On both sides of the Atlantic, the crème de la crème of developed-world motorcycle manufacturers are faced with a witch’s brew of high interest rates and other economic pressures, steadily undermining consumer confidence and therefore sales. Nine months into their current financial years, a winter of discontent now looms.
BMW MOTORRAD ON THE BACK FOOT?
BMW Motorrad management in Berlin and Munich broke its usual collective vow of sworn quarterly silence for a brief bleat about the difficulties they are currently facing. Enlightening detail proved to be meagre, though.
For the nine months of 2024 to the end of September, Motorrad revenue had declined marginally by 0.3% to £2.134bn. But operating profit was a more punitive 21.1% down to £202.3m. Operating margin dropped from 12% to 9.5%. However, the brand’s worldwide retail motorcycle and scooter deliveries in the year to date were apparently robust, losing just 0.9% on 163,436 units. The UK contribution had retreated by 2.5% to 7809.
Pre-tax earnings came in at £203.2m, falling by 21.5%. And more pertinently, consolidated three-quarterly net profit had fallen by 23.5% to £140.8m.
The Q3 July-September picture featured some remarkable differences. BMW Motorrad global retail sales had shrunk by 3.2% to 50,364 in the quarter. Here in the UK, they were 10.4% down. On a brighter note, revenue had risen by 8% to £585.2m. That contrasted with an operating profit of a mere £22.5m – versus an operating loss of £3.3m in Q3 2023 – and the operating margin dropped to only 3.8%. Q3 pre-tax 2024 profit was £23.3m (against a £1.7m pre-tax loss in Q3 2023) and net profit stood at £14.2m.
Confusion reigned, perhaps until we factor in the aforementioned obtuse managerial intervention. “Volumes and pricing in the motorcycle segment are being impacted by a challenging market and competitive situation in core markets, which include China and the USA,” it explained. “Deliveries in this segment are therefore expected to be in line with last year’s level. The operating margin is expected to be between 6% and 7%, and the segment RoCE [return on capital employed] between 14% and 16%.”
Is this a new-wave harbinger of focus on the budget motorcycling firmament? The pre-EICMA unveiling of an almost production-ready BMW Concept F450GS, promising a modest 48bhp and an undoubtedly wallet-friendly price point, might suggest that’s the cunning plan. Toprak Razgatlıoğlu promoting entry-level BMW M125 RR delivery scooters will surely follow …
€-£ currency translation at forex rates applicable on 6 November
DUCATI AMONG THE DUNCES
Assailed by challenging market conditions, supply constraints and fierce competition, the majority of Volkswagen’s Brand Group Progressive premium product participants – in which Ducati is the solus powered two-wheeler representative – had become steadily weaker as the year progressed.
For the nine months of 2024 to date, Ducati’s revenue registered a 9.7% decline to £664.4m. Operating profit during the period plunged by 31.9% to £79.7m. Operating margin shrank from 15.9% to 12%. These were hailed as “solid financial figures” by some deluded Teutonic beancounter, contributing to the results statement by polishing turds.
The brand’s global retail motorcycle sales volume was 8.5% down to 43,772 units. Any growth was exclusive to the Dual/Hyper segment covering Hypermotard, Desert X and Multistrada models, with deliveries to customers rising by 11.6% to 18,913. The Scrambler sub-brand deteriorated by 23.3% to just a questionably sustainable 4865. The Naked/Sport Cruiser segment, harbouring Diavel, Monster and Streetfighter kit, fell by 21.3% to 12,264. And finally Sport, spanning Supersport and Panigale models, was 13.8% lower on 7731.
Nine-monthly production ran to a similar rhythm, retreating in total by 2.9% to 45,010 units. Dual/Hyper was 26.2% up to 19,090. Scrambler was 26.5% down to 5196. Naked/Sport Cruiser and Sport respectively dropped by 12.7% to 12,869 and 16.7% to 7855.
Ducati’s global quantitive retail divide saw Europe account for 62%, improving from 59%. China, including Hong Kong, fell by 1% to 4%. The US market contribution also lost 1% to 13%. A final 22% slice of the complete pie filled by more minor unidentified destinations remained static.
