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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Saturday, October 24, 2009 Motorcycle sales are running out of gas Harley-Davidson reports an 84 percent drop in quarterly earnings. Los Angeles Times A year ago, it looked as if fuel-sipping motorcycles might be the option for motorists facing increasing gas prices. This year, little seems to be working for bike makers. Sales of motorcycles plunged 38 percent in the third quarter from the same period a year ago, with the biggest drops coming in two of the industry’s biggest product lines: cruisers and sport bikes, according to the Motorcycle Industry Council. Sales of scooters, which were gaining a year ago, also have fallen sharply. The council, which doesn’t release revenue figures of the mostly privately held member manufacturers, said overall sales of bikes fell to 136,876 for the quarter from 218,242 the previous year’s quarter. The only bright spot was that sales are dropping at a slower pace: The number of bikes sold in the second quarter fell 53.5 percent from the same period a year earlier. Historically, the second and third quarters are strong for the industry because the weather generally is warm and buyers are gearing up to ride. “Every category is down, and it keeps going down,” said Don Brown, an analyst from Irvine, Calif. “It’s not the old, ‘Let’s get out there and sell more’ that works anymore. ... People just don’t have the money.” Despite a federal stimulus that allows bike buyers to write off the sales tax, companies are cutting staff and other expenses. Last week, publicly held Harley-Davidson Inc. reported an 84 percent drop in quarterly earnings to $26.5 million. The company said it was getting out of the sport-bike business, shutting down the longtime Buell line and selling its MV Agusta operation, a high-end Italian brand it bought last year. Already this year, the Milwaukee manufacturer joined the likes of Honda, Kawasaki, Yamaha, Suzuki and Victory in laying off employees, reducing production and dropping prices to help dealers shrink swollen inventories. Even high-end motorcycles have been hit. Confederate Motor Co., the Alabama maker of the $92,000 Wraith, expects to sell 30 bikes this year, down from 37 last year, said company founder Matt Chambers. His clients aren’t as affected by the economy, he said, but with the deep recession, “it was very fashionable to not be buying a high-end luxury product like ours.” Many manufacturers have introduced programs to add value to their products. Twice in the past year, for instance, Harley operated a Ride Free program, which allowed buyers of Sportsters to get credit for the original retail price of the bikes on trade-ins for more expensive models. Yamaha Motor Co. introduced its Pro Yamaha initiative, directing dealers to be more informed about products and follow up with customers to ensure they were happy. Ducati North America, which has seen a 30 percent quarterly drop in sales, began giving its customers a year of free scheduled maintenance. And Victory Motorcycles, which suffered a 56 percent decline in the July-September period, began offering a five-year warranty to show “significant confidence to buyers,” said Mark Blackwell, Victory’s vice president. “We haven’t laid everybody off. We haven’t totally stopped advertising. We’ve kept up the product development because we’re positioning this business for when the market stabilizes and grows,” he said. Harley-Davidson and Victory, a division of Polaris in Minnesota, hope to stem U.S. losses, in part, by growing overseas sales. Harley is pursuing emerging markets such as India and China; Victory is going after Europe. For 14 years, through 2006, U.S. motorcycle sales had increased every year. Sales started to drop in 2007 but still topped the 1 million mark. Last year, as gas prices pushed toward $5 a gallon, fuel-efficient two-wheelers got a boost. Despite the worsening economy, street bike sales were down only 3.3 percent for the year as scooters had their best year, posting a 41.5 percent gain from the year earlier, according to the Motorcycle Industry Council. “Last year, with gas prices, we could sell scooters without a whole lot of work,” said Kevin Andrews, Vespa’s North American brand manager. “With the economy, we’re talking about operational cost.” The cost of owning and operating a car, for instance, is $750 a month, Andrews said, citing American Automobile Association data. But owning and operating a scooter costs less than $300. It’s a message Vespa is promoting through advertising with its dealers and on its Web site. Still, scooter sales are down 62 percent through the first three quarters. “We had a period of constant increases, and I think the industry grew complacent,” industry analyst Brown said. “Then the economy hit hard, and it’s only gotten worse.” Confederate Motor’s Chambers expects his sales to increase next year, thanks in part to a strategy most manufacturers are using: making lower-priced bikes. Manufacturers also are coming up with ways to help buyers finance purchases. Since April, Piaggio Group Americas, which sells Vespa scooters, has offered 7.9 percent, 36-month loans. And Harley-Davidson Financial Services, aided by $300 million in notes placed with Warren Buffet’s Berkshire Hathaway earlier this year and, more recently, a stronger financial market, should support any funding needs throughout 2010, said Harley spokesman Bob Klein. Most manufacturers, meantime, are scaling back on advertising, and longstanding enthusiast publications are finding the advertising climate “harsh” with revenues down sharply, said Larry Little, senior vice president of Cycle World magazine. “Everybody’s fighting for survival up and down the food chain,” he said. Yamaha spokesman Bob Starr said his company has to be “very focused on where, when, how and why we’re advertising.” Yamaha experimented this year with low-cost viral marketing. Earlier this summer, the company produced three YouTube videos featuring some of its biggest racing names. Each video has been viewed more than 100,000 times. Whether the videos sold any bikes is another issue. “Did somebody come in to a dealership and say, ‘I saw this video ... and it was so funny I’m going to buy a bike?’ It’s hard to say,” Starr said. Sport bike sales are down 51 percent this year. And with the riding season over for much of the country, summer 2010 can’t come fast enough for the industry. READER COMMENTS Log in or register to post new comment | Log out Caveat Emptor! Beware Kevin Andrews' numbers for the cost of owning a Vespa. That number doesn't really reflect the cost of running a Vespa as your daily driver, which is what you will be doing if you replace your car with a Vespa. Many folks have discovered that Vespa rear tires only last about 2500 miles. That means you will need a new back tire every 2 months of intensive riding along with a rather expensive 3000 mile service. Plus, that kind of riding will wear out parts in the CVT automatic transmission about every second oil change. When you add these costs, the scooter becomes far less of a bargain, if at all. The best place to get realistic information on the cost of scooter ownership is ModernVespa.com John Smith | Oct 24, 2009 5:58 pm | 0 replies | View all | Post reply | Request removal

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