#bmwmotorrad

Harley-Davidson needs a major overhaul

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Harley-Davidson (HOG) is the classic case of a divine franchise. While still the world’s largest maker of cruiser motorcycles, it is being swamped by new competition. HOG’s EBIT performance has slid for the last 4 years and is even below the level of 2012. BMW Motorrad, KTM AG, Ducati and Triumph are all growing unit sales and profits. HOG has a very defined product line whereas its competitors are flush with sports, adventure, cruiser, heritage, cafe racers, scooters, off road and much broader engine sizes.

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The further complication is that the Japanese are getting their act together. Honda is targeting over 20mn units in 2018 (mainly driven by emerging Asia). Honda has received rave reviews of its new CB1000R which should keep the fires burning. Several years ago, Yamaha introduced a budget cruiser called the Bolt but HOG responded with a competitively priced bike made in India which showed the desperation of a strategy where it doubted its brand power. Kawasaki has a 12 month waiting list on its Z900RS cafe racer which is a replica of the 1970s classic. Kawasaki has no interest playing in scooter markets and remains focused on its core larger bore segmentation.

Yamaha and Kawasaki have gone down the path of profitability than pure unit growth while Suzuki is the real laggard, lost in me too group think product. Honda has had a real resurgence in product which harks on its history. Honda now has 75% market share in Indonesia, 72% in Vietnam, 80% in Thailand and 82% in Brazil. Only 28% in India. Still, the market share, resale and brand power in Asia no maker will usurp them for decades. Put another way, the risks associated with dethroning Honda in Asia by a dealer channel push would be astronomically high. Yamaha has the other 10%.

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Profitability is starting to look much rosier for the Japanese too. Even Suzuki has managed to pull itself out of loss.

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Sadly for HOG, 1Q 2018 has shown even worse numbers. Global unit sales were 7.2% down on the previous year and 12% down at home.  Japan and Australia were soft. Looking at the strategy it looks like throwing spaghetti at a wall and hoping it sticks. It looks like some consultant has rattled together some funky catchphrases.

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HOG’s problems are simple. It is not listening to customers. When grandson of the founder, Willie Davidson, took over the reins after the near bankruptcy under AMF stewardship in the 1980s, the company really consulted customers and worked out they wanted more reliability and capability. It delivered. Sadly HOG is hanging on by its fingernails on brand alone today. The Polaris-owned Indian brand is coming up with excellent product lines which have all of the cachet of HOG given it was its fiercest competitor in the 1930s.

HOG’s product line up is relatively stale in terms of real innovation. While the Milwaukee 8 engine is a very good start and the Fat Bob is a proper philosophy change, the rest of the line up needs major revamp. At the moment it seems the brand is stuck in an echo chamber.

In closing Harley’s are a cult. There aren’t many brands where customers are prepared tattoo it to their bodies. In all the bikes CM has owned, the Harley had 10x the number of people wanting to ride on the back vs the rest combined. Yet it goes to show that brand only goes so far. Product still matters.

 

Harley-Davidson sales tank in Q1 2018

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Harley-Davidson announced Q1 figures which saw its US based unit sales (c 50% of group) fall 12% with global sales down 7.2% YoY. H-D is often regarded as a canary in the coal mine for discretionary spending. 30 day delinquencies continue to rise in Q1 2018 @ 3.31% the highest in 6 years. Harley wrote,

The U.S. 601+cc industry was down 11.1 percent in the first quarter compared to 2017. Harley-Davidson’s first quarter market share was 50.4 percent in the U.S. The 601+cc industry in Europe was down 7.3 percent in the first quarter compared to 2017.  Harley-Davidson’s first quarter market share was up 1.3 percentage points to 10.4 percent in Europe.”

Highlights:

Revenue up 2.7% despite 9.7% lower shipments

Gross margin 34.7%, down 1.0 pt.

SG&A up

Restructuring charge of $46.8 million

Operating margin of 12.7%, down 5.1 pts.

