Ok, so this is my first time actually considering a long-term short on a stock and here is my argument:
"Harley-Davidson international retail motorcycle sales were up 2.6 percent in the third quarter of 2018 compared to 2017 and U.S. retail sales were down 13.3 percent. Worldwide retail sales decreased by 7.8 percent."
I believe there are multiple reasons for these declining sales (ofc this is represented in a significant downtrend in HOG):
1: A Luxury Item
Motorcycles have always been a luxury item, not a necessity such as a car. What I mean by this is that Motorcycles are not that practical when used as a primary mode of transport, causing them to be seen as a discretionary purchase, which is one of the first things cut from a budget during an economic downturn. Such as the one anticipated by economists within the next few years.
2: A Loyal Consumer
Their core group of consumers is getting older. What do you see when you picture a Harley Davidson owner? A 50-60-year-old white male with a leather jacket and an obnoxious beard, right? The younger generation is just not interested in Motorcycles like they used to be... or at least not in the monstrously fuel-inefficient models offered by HOG. They would be more interested in a faster, environmentally friendlier, sleeker and lighter Yamaha or Honda.
Without capturing a younger generation of customers a company cannot survive, and currently, HOG has no real way of doing this. The barrier to entry is just too high: Think about it, to get into motorcycles you have to either rent or buy. Both of which are not an option to a broke millennial. The cost of renting a Harley for a day is $100 - $200, whereas the cheapest model you can currently buy is the Street 500 for $6,849 (MSRP)
3: The Caucasian male
HOG always has had issues capturing any demographic outside of the middle-aged Caucasian male group, which used to be a good thing, because of it promoting extreme brand-loyalty. Basically, their entire customer base is middle-aged white men who got into Harleys when they were 25, there are no real new customers flocking to HOG.
HOG has 2 options here: One, they tailor their product to meet the demands of the younger generations, by designing more modern Motorcycles, doing ad-campaigns focused more on a younger mindset rather than the current corporate identity of "ALL FOR FREEDOM. FREEDOM FOR ALL." But this may cause disarray among their loyal fanbase, forcing them to lose that share of the market. Or two, they do nothing and continue slowly dying, thanks to their customer base retiring from riding.
TL;DR Motorcycles are a luxury item that young people no longer want or can afford, with a loyal fanbase which is slowly retiring their Harleys.
Discuss...
(I'd be open to anyone to change my view. )
Submitted November 08, 2018 at 01:26AM by Versart https://ift.tt/2FaHrqQ
