Harley-Davidson is in trouble, and has been for some time. Young people in America don’t want the big, heavy motorcycles that are Harley’s main business, and President Trump’s trade war has been nigh disastrous. So it increasingly has turned to Asia. Pretty soon, the company hopes, selling bikes abroad will be its biggest market.
Harley’s in a weird spot. But like how Buick sells a ton of cars in China but is trying to get over its image as a has-been here in the U.S., Harley has found that its image overseas has much greater upside than here. What’s interesting about that strategy, is that Harley is growing in Asia and other markets by selling lighter-weight motorcycles, which is the same strategy that Honda, Kawasaki, Yamaha, and Suzuki used to nearly break Harley itself when they entered the American market in the ‘60s and ‘70s.
Now, according to The Wall Street Journal, Harley is partnering with Qianjiang Motorcycle, a Chinese company—backed by Geely, owner of Volvo—to produce a light motorcycle, with a goal to sell half its motorcycles overseas by 2027. Harley already has plants in Brazil, India, Australia, and Thailand, and said last year that it would be closing its operations at its plant in Kansas City.
Harley said Wednesday that the new bike will be manufactured by Qianjiang Motorcycle Co. and have an engine displacement of 338 cubic centimeters. Most motorcycles sold in the U.S. have engines of 601 cubic centimeters or more, according to Harley.
The new offering will be the only Harley-branded bike not made at its own facilities. The Milwaukee-based manufacturer said that despite the small size, the bike will be a premium product in China that looks and sounds unmistakably like a Harley. It is due to make its debut by the end of 2020.
Three-hundred thirty-eight CC is a tiny bike, at least by the standards of Harley’s big bikes, which can have engines nearly six times that size. But Harley is finding, like the Japanese manufacturers did decades ago, that the market for smaller bikes is simply bigger than it is for the heavy ones.
Harley also has a long tradition of licensing its name for all sorts of products, so it isn’t surprising that it wouldn’t hesitate to do so for a motorcycle made overseas in a market that its core customers in the U.S. will likely never interact with. And the very definition of Harley’s “core customer” will inevitably change as its overseas expansion grows and grows.
And Harley already says it knows who its buyers are going to be over the next couple of years:
“We see tremendous long-term opportunity in China,” Chief Executive Matt Levatich said on a call with analysts in January.
Harley said last year that it expects industry-wide sales of smaller bikes in Asia to grow 6% a year between 2017 and 2022, while it expects sales of many types of motorcycles in the U.S. to decline over that period.
Put in this context, Harley’s all-electric bike, the LiveWire, is almost a footnote. The people actually handing over money for a new Harley increasingly don’t live on American soil. This isn’t anything to be upset about, really, and it’s a smart strategy for the company, doing what the Japanese manufacturers did all that time ago, which was to go where the money is.
And if you love Harley, you should applaud these developments. It’s fighting for its life, by any means necessary.