Harley reported 243,000 units in 2017 (-6.7% on 2016) and it is shooting for mid 230,000s for 2018. This despite some stunning new models. The problem with a divine franchise is that complacency kills. The competition is much fiercer and the prices of its bikes are for the better heeled who seem to be cooling them

 

Stars of the Tokyo Motorcycle Show 2018

Ducati Panigale V4S

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The absolute star of the 2018 Tokyo Motorcycle Show was the Ducati Panigale V4S. 214hp, 174kg. It not only raises the game but doubles down. Completely customizable bike which has basically bombed the goalposts of what is technically possible. It is a Ferrari La Ferrari on two wheels.

KTM 790 Adventure

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Austrian makes KTM has effectively made a Paris-Dakar bike with a bigger motor and light weight. It should totally devour trails versus the competition.

Husqvarna 701/401

Both Vitpilen and Svartpilen models should sell like well in Japan.  Compact size, well appointed and funky Swedish design even though it is built in Austria.

BMW 850GS Adventure

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BMW has a problem in Japan. It has seen some of its older riders find that the R1200GS is too much to handle as they age so some switching to the 310GS. This should be a good half way house. Lighter and more powerful with well appointed LCD screen.

Triumph Bobber

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Triumph has really got its act together. Properly decent bike range with unique product which Harley should be copying. Harley has been struggling in Japan because it I s stuck in the 70s when it should be going back to the 1930s-40s like the Bobber.

Harley FatBob 114

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Almost 2000cc gives ridiculous torque. A sensible departure from the current range which suffers from the divine franchise. It looks like it is a decent replacement for the V-Rod but they neeed a proper Bobber bike. The Japanese don’t seem to like it.

Kawasaki Z900RS

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Actually this is the #1 selling big-bore bike in Japan. It harks back to the 1970s when the Z-1000 was king. A modern day interpretation of a classic. Sold out in Japan til next year. Amazing to see how many custom shops were playing with this bike. Best of the Japanese.

Honda CB1000R

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Honda finally showing it has a pulse. It may make 18 million bikes a year but it has a deadly dull product range. The CB has modernized a classic. Not quite a Kawasaki Z900 but it is something that should sell equally well. I’ve never wanted a Honda but this is something worth considering. 140hp motor.

Yamaha Niken

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Essentiallyba quirky 3-wheeler with a bomb in it. It won’t be for purists but it takes the maker down a unique path. Yamaha will sell a lot of these to bikers who are coming back to it now the kids have left home. It’s a safe alternative.

Two bikes that should be built:

BMW R-32 Heritage

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Two years ago CM told BMW Motorrad management that the K1600 Bagger was a waste of time. If people want a cruiser they’ll opt for a Harley, Indian or Honda Gold Wing

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It was an excuse to find a chassis for the 6-cylinder motor. Nothing else. That’s never a good reason. It is a technical tour de force with a million buttons which press none where it matters. However the success they’ve had with the RNineT is admirable Still a modern day version of the R-32 is what it must produce for the purists. It would be special. Does it have the guts? The K1600 should be made into an S with 200hp+

Suzuki GSX-R

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Suzuki invented the racer replica market in 1987. A mint 30yr old GSX-R750 sells at a premium to a brand new one today. The current GSX-R gets rave reviews but it has no unique qualities that sets it apart from its competition. CM’s suggestion is to encase it like above. The people in their 40s who can afford it would fall over backwards to buy the poster on they once had on their wall as a teen. CM did. Suzuki toyed with the concept in 2015 with the GSX 1200 but it was a half-baked job with a pokey 100hp. A retro GSX-R1000 will crush it and revive a brand that has seen its sales halve inside a decade.

Warned to be mild

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Steppenwolf coined the “born to be wild” moniker which became synonymous with Harley-Davidson. Harley is all about conspicuous consumption. It has generally been a good indicator of discretionary income. Harley is not so much about transport but lifestyle. Harley-Davidson’s sales fell 9.3% in the U.S. and 6.7% globally in Q2 2017, ending June 25th. Harley also stated it had lost ground in the big-bike market (601cc and above), dropping from 49.5% market share to 48.5%. Matt Levatich, President and CEO, Harley-Davidson. “Given U.S. industry challenges in the second quarter and the importance of the supply and demand balance for our premium brand, we are lowering our full-year shipment and margin guidance.” Q3 shipments are expected to be down c.20% (39,000-44,000 units).