In VW Brand Group Progressive terms, Ducati belonged on the lowest rung of dunce ranks. Most shameful and biggest member was Audi, with car sales 10.9% down to 1.236 million and operating profit slashed by 69.6% to £843.6m. Bentley sales were 26.6% down to 7380 limousines, while operating profit dived by 40.7% to £250.1m. Ducati tucked in quietly behind that. Lamborghini, on the other hand, was a stand-alone bathed in glory, boasting sports car sales 8.6% up to 8411 and operating profit climbing by 9.8% to £564.9m.
€-£ currency translation at forex rates applicable on 5 November
HARLEY HARDLY HOGGING THE LIMELIGHT
Harley-Davidson’s 2024 nine-monthly and third-quarter results constituted yet another grim read. Inevitably, Harley chairman and chief executive Jochen Zeitz, got his long-winded story straight first. “We have worked diligently to mitigate the impact of high interest rates, and macroeconomic and political uncertainty, that continue to put pressure on our industry and customers, especially in our core markets,” he opined, no doubt pausing for breath. “We are optimistic about our ability to make sound progress in the new year, and we are expecting further interest rate reductions and improved consumer confidence will provide the industry with a needed tailwind.”
For the nine months of 2024 to date, revenue from its HDMC business – mainly responsible for motorcycle and related products output – was 8.7% down to £2.848bn. HDMC operating profit for the period declined sharply by 30.3% to £378.3m. Year-to-date wholesale motorcycle shipments from HDMC to dealers worldwide dropped by 10.4% to 134,852 units.
Harley’s notionally stand-alone LiveWire electric motorcycle operation had even less to shout about. Its revenue fell by 30.4% to £12.3m, although wholesale bike shipments more than doubled to 374. LiveWire’s operating loss grew by 2% to £64.4m.
However, some better news came from the HDFS consumer credit and dealer inventory funding arm. HDFS turnover increased by 10.5% to £602m and operating profit rose by 14.3% to £155.5m, presumably associated with reduced provision for bad debts.
Consolidated operating profit for the company as a whole was 23.8% lower at £469.6m. Pre-tax profit, bolstered by investment and other income streams, nevertheless fell by 20.3% to £529.4m. Bottom-line net profit attributable to Harley-Davidson Inc retreated by 15.9% to £440.7m.
Harley’s three-quarterly global retail motorcycle sales weren’t exactly prospering either. Overall, they were 5.3% down to 125,569 units. North America (the US and Canada) more or less broke even, 1.7% in arrears on 86,896. But the EMEA region, dominated by Europe, sank by 11.7% to 19,333. And Asia Pacific was also seriously in arrears, falling by 14.9% to 17,188. Latin American dealers managed to sell 2152 bikes, a mere 44 more than in the equivalent period last year.
Within all of that, Q3 performance had been altogether more painful. Quarterly HDMC revenue plunged by 32.4% to £678.7m, owing to a 39% reduction in wholesale bike shipments as dealers adjusted their inventory levels to fit with an increasingly desperate retail environment. Related operating profit dived by an extraordinary 68.5% to just £42.7m. Again, this was offset to some degree by strong revenue and profitability at HDFS. But Q3 consolidated operating profit was still dire, 49.4% down to £82.2m, and net profit sank by 40.1% to £92.5m.
Understandably, Harley’s full-year 2024 financial outlook is now in ruins. HDMC revenue is now expected to drop by 14% to 16% and its operating margin will only be somewhere between 7.5% and 8.5%. At least the HDFS operating profit contribution should be 5% to 10% higher. Oh yes, and LiveWire’s annual operating loss should be somewhere around £81.6m to £89.3m.
$-£ currency translation at forex rates applicable on 31 October
STRETCHING REALITY AT PIAGGIO
Hiding behind the usual dose of Italian waffle, Piaggio Group was yet another turd polisher, trying to make out that its clearly struggling year-to-date performance somehow concealed firmer promise. The truth, of course, was endemic difficulties currently shared by all major Western powered two-wheeler brands.
Nine-monthly consolidated sales revenue fell by 16.2% to £1.129bn. Then Piaggio chose to bang its corporate drum on the subject of EBITDA – earnings before interest, tax, depreciation and amortisation – which is widely denigrated by financial analysts as “bullshit profit” because it’s so easy to manipulate. While EBITDA had actually sunk by 13% to £194.2m, the associated EBITDA margin improved from 16.6% to 17.3%. This was hailed as its highest-ever level and a great achievement.
