Rough Ride: Harley-Davidson's Falling Stock Price and the Search for Stability
How the Falling Stock Price Is Creating Challenges for Harley-Davidson !
Harley-Davidson quarterly results in November , after which the share price fell significantly. Net income fell about 24 percent to $199 million. The price has currently stabilized at around €27, after being constant at around €31 in the last three months, which has been a common price level in recent years. When the price was at €15 in March 2020, Jochen Zeitz was appointed CEO of Harley-Davidson to take on the task of leading the company back to profitability.
Share price ups and downs under Jochen Zeitz
During Jochen Zeitz's term of office, the share price reached a peak of €45 in October 2022, but then fell slightly again, a trend that lasted until the presentation of the new 2023 models in February 2023. After the presentation, another rally began and the price briefly approached the €45 mark again. But at the end of February 2023, the tide suddenly turned on the stock market and the price fell.
Investor assessment and strategy change: Harley-Davidson's balancing act in a challenging market
And now, as the year draws to a close, it seems as if investors want to take stock of the impact of global layoffs and real estate divestments and other strategy changes, especially if profits don't increase. Harley-Davidson introduced price increases just this spring aimed at improving the company's profitability in a challenging market environment. These price adjustments are a response to rising production costs and the desire to position the brand more strongly as a premium provider in the market. But the market and investor reaction to this strategy is mixed.
Price increases: risk and opportunity for Harley-Davidson
In an uncertain economic environment, higher prices for Harley-Davidson motorcycles deter potential buyers, which could negatively impact sales and market share. On the other hand, these price increases have the potential to strengthen the company’s profit margins and contribute to its financial stability in difficult times.”
Investor perspective: Impact of price increases on Harley-Davidson
Investors are particularly interested in seeing how the price increases affect Harley-Davidson's financial performance. They closely monitor how the company's decisions affect its stock price and long-term competitiveness.
Strategic Realignment: Harley-Davidson's Path to Financial Stability
The price adjustments were one of many strategies Harley-Davidson considered to correct its financial course and position the company for the future. The global layoffs and real estate sale were also part of a broader plan to optimize the company's cost structure and focus on core competencies.
As Harley-Davidson navigates through these changes, questions remain as to how successful these measures will be in improving the company's long-term financial health and creating value for shareholders.
Serial 1 has now been sold to LEV Manufacturing
Harley-Davidson sold its e-bike division to the US company LEV Manufacturing in November 2023. In collaboration with the investment firm Lave VC, the company plans to initially offer the e-bikes on the US market at lower prices. Previously, the Serial 1 e-bikes were sold exclusively through authorized Harley-Davidson dealers, with the dealers only making small margins compared to the general e-bike market.
This made the sale less attractive for them. In addition, this division is not part of Harley-Davidson's core business. It is not yet clear whether the licensed Harley-Davidson logo is included in the package or whether we will only see the Serial 1 logo in the future without the Harley-Davidson logo. It may well be that Harley-Davidson used the funds to buy back its own shares in order to cause a slight turnaround in share price. If investors see the Serial 1 sale as a positive signal, it can create a buying mood in the market.
LiveWire electric motorcycle development and CEO change
At LiveWire, the spun-off company in which Harley-Davidson holds 74% of the shares, the new electric motorcycles only bear the name 'LiveWire designations' and not the Harley-Davidson logo. Surprisingly, however, you can still find components that are somewhat hidden, with the Bar&Shield logo from Harley-Davidson, for example, on the new LiveWire S2 Del Mar. It was only on June 12, 2023 that Jochen Zeitz handed over leadership to Karim Donnez, who has since become the new CEO of LiveWire. So there have been numerous shifts in the Harley-Davidson transmission throughout the year, but next year will show whether they are now in the right gear.
With the new CVO Street Glide and CVO Road Glide models we are already seeing attempts to find new pricing strategies!
The company aims to achieve higher profits through different paint options on the premium models. The CVO Street Glide is available ex works in palladium silver for €45,495. However, if you choose the same model in the more elaborate Whiskey Neat / Raven Metallic paintwork, you will pay an additional price of €7,140. Through this strategy, Harley-Davidson has managed to keep entry costs for the premium class relatively low and has an even higher margin upwards.
Market gap in the low-price segment: Lost opportunities for Harley-Davidson
An ongoing problem is the lack of offerings in the lower price segment, in which the Evolution Sportster models were previously positioned. Not only is the sales of the formerly around 8 models lost, but also the downstream business, such as merchandise, accessories and often also the financial services business. After the Sportster, a transition to the Softail / Cruiser class was often common.
Loss of entry-level models: A setback for Harley-Davidson and customers
Even though these models didn't generate much profit for the company, they made it easier for buyers to get started. Over the years, customers had paid off their models or created reusable value. With these very price-stable models, end consumers hardly suffered any losses, but rather created value that they could bring in when purchasing the next model. This turnover is now missing internationally!
The actual Sportster successors with the 975 and 1250 Revolution Max engines cannot really fill this gap. Since spring, they have no longer been competitive in terms of price, which has currently led to prices being reduced at the end of the year.
