaller one, in the industry thanks to its on- and off-road applications, low price points and internal engineering. All are characteristics that have intrigued a younger buyer, resulting in retail sales that have increased this year by more than 40 percent.

Playing catch up

It wasn’t until Ural went through a management buyout in 2000 that it started making significant headway beyond Russia. North American and European consumers’ interest was beginning to grow in the brand, but the manufacturer had to boost its quality.

“From the early ’90s when all the borders opened, there was an interest from the West, something unique, mystique from behind the Iron Curtain,” said Madina Merzhoeva, marketing director of Ural. “Because the factory was so huge and closed to the world for many, many years, the progress was non-existent in terms of the quality of motorcycles.”

To accelerate the progress of the company’s international venture, the new management team established communication channels between the end users in the West and the factory.

“They went to the events and rallies where people were riding Urals,” said Merzhoeva. “(Management) also approached online forums, and this was early 2000s, when the online communications was just being born. In that sense, Ural was one of the pioneers of online communications with their consumers.”

The company then began restructuring the factory to make it more efficient, which included downsizing it, says Merzhoeva.

“That’s when the major changes of the product started taking place,” she said. “The first shipments into the U.S. that took place in 2003 were incredible. The 2003 Urals were light years away from 2000. The 2010 Urals are light years away from 2007 Urals. This transformation was amazing in such a short period of time.”

Along with the new models came a whole new customer client.

“There’s a new consumer emerging that’s completely different than the traditional Baby Boomers who’ve been feeding the overall motorcycle sales,” said Merzhoeva. “The new ones don’t go that much to motorcycle shows. They read everything online, on Facebook. It’s a completely different layer than the traditional motorcycle buyers.”

The environmental, budget-conscious demographic is looking for something practical, functional, but unique, comments Merzhoeva.

And that’s where the Urals fit in.

The bikes

Although the bikes look similar to the Urals built in the past 60 years, “internally, it’s a different animal,” said Merzhoeva. “It’s a modern bike.”

The Urals have parts from many different major manufacturers, including Japanese carburetors, Italian controls and gearboxes that would be found on KTM or BMW bikes, says Merzhoeva.

“We dig into the same parts bins as the other manufacturers,” she said. “The design is still very simple and functional. It allows people to work on the bikes themselves if they’re inclined to do so. It’s straightforward in terms of servicing.”

Much of the bike, however, is still manufactured in Russia. There’s no plastic on the Urals, and all the metal continues to be manufactured in the original facility, notes Merzhoeva.

Finalized just a few months ago, a couple of the latest models the manufacturer introduced were its ST (MSRP: $6,999) and Ural T (MSRP: $9,999) motorcycles, which are lower price point models, says Merzhoeva.

The main attraction to these bikes is their versatility. They’re both on- and off-road capable. “They have all the core values of the Ural brand, off-road and on-road, dual-sport application, but they’re dressed down,” noted Merzhoeva. “We removed all the bells and whistles, so they could have a lower price point but maintain the Ural quality.”

The ST, which is expected to arrive later this month, is already sold out for the first six months. Merzhoeva says they’re selling into September. “We’re ahead of last year already, but we’re trying to get as close to 2008 as possible,” she said. “For the first five months of the year (January-May), Ural retail sales are up 41 percent from 2009.

“Our inventory is down, the demand is picking up steadily. There’s a healthy balance between inventory and the retail sales.”

Dealer expansion

Being that Ural customers tend to be savvy and informed prior to visiting a dealership, Ural’s dealers are very in touch with their customers, says Merzhoeva.

Ural has had a lot of success in the Northeast and Midwest, but they’re looking to expand into other prominent areas, including New York, Dallas, San Francisco and Cleveland.

“We still have a lot of major metropolitan dealers that aren’t covered, so we’re focused on covering those areas,” Merzhoeva said. “Quite often people drive 200-300 miles to get to a dealership. We’re looking for dealers in the major areas. We don’t want an enormous dealer network, but a smaller, more efficient one.”

One important value Ural carries is reasonable dealer inventory. “We aren’t going to stuff dealers with inventory that they can’t afford,” Merzhoeva added. “We have small inventory requirements, two motorcycles initially, which is between $20,000-$25,000. Get two bikes on the floor and take care of your customers. We don’t offer financing. All our dealers pay cash for the motorcycles. It keeps things healthy from an inventory standpoint.”

The company has dealers all over the world, including the United States, Canada, Australia, Japan and Europe.

“North America is No.1 market in terms of volume, then it’s Europe, then it’s Australia and Japan,” said Merzhoeva. “North America is slightly over half of our sales.” psb