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Analysts agree, Harley launch didn’t disappoint

Analysts Tim Conder of Wells Fargo Securities and Gerrick Johnson of BMO Capital Markets were among those in attendance at the Harley-Davidson dealer meeting in Denver, where the 2014 model lineup was launched Monday.

And with three of eight bikes in the H-D touring lineup now getting a “twin cooled” engine, dealers on site provided feedback to the two that rated the unveiling as a success in the wake of Indian’s relaunch earlier this month.

Conder, in a research note provided to Powersports Business, writes that the “product introduction did not disappoint. … Project Rushmore should solidify Harley’s dominance in the Touring category and significantly drive MY2014 product mix and pricing (+3.5% yr/yr). New engine should help counter new competitive threats from Indian. Redesigned Fat Bob and Sportster enhancements were also introduced. Supporting our existing view … management expressed confidence that new products and easy comps will drive 2H13 retail sales. …

“HOG continues to execute outreach customer growth. Since embarking on expanding beyond its core customer of 35-74 year old Caucasian males (‘old white guys’), Harley has been a heavy weight industry leader growing and gaining market share in each of the following outreach segments (2008-2012):

Young Adults +13.7pts
African-American +13.5pts
Women +12.4pts
Hispanic +11.3pts.”

Living up to the hype

Meanwhile, Gerrick Johnson of BMO Capital Markets writes that “the new lineup lived up to a prelaunch dealer buzz and growing investor excitement. But more important, we believe the new models will give a strong boost to an ongoing replacement cycle and energize HOG’s retail sales for the remainder of calendar 2013 and into 2014.”

Johnson reports that “dealer expectations were high for a transformative new lineup with some radically different designs. Management had been, leading up to the event, uncharacteristically giddy about this new launch. Investor expectations were growing, but still somewhat uncertain as to what would be revealed. We do not think any of these three parties left the event disappointed.”

Johnson is high on the RUSHMORE project, noting that “Touring represents about 40% of HOG’s volume and close to half its profit. These new bikes are packed with new rider-friendly features, upgrades, and incorporate new design cues, like the first redesign of the front-end fairing in almost 20 years. We think these new models really look sharp.”

With owners of Harley-Davidson motorcycles typically replacing their bikes once every four to five years, “that’s been pushed out this time around, and a lot of guys that are sitting on old Street Glides or Road Kings now have a great reason to replace their old bike with a new one. Whereas one may not have been able to tell the difference between a 2012 model and a 2013 model, for 2014 riders will be able to notice right away who’s sitting on the new bikes and who isn’t.”

Some outtakes from Johnson’s report:

-He calculates the new motorcycles’ average unit price increase of 3.7 percent, the biggest price increase by Harley-Davidson since the economic downturn.

-HOG positions its twin cooled bikes “as choice, but seems intent on growing the liquid cooled presence over time, just as it did many years ago when direct fuel injecting slowly replaced carbureted engines. All the touring bikes sold in international markets, where liquid cooling is much more accepted, will incorporate twin cooling, which includes the Road King and Street Glide models, as well as the Electra Glide Ultra Classic.”

-“Based on the dealer reaction, as well as our own view of the bikes, we think HOG nailed it [with Project RUSHMORE]. … Most dealers seem pleasantly surprised at the company’s ability to incorporate partial liquid cooling without adversely impacting the styling of the bikes.”


-“Some of the biggest applause at the dealer presentation was actually around enhanced rider ergonomics and convenience. More conveniently located and intuitive switches, toggles and hand controls are easier and less complicated to use, meaning the rider’s eyes are on the road and their hands are on the handlebars more often. New ‘one touch’ saddle bags and storage units have been redesigned to be easier to use and access, requiring only one hand to open and close, a vast improvement for touring riders.”

-Regarding the Indian 2014 lineup, “many HOG dealers appear to welcome the competition, believing that bringing more attention to the American cruiser market can only help them. While investors like to debate Harley vs. Polaris/Indian, we think both can be winners, while the losers look to be, once again, the Big Four Japanese brands, Honda, Yamaha, Kawasaki and Suzuki, who have offered limited innovation in the heavyweight cruiser/touring market.

“With this double-punch of American innovation, we wonder if the Japanese competition will finally start to use the weak yen as a pricing weapon. Unable to compete in the heavyweight market with Harley or Polaris on the merits of their bikes, the Big Four may finally turn to an aggressive pricing strategy to undercut the American competitors in an effort to maintain their market share.”

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