Harley sales recovery far off as young buyers turn to used bikes

By Ankit Ajmera and Rachit Vats

REUTERS - Harley-Davidson enthusiast Jo Verrette, 65, finally sold her 2006 model Harley Deluxe this year for $6,500, a third of what she bought it for, after listing it on Craigslist on and off for two years.

Verrette sold the motorcycle to a 36-year old man. She is among thousands of aging baby boomers - the company's core customer group - who are unloading their bikes, keeping prices of used Harleys in the market low and pressuring sales of new motorcycles.

Analysts expect Harley-Davidson Inc's sales growth to be weak for at least the next few years as younger buyers prefer cheaper, used Harley models or shop for less expensive motorcycles offered by Honda Motor Co Ltd and BMW.

"So long as the base of ridership declines (in the United States), it will be an uphill battle for (Harley-Davidson). I have a projection of total motorcycle ridership for the country declining for at least the next five years," Bernstein analyst David Beckel said.

Harley-Davidson's U.S. retail sales hit a five-year low last year. The company said last month new-motorcycle sales fell about 8 percent through June this year in the United States, forcing it to lower its full-year shipment forecast and cut production and jobs.

Dramatically low used-bike prices have encouraged young Americans to buy their first Harleys, giving them an opportunity to own a storied brand even as they worry about paying off home and student loans.

But it's not helping Harley-Davidson's bottom line.

"I guess they (Harley) can take comfort in the fact that people are still interested in the brand. But certainly (used Harley bikes) don't do anything for the company and it sure doesn't do anything for the shareholders," Longbow Research analyst David MacGregor said.

Indeed, Chief Financial Officer John Olin said on a post-earnings call last month that through May the company saw healthy sales growth of used Harleys, a market more than twice the size of new motorcycle sales.

Harley-Davidson has done more this year to encourage dealers to bring used-motorcycle buyers into the family, said Jim Woodruff, chief operating officer of auction services provider National Powersport Auctions (NPA).

"It's more acceptable for an authorized Harley dealer to have more used inventory this year than last year."

But some dealers said it would take Harley-Davidson a long time to capitalize off that trend as it could take up to five years for a buyer of a used Harley to upgrade to a new one.

MILLENNIAL DRIVE

After years of targeting older, affluent riders, Harley-Davidson is now focusing its marketing strategies on a younger generation as it seeks to expand its fan base.

The company recently started a social media campaign and last week launched 13 motorcycles with its new Milwaukee-Eight engine and futuristic styling. (http://prn.to/2wibDK7)

Harley-Davidson has also partnered with motorcycle rental company EagleRider, which serves more than 100,000 riders annually and offers bike tours across the United States.

The company, which says 3 million people ride its various motorcycles in the United States, is aiming to add another 2 million riders in the country by 2027.

(Reporting by Ankit Ajmera and Rachit Vats in Bengaluru; Additional reporting by Anna Driver in New York; Editing by Sayantani Ghosh and Saumyadeb Chakrabarty)