S&P downgrades Harley to ‘junk grade,’ cites profitability concerns over new strategy
Harley-Davidson’s new strategy to regain market share with more affordable motorcycles has drawn skepticism from one of Wall Street’s major credit rating agencies. While we don’t usually pay that much attention to credit-rating news, this one stood out for its lack of confidence in Harley’s new Back to Bricks strategy.
According to S&P Global Ratings, the company has been downgraded one notch from BBB- to BB+, moving its long-term credit rating from investment grade to speculative grade, commonly referred to as “junk” status. S&P assigned the company a stable outlook while also lowering ratings on Harley-Davidson’s unsecured debt, financial services subsidiary and medium-term notes.
The downgrade centers on Harley-Davidson’s recently announced “Back to Bricks” strategy, unveiled in May, which shifts the company’s focus toward attracting new riders through lower-priced motorcycles. The plan includes the return of the Sportster lineup and the introduction of a new Sprint model, with entry-level pricing expected to start around $10,000 when the motorcycles reach dealerships beginning in late 2026 and into 2027.
S&P said the strategy could help Harley-Davidson recover market share that has steadily declined in recent years. According to the agency, Harley’s share of U.S. motorcycle registrations fell from approximately 49% in 2019 to about 34.5% in 2025. If the strategy succeeds, S&P estimates the company’s market share could rebound to roughly 45%.
However, the ratings agency questioned whether the lower-price approach will generate sufficient profitability for investors.
In its analysis, S&P said Harley-Davidson appears to be prioritizing market share over per-unit margins, projecting adjusted EBITDA margins of just 5% to 6% in 2026. The agency said it could take several years for margins to approach 10%, well below the more than 16% EBITDA margins the company reported in 2022 and 2023.
S&P also pointed to additional financial headwinds, including restructuring costs tied to workforce reductions and tariff-related expenses. Harley-Davidson has targeted $150 million in annual cost reductions and recorded approximately $15 million in restructuring charges during the first quarter. The agency also noted management expects steel and aluminum tariffs to increase costs by an estimated $75 million to $90 million in 2026, although Harley believes those costs will moderate over time as trade policies evolve.
The strategy is being led by President and CEO Artie Starrs, who took over the company in late 2025. The plan aims to increase motorcycle sales through more accessible pricing while expanding the installed customer base that can generate higher-margin revenue from parts, accessories, apparel and customization.
Despite the downgrade, S&P said Harley-Davidson maintains a strong liquidity position. As of March 31, the company held approximately $1.8 billion in cash and cash equivalents and had access to more than $2 billion through its commercial paper program. The stable outlook reflects the company’s liquidity and relatively conservative leverage profile, according to the ratings agency.
S&P’s assessment differs from other major credit agencies. According to the agency’s report, both Moody’s and Fitch continue to rate Harley-Davidson’s debt within investment-grade territory, although at different levels.
For dealers, the downgrade highlights investor concerns about the profitability of Harley-Davidson’s turnaround plan rather than its financial stability. While expanding the lineup with lower-priced motorcycles could help attract younger and first-time riders, investors and analysts will be watching closely to see whether higher unit sales can offset thinner margins and restore the company’s long-term earnings growth.
