#ducati

Yamaha’s MotoGP woes in stats

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Many in the MotoGP world are questioning the horrible performance of Yamaha in 2018. As it stands Yamaha holds no victories this year with a handful of races left in the season. This would equal its worst performance in 15 years.

Yamaha’s successes really started to trend much higher after hiring Honda legend Valentino Rossi (who took the 2001, 2002 & 2003 crowns for Honda). He subsequently took 2004 & 2005 crowns for Yamaha. After narrowly missing the 2006 title to Honda’s Nicky Hayden and losing to Aussie Casey Stoner in 2007 on a Ducati (the first title for the Italian maker) Rossi won for Yamaha in 2008 & 2009.

Yamaha won the championship again in 2010, 2012 & 2015 under Jorge Lorenzo. Honda won the 2011 with Stoner and the 2013, 2014, 2016 & 2017 titles under Marc Marquez who looks odds on to win 2018. At tonight’s Aragon GP in Spain, Yamaha’s four riders start 12th, 14th, 17th & 18th on the grid.

In August this year after the poor performance at the Austrian GP, Yamaha made the unprecedented motion of apologizing to its riders for having such a rubbish bike. The problem has continued for 18 months now. No doubt the developers in the team back in Iwata, Japan are still busy working out how to take responsibility instead of working to fix it.

The reality is that the other motorcycle teams have got much better. The Italians didn’t qualify for the recent Football World Cup and Germany was bailed out in the pool games. So Yamaha needs to stop resting on the laurels of having two world class riders with 10 championships between them to come up with a competitive product.

N.B. Suzuki withdrew from MotoGP in 2012 & 2013. Ducati entered MotoGP in 2003.

Harley-Davidson to go into the Adventure category

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Actually credit where credit is due. Harley maybe very late to the party but realizes it must be bold to survive in the long run. Adventure (ADV) bikes (think of them as 2-wheeled SUVs)  are one of the most popular motorcycle segments now due to versatility but the competition is fierce and only getting moreso. Harley plans to launch a 1250cc ADV bike in 2020.

It is unlikely to cause segment leader BMW to quake in its boots with respect to its best seller GS series although the question is can the Harley brand can carry any sales at all? At the luxury end BMW, KTM, Ducati, Triumph, Moto Guzzi and Aprilia all have ADV bikes. BMW & KTM are the sales chart leaders. BMW for inventing the segment and KTM for strapping a 160hp nuke to its expertise in off road and 17 straight wins in the Paris-Dakar.

It is fast becoming a horsepower war. BMW is looking to launch a 145-150hp 1250cc next year for the GS from the 125hp 1170cc twin it currently has to keep up with the competition.

Without a spec sheet it is hard to tell much about the Harley ADV. It looks heavy. Weight matters. The BMW is around 240kg. The KTM 210kg. Will the Harley keep it under 260kg?

Horsepower is not a Harley strong suit. You won’t find power in a Harley spec sheet at the dealer. Will it use a clump of lazy torqued Milwaukee pig iron for an engine? In a low slung cruiser one can get away with it but in a tall ADV bike, when negotiating goat tracks (that’s a wide belly pan!), traction, power delivery and how a bike carries its weight is crucial. Can Harley produce over 120hp from this 1250cc engine with flexibility across the rev range? Will it be chain driven? Shaft? Belt? These things matter to the ADV snobs.

The design of the ADV Harley is certainly bold. CM likes it although if you drop it that headlight unit sure looks expensive to replace. Like many SUVs never see more off-road than a gravel driveway, the most dirt tracking Harley ADVs will see might be some road repairs on Route 66. The Pan America name certainly rings of highway biased use.

The next thing will be price. Even before (and after) we have full specs can Harley launch the bike at a competitive price? Harley can’t just rock up into a segment it’s never been active in and demand the type of premium it’s cruisers carry. It’s top of the line CVO series can be $50,000. BMW is considered the premium offering in ADV. Luxury Italian brand Ducati tried to price it slightly north and was caned in the sales race. KTMs are priced slightly cheaper but BMW remains king and having owned one know exactly why. The BMW is good at absolutely EVERYTHING.