However, the far more trustworthy operating profit yardstick was 19.2% down to £107.3m and operating margin fell to 9.5% from 9.9%. Pre-tax profit plunged by 30.1% to £75.3m and net profit executed a 27.4% dive to £51.5m. The Group’s net debt at 30 September 2024 was £337.2m, up from £359.8m on 31 December 2023. Capital expenditure during the period grew by 13.2% to £97.3m.
Piaggio’s powered two-wheeler sales volume over the three quarters in question declined by 20.5% to 290,300 units, although this tally reportedly encapsulated a 4.4% increase to the nice round number of 40,000 motorcycles. Resultant revenue posted a 17.9% reduction to £878.9m, including a turnover contribution from spares and accessories.
Information on performance in various markets was scarce. In Europe, Piaggio claimed a 21.3% share of the scooter segment and a 3.9% share of the over-50cc motorcycle segment, combining into an overall 11.6% share of the European powered two-wheeler market. Its share of the North American scooter market was allegedly 27.5%. The state of play in extensive Asian operations was obviously too embarrassing to warrant a mention.
Commenting on the bleedin’ obvious, Piaggio Group managing director and chief executive Michele Colaninno said: “The current economic situation has affected the purchasing power of global consumers. And sales trends in the first nine months of 2024 are a direct consequence.”
€-£ currency translation at forex rates applicable on 8 November
A LITANY OF EXCUSES AND LACK OF FIGURES FROM PIERER
Europe’s largest motorcycle manufacturer Pierer Mobility, traditionally ignores the opportunity to publish nine-month and Q3 financial results. And in the latter half of this year the company had particularly strong grounds to hide down the nearest rabbit hole. All previous guidance issued for 2024 prospects was cancelled, the executive boardroom was stripped of under-performing senior management and a bitter blame game ensued instead.
We were told by the survivors that difficult macroeconomic conditions are lasting longer than expected. The European economy is stagnating, with the important German market especially in recession. In the USA, consumer purchasing power remains low due, to the high cost of living and an extended period of expensive consumer credit. The US motorcycle market as a whole therefore declined and Europe was losing momentum.
For Pierer, the second half of the year is generally characterised by a high-margin product mix, especially in the off-road segment. However, available registration data for the US motorcycle market, covering the nine months of 2024 to date, illustrated a 6.3% decline. September was also the weakest month with a 14.6% sales retreat, so recovery cannot be imminent.
In Europe, motorcycle registration data for the same period apparently remained at the previous year’s level. But this was due to increases in lower-priced products and these also indicated a slowdown. So despite a slight reduction in inventories, further destocking remains an important objective – presumably reflected by the recent rabid discounting frenzy of KTM and Husqvarna dust-gathering wares witnessed in the UK.
However, Pierer claims to be clearly committed to supporting dealers and suppliers as a strategic partner in these difficult times. As a result of measures taken in this regard, working capital and consequently the company’s net debt and interest expenses have grown.
As for Pierer’s beleaguered bicycle business, we were told that restructuring is in full swing, destocking continues and balance sheet restructuring will be completed this year. But it will involve additional extraordinary impairments that are higher than originally assumed. Reduction of cost structure in the core business, with a reduction in headcount and consolidation of all R&D activities for group brands, has already been implemented to a large extent. Re-dimensioning the entire bicycle division will be systematically continued in 2025. The aim is to operate the bicycle division profitably with a business model focused on niches and premium.
As a result of such circumstances, Pierer says it will fall short of expectations in terms of revenue and earnings, as well as with regard to the reduction in working capital and net debt in the current financial year, and has therefore revoked annual guidance. A new review of non-cash value adjustments will also be carried out by the end of the year.
Finally, blood on the executive boardroom floor began in July, when chief financial officer Viktor Sigl was summarily dismissed without replacement. Of the remaining six board members, four more were subsequently shown the door in October. Company veteran Hubert Trunkenpolz was the most notable victim, as the man whose family name originally featured in the historic KTM acronym of Kronreif & Trunkenpolz Mattighofen. He had also taken command of Pierer’s MV Agusta acquisition as chief executive earlier this year. The other departures were Florian Kecht, Alex Pierer and Rudolf Wiesbeck. The eponymous Stefan Pierer and his recently recruited sidekick Gottfried Neumeister now share the chief executive officer role.
During October, when these various revelations emerged, Pierer Mobility’s share price on the Austrian Wiener Börse halved in value, down to €12.50 on 1 November.