The Sportster S is now currently (as of 11/23) starting at €17,245 (spring 2023 / €18,495) and is more likely to be found among former FXDR and V-Rod drivers. The Sportster Nightster now starts at €14,905 (Spring 2023 / €16,095) and the Nightster Special reduced to €15,985 (Spring 2023 / €17,595) The price-performance ratio was not really optimal in the spring, but the market principle of supply and demand seems to be working, even if these are rather unusual actions for the Harley-Davidson brand, but we are currently living in unusual times.
Trade-in campaign: Adjustment of the pricing strategy at Harley-Davidson
The highly sought-after Street Bob was normally available ex works from €19,495 until autumn. A trade-in special campaign ran in our country until September 30th, 2023, in which a trade-in bonus of up to €2,400 was granted on selected models and their current list price is €17,695 ex works.
According to information from Harleysite, this campaign was very successful and many bike owners took advantage of the offer. This suggests that the price range may have been previously set too high. Some Harley-Davidson authorized dealers also followed up with their own campaigns immediately after the campaign, to which Harley-Davidson probably responded itself.
Sale of the 120th Anniversary Collection
The Harley-Davidson CVO Road Glide 120th Anniversary Limited is being hit particularly hard. currently on the official Harley-Davidson website (as of November 26, 2023) ex works, it was only this week that I noticed significantly lower prices at some Harley-Davidson dealers - up to 10,000 ,- € below the list price.
This price reduction could indicate that the original price is perceived as very high even by Harley-Davidson standards, or in order to bring the exclusive special model, limited to 1,500 models, to customers this year. I see the 120th Anniversary CVO as one of the reasons why we won't get any new CVO Limited models in 2024, at least I haven't heard anything about it yet.
The Anniversary paint set from the CVO is really impressive, the elaborate design, with the eagle that runs across the entire machine, is really not an everyday occurrence. But the beautiful red metallic of the other 120th Anniversary models also looks great, especially in the sunlight. There are only a few of the 120th Anniversary models, which are also limited.
Special 120th Anniversary Merchandise Offers for the Open House
The 120th Anniversary Merchandise is intended to move out of storage and make room for the new season. Some Harley-Davidson dealers have already announced special offers with very exceptional discounts the open house in December
Introducing new products in January may not have been the best decision
In the past, the new models were often presented for the first time at Lake Faaker See, whereupon many customers decided directly and promptly signed contracts for the new models. Delivery usually took place on time for the new season. Not only that, but often conversions had already been completed. This also affects suppliers, such as manufacturers of exhaust systems, who first need the vehicles for measurements and tuning before they can begin production. Business is being postponed or not taking place at all.
If you only have around 4 months to sell an anniversary model, for example, time is running out. If the customer could have taken a look at them in 2022, the desire might be a little more intense, especially if the matching merchandise is already sold in the Christmas business and is under the Christmas tree.
They completely missed that last year, now the price level of the 120th Anniversary Portfolio is completely heading towards the bargain market. We haven't had that before, so some people will be happy to be able to get a bargain now.
What are the Harley-Davidson prospects for 2024?
After the leak of the CVO models in the spring, access to information is now more difficult. The leak caused a lot of confusion at the manufacturer; the really bad photos of the leaked CVO models, which particularly affected the CVO Road Glide, got the community excited. It is not confirmed, but from what we hear, the presentation of the CVO models has been significantly advanced in order to establish facts.
New design and engine innovations: Harley-Davidson's outlook for 2024
Nevertheless, some details about the 2024 model year are already known, for example Harley-Davidson has ushered in a new era with the new design and the new 121ci VVT engine. It is very likely that we will see elements of this again in the Street Glide Special 2024 and Road Glide Special 2024 .
Unclear details, clear priorities: focus on high-selling models in 2024
However, the details of whether the Skyline OS infotainment will be adopted and how the implementation around the engine will take place are still open. The focus in 2024 will be on these two important and high-revenue models; they will play a key role in 2024.
Strategic direction and investor confidence: challenges for Zeitz in the transition to 2024
It seems unlikely that the large Limited models will see any changes other than the paint kits in 2024, otherwise they wouldn't have released the 120th Anniversary CVO Harley-Davidson Road Glide Limited this year. It is the most expensive limited special model in the Harley-Davidson range to date.
Harley-Davidson will focus on the Grand America Tourer Special versions, and if these are well received by customers, the financial result will be positively influenced, but only in 2024. So it is clear that it will not be an easy turn of the year for Jochen Zeitz , if he now loses the trust of investors and the price continues to fall.
Long-Term Prospects: LiveWire's Role in Harley-Davidson's Electric Strategy for 2024
In the long term, it could make sense to stick with LiveWire , because it is already foreseeable that registering an internal combustion engine could become problematic in 12 years at the latest, unless a political change would prevent this. But a LiveWire is not a Harley-Davidson LiveWire , so it is no longer a real topic on the Harley site; it is reserved for the Harley-Davidson LiveWire, of which there are still a few models. LiveWire has announced that the S2 Del Mar will be delivered in Germany in quarter 01/2024, which ultimately means that the electrical division will generate revenue in 2024.
Critical months for the CEO: Persuasion without revealing the 2024 model strategy?
Conclusion: It will be a tough few months for the CEO; the question will be whether he can convince investors again without revealing the model strategy for 2024. It would probably be better for him and especially the European market at the moment if he could pull this ace in November and the new models could be presented directly to local dealers and customers in January / February.
Text & image credits: Harley-Davidson & Harleysite
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