Harley has history in new ventures. It broke the mold decades ago and took a stab at sports bikes with the Buell brand, but it was an abject failure. Porsche was called into help develop the V-Rod engine some 18 years ago but that is no longer sold.

Harley also aims to launch electric bikes, smaller 250-500cc categories for Asian markets and a mid range 500-1250cc for new sport type street fighters. All looks margin crushing from a distance.

From an investor perspective the accountants will require a lot of volume to justify the R&D expense. The shares closed toward the lows on the announcement.

Without getting too Harvard MBA, Harley feels extension of product is vital. To a degree it is right. Unfortunately graveyards for such strategies are too commonplace. Few get it right. Buell was case in point. BMWs K1600 Bagger will flop because it was an excuse trying to find a home for its 1600cc 6-cylinder regardless of capabilities. Customers see through this.

Harley’s ADV will have distribution channels as it’s biggest weapon. It will have a hard time converting ADV faithful unless it offers something truly better at a competitive price. Otherwise it will gather dust on showroom floors.

Personally this ADV will probably do better than most think. It won’t get close to toppling the Beemer but there are enough quirky people out there who want to be different. Nice job Harley but can it turn groups profitably around? The last 5 years have been a disaster. The question is all this product arrives at a time when the economy is likely to turn south.

Harley-Davidson Shinjuku declares bankruptcy after revenues fall 85%. Changes ownership.

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Yahoo Japan reports Harley-Davidson Shinjuku, a central Tokyo dealer for the motorcycle brand has gone out of business after almost 70 years in the trade.  Established in August 1953 before Harley Davidson Japan became the domestic agency, it ran a parallel imports business of the iconic brand. In the fiscal year ended July 1992, the annual turnover was estimated to be about 2,426 million yen. However, as the motorcycle market contracted, annual sales in the fiscal year ended July 2017 fell 85% to about 376 million yen. Even after closing the Yokohama, Hachioji stores, losses continued every year.

Debt is approximately 146 million yen as of the end of July 2017. “Harley Davidson Shinjuku” was closed on July 11.

It has since reopened under new ownership. Customers of the dealership have been informed of the ownership change according to HD Japan. Harley had peak sales of 16,000 units in Japan and is likely to do around 9,500 units in 2018.

Harley – the Milwaukee Anvil

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Harley can blame tariffs for ruining margin but the rot set in well before. 2Q motorcycle shipments came in at 72,593 (-11.3%). The other luxury brands continue to climb. Its long time American arch rival Indian continues to grow. Indian’s parent Polaris Reports Q2 tonight. Indian sales were up double digit in Q1. The limited edition Indian Jack Daniels Scout Bobber sold out in 10 minutes. Product anyone?

Harley is losing share in America, it’s largest market, and Australia and Japan remain soft. Harley used to sell 16,000 units in Japan. In 2018 it will be lucky to ship 9,500. Ironically Europe is its most encouraging growth area yet tariffs will impact it.

Luxury motorbike brands BMW Motorrad, KTM, Ducati, Triumph etc are ALL growing.  Just Harley is flailing – the best motorcycle brand in the business (one where customers are prepared to tattoo the brand to their bodies) is chasing dreams from some consultant inspired long term plan which misses one core ingredient – listening to customers.

Expect the Harley management to keep the excuses rolling. It suffers from the divine franchise and its leadership seem more willing to point to external factors for its issues when internal complacency and resting on the laurels of the glory days seem the biggest factor. It is so obvious.

So Harley met its Luke warm 2Q EPS guidance. Maybe shareholders should reflect on the $103mn (1.3% of outstanding) of the $700mn in planned share buybacks which flatters EPS. E is not rising, S is falling. 10% of the stock is being shorted.

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.