This Motorcycle Maker Faces Headwinds Abroad
Harley-Davidson is an iconic American brand with roughly 54.9% of the heavyweight motorcycle market share in the U.S., but the bike maker also has its sights set on dominating the international market. It's a challenging endeavor -- the company experienced red tape that slowed business overseas during its most recent quarter. When this is paired with new competition from Polaris Industries , there are a few headwinds Harley has to deal with overseas.
Overall, Harley had positive performance overseas recently with retail sales in international markets growing 4.7% during the fourth quarter and 4.3% for the year; however, recent sales have started to slow.
The company had a frustrating fourth quarter in Latin America, where sales dropped 2.8% as a result of a slow Brazilian motorcycle homologation process. The certification process kept Harley from getting their new Rushmore and Sportster motorcycles to dealerships before the end of 2013. This had a large effect on overall Latin American sales because Brazil is the company's largest market in this area. The bikes have since been approved and should arrive in Brazilian dealerships by mid-February.
Harley's Europe, Middle East, and Africa, or EMEA, retail sales decreased 1% during 2013 despite a 5.5% increase for its fourth quarter. The recent increase in sales is due to strong growth in Europe, specifically Germany and France. The company's market share in Europe alone increased 0.7% to 12.8%.
In response to this fourth-quarter improvement CFO John Olin said, "While we're encouraged by fourth quarter results, we remain concerned with ongoing economic challenges in Europe and the potential impact on our European business." The company plans to focus on what it can control while promoting its brand across Europe in hopes of continuing its recent sales growth.
Harley faces some of its biggest potential headwinds in China. The country has several laws in place that make owning a luxury motorcycle more expensive and less practical.
Nearly 200 cities in China have placed bans on motorcycles to cut down on traffic complications. In Beijing, motorcycles are banned from certain roads completely or during the day. License plate distribution for motorcycles is limited with certain plates allowing access to corresponding roads. Motorcycles must also be destroyed after 11 years of registration regardless of bike quality. These complications are hindering, but have not stopped, Harley from working to grow motorcycle culture in China