Harley-Davidson sold 262,221 motorcycles last year and forecast a flat market this year but has downgraded those numbers to a forecast of 241,000 to 246,000 units (-7~8%). US shipments were well below expectations in the US.

Harley-Davidson is suffering from divine franchise syndrome. It has failed to modernize its line up until very recently. While it has plans to put 2mn new bikers on the road over the next 10 years, its competitors do not seem to be suffering with BMW, KTM and Triumph hitting new shipment records. The European makes have much broader product line-ups which adds to the rumours that Harley may wish to bid for Italian sportsbike maker Ducati from Audi to plug the segment gaps in its line up. Harley has had a failed attempt in the sports category via Buell but the Italian maker brings a proper platform to the party vs an in-house employee wanting to rev up Harley products out of a barn.

 

Rebels too old for a cause

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The average age of motorcyclists in Japan is 53 years old and continuing to climb as younger riders looking to obtain new licenses continues to drift. Between 2010 and 2016 the Japanese National Police Agency (JNPA) noted that large capacity motorcycle license holders (ogata – classified as 400cc+) have fallen by nearly 1,500,000. While mid-size (chugata – classified as below 400cc) have risen around 715,000. Female riders have shown a similar pattern of 178,000 fall in ogata licenses and 147,000 increase in chugata respectively. While there are still 9.175mn men and 625,000 women willing to get out on the highway with large capacity bikes, the trend is alarming. More frighteningly, new graduates aren’t lining up either. 30,000 fewer students lined up to get a mid or large size bike license between 2014 and 2016 representing a 12.3% dip. Latest report found here Motorcycles in Japan – Analogica KK

The changing face of the global motorbike market

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Earlier in the week we touched on the 1,800,000 fall in the number of Japanese who possess a large capacity motorcycle license. The status of the Japanese motorcycle companies makes for some interesting comparisons. Honda remains the largest global manufacturer with over 17.7 million units produced annually. Yamaha has seen a c.1mn unit decline over the last 5 years but a jump in the average profitability of its bikes. Suzuki has cut production by almost 50% as it continues to rack up losses and Kawasaki has stuck to a large bike bias which has stabilised profitability. Here is a look at the state of revenue growth over the last 5 years among major listed motorcycle manufacturers.

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Profitability is a different picture among the global makers. Suzuki has been struggling to make a profit, Kawasaki has drifted down but remained in the black. Honda has been outpaced by Yamaha and among the foreign makers BMW Motorrad and KTM have beaten Harley-Davidson’s performance.

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The foreign makers are all much smaller scale than the Japanese and tend to focus in the larger engine size segments. Harley-Davidson has suffered the most among the 5 big players in terms of unit growth. KTM, followed by BMW Motorrad have made the biggest relative gains.

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Looking at average EBIT/unit produced yields starkly different results. Harley nets around $3,000 per motorcycle in EBIT with BMW around half of that amount at €1,285 ($1,430) with KTM half of that. Kawasaki makes the most per motorcycle among the Japanese on a unit basis. Honda has remained relatively stable at $103 (although we should note that this is closer to $170 as the consolidated production number is about 10m units and the global number including equity method companies is the 17.7m) and Yamaha at $64.  These are ridiculously low numbers and of course identifying mix within that would yield far more healthy results for certain models and losses on others.

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One thing it points out is that focused strategies appear to be paying off for the Europeans and to some extent Kawasaki which has moved away from a me too approach. Efficiency and brand seems to be paying off for BMW’s continued rise and a broad range of product unlike Harley which seems to be stuck in a divine franchise scenario. Profitable but struggling to break out of cruisers. It has had a stab at sports bikes through Buell (business was spun off and EBR has since closed) and the Porsche designed V-Rod (now out of production). Now that Ducati is potentially being sold by Audi, does Harley look to use a proper sports brand with no clash in its line up to fuel (no pun intended) its growth?

