BDN financial editor Roger Willis has been looking at Harley-Davidson’s “More Roads to Harley-Davidson” growth plan through 2022.
The company’s plan is “to inspire even more people around the world to experience the exhilaration of riding a motorcycle”.
Roger’s fascinating analysis of Harley’s future direction appears in the September issue of BDN. In the meantime, here is Harley’s press release in full.
“In a fast-changing world with new consumer demands, these accelerated actions support Harley-Davidson’s 2027 objectives with increased focus and strategic investment to reinvigorate the U.S. business while accelerating the pace of international growth.
“The bold actions we are announcing today leverage Harley-Davidson’s vast capabilities and competitive firepower – our excellence in product development and manufacturing, the global appeal of the brand and of course, our great dealer network,” said Matt Levatich, president and chief executive officer, Harley-Davidson, Inc. “Alongside our existing loyal riders, we will lead the next revolution of two-wheeled freedom to inspire future riders who have yet to even think about the thrill of riding.”
The result of a comprehensive, top-to-bottom assessment incorporating a “customer first” perspective, the More Roads to Harley-Davidson plan includes:
• New Products – keep current riders engaged and inspire new riders by extending heavyweight leadership and unlocking new markets and segments
• Broader Access – meet customers where they are and how they want to engage with a multi-channel retail experience
• Stronger Dealers – drive a performance framework to improve dealer financial strength and the Harley-Davidson customer experience
“We expect this plan will result in an engaged, expanded Harley-Davidson community with a more diverse rider base, along with industry-leading margins and cash flow,” said Levatich.
Leveraging its industry-leading design and strong manufacturing capabilities, Harley-Davidson plans to offer its most comprehensive lineup of motorcycles, competing in many of the largest and fastest growing segments with a full portfolio of motorcycles across a broad spectrum of price points, power sources, displacements, riding styles and global markets. Highlights include:
• Extending the company’s leadership in heavyweight motorcycles by continuing to develop improved, more technologically-advanced Touring and Cruiser motorcycles that will keep existing Harley-Davidson riders engaged and riding longer.
• Introducing a new modular 500cc to 1250cc middleweight platform of motorcycles that spans three distinct product spaces and four displacements, starting with the company’s first Adventure Touring motorcycle, the Harley-Davidson™ Pan America™ 1250, a 1250cc Custom model and a 975cc Streetfighter model, all of which are planned to launch beginning in 2020. Additional models to broaden coverage in these product spaces will follow through 2022.
• Developing a more accessible, small-displacement (250cc to 500cc) motorcycle for Asia emerging markets through a planned strategic alliance with a manufacturer in Asia. This new product and broader distribution is intended to fuel Harley-Davidson’s customer access and growth in India, one of the largest, fastest growing markets in the world, and other Asia markets.
• Leading the electric motorcycle market by launching Harley-Davidson’s first electric motorcycle, LiveWire™, in 2019 — the first in a broad, no-clutch “twist and go” portfolio of electric two-wheelers designed to establish the company as the leader in the electrification of the sport. LiveWire will be followed by additional models through 2022 to broaden the portfolio with lighter, smaller and even more accessible product options to inspire new riders with new ways to ride.
Harley-Davidson will advance its market delivery approach and meet today’s customer needs by:
• Creating high-engagement customer experiences across all retail channels – including improving and expanding the company’s global digital capabilities by evolving the Harley-Davidson.com experience to integrate with and enhance the dealership retail experience for existing and new customers.
• Establishing strategic alliances with global leading e-commerce providers to extend access to Harley-Davidson to a pool of millions of potential new customers.
• New retail formats — including smaller, urban storefronts globally to expose the brand to urban populations and drive sales of the expanded Harley-Davidson product portfolio and expand international apparel distribution.
Harley-Davidson’s world-class dealer network is an integral part of the company’s accelerated strategy and critical to overall success. The company will implement a performance framework to significantly enhance the strength of the dealer network and the customer experience, enabling the best-performing and most entrepreneurial dealers to drive innovation and success for themselves and Harley-Davidson — while providing the premium customer experience the brand is known for across an increasingly diverse product and customer base.
“Harley-Davidson is iconic because we’ve never been static,” said Levatich. “In moving forward, we are tapping into the spirit that drove our founders back in 1903 and every one of the employees and dealers who rose to the challenges faced along the way. Our plan will redefine existing boundaries of our brand – reaching more customers in a way that reinforces all we stand for as a brand and as a company and we can’t wait to kick it into gear.”
Funding & Financials
In addition to building riders, the company expects More Roads to Harley-Davidson to create more value, stabilize and strengthen the existing business, improve Harley-Davidson Motor Company Return on Invested Capital (ROIC), increase revenue and earnings, and allow the company to return more cash to shareholders.
The accelerated strategy will require significant investment to change the trajectory of the business globally, and the company plans to fund it entirely through comprehensive cost reduction and reallocation of previously planned investment and resources including operating investment through 2022 of $450 to $550 million and capital investment through 2022 of $225 to $275 million. In total, the company plans More Roads to Harley-Davidson to generate more than $1 billion of incremental annual revenue in 2022 as compared to 2017.
The company believes its accelerated strategy is in line with and reinforces its objectives to drive revenue growth and expand operating margins. The company expects to fund strategic opportunities while maintaining its current investment and return profile and capital allocation strategy.
Harley-Davidson’s funding principles will focus on stabilizing and strengthening the existing business, enhancing the premium brand, and investments in profitable, growth-oriented projects. We expect these principles, along with a disciplined capital allocation focus, will allow Harley-Davidson to execute with improved cost competitiveness and overhead efficiencies.”