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BMW R1200GS Rallye Sport Review

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Epic. This must be the best BMW I’ve ridden to date and I’ve ridden and owned lots. This review has nothing to do with BMW Motorrad Japan’s kindness either. 600km in the saddle today . Not tired. It eats miles like any other GS. Perhaps the biggest fault with the liquid cooled GS Adventure (I’ve owned one) is a slightly detached feeling beneath you. It’s not that you don’t trust it but sometimes you’re never quite sure what is going on below. The GS Rallye Sport changes all that. While perhaps not as crisp (nor should it be) as the S1000RR superbike the Rallye’s handling is exceptionally communicative. Loads of feedback. Ironic that the Rallye is supposed to be a hard core off-road GS but it’s on-road manners are better than most of the other road going bikes in the BMW stable. Let’s break it down.

Handling 5/5

While it is 20kg lighter than the GS Adventure it is a totally different bike. Despite the same 19-inch front tyre I kept turning into corners too early to begin with as it darts like it had a 17″ up front. Not a criticism. Just a pleasant surprise. Once you get used to the quick turn in you forget your waltzing with the fat bird from the Flight of the Valkyries and start doing the tango with Marlene Dietrich.

Handling is very neutral as all GS are with a dash of shaft oversteer when pushing and hard braking while down shifting. There is no understeer whatsoever in sharp bends despite the 19″. The suspension is self leveling and never got flustered at any speed (of course the speed limit was never exceeded… erhem). Even in the wet the feedback was confidence inspiring.

Even in wet weather with patchy road surfaces  the Rallye just ploughed through. It never got bumped off line and kept relaying what was going on.

I had a small jaunt off road but not enough to pass judgement.

Brakes 5/5

They are the same spec as the GSA but somehow the bite is much stronger with good progression. This was surprising. I’m big on brakes after my accident. The brakes are linked  when the front lever is pulled but the rear is independent and offers good feel.

Engine 4/5

The engine is sweet with 125hp of power. There are times you thirst for a bit more top end but it is tractible everywhere in the rev range and has enough hustle. A KTM will eat its lunch with 160hp but it’s  real world power.

Economy is good. The 20 litre tank is good for 350km, maybe 400km if ridden gently.

Gearbox 4/5

The new synchro box is pretty decent. It has a quick shifter which is smoother down than up. I’ve ridden the S1000XR with a quick shifter and on the move it’s fine. It is when pulling away from a stop when you feel the fight between the clutch control and the computer controlled hydraulics. It feels cumbersome. The GS Rallye doesn’t suffer like this which also allows you to turn it on a dime at walking speed. Impressive

Ergonomics 4/5

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The dash is simple to read and the Navigator V is much quicker than its predecessor with clever functionality on the left handlebar mounted swivel mouse. I haven’t played with the settings of the navigator but it seems to have been designed by a dodgy taxi driver sometimes sending you on such a long way round that it seems implausible. I tried to go from Fukushima to Minami Soma (around 60km) and the navigator said 256km. Hmmm. This has been so on several I’ve tried.

The weather on the way from Fukushima to Sendai was a deluge. Wind and weather protection was good but I’d elect for the shorter screen as the standard screen in high or low setting sends wind flow hits my helmet right at ear level.

Seating position is perfect (for me). With suspension in dynamic MAX mode and the ride height with seat in high position it is around 890mm. The seat is plush and the backside didn’t give out over the 600km. In fact it is far better than the GS Adventure’s bench. Heating would be a nice option, especially for a pillion.

Mirrors are pretty useless. More a fashion item. They should be squarer instead of triangular.

I initially didn’t like the idea of keyless but after today I see its benefits.

Summary

It is such a leap forward. They have taken the best selling adventure bike around and dialed it to 11. Flummoxed by nothing. Good looks and practicality. Anyone who owns a GS should ride one. You won’t believe how much better it is than what you have. In fact don’t ride it because you’ll regret it when you hand the keys back.

I’ve owned a R1100S, K1300S, K1600GT, a liquid cooled GSA and still have my oil-cooled R1200GSA. With the exception of the one I’ve kept, most of them have been technological masterpieces but lacked ‘soul’. The Rallye on the other hand has bags of character and I’ve been smiling all day at how unbelievably good it is. Sorry Lee I’m not giving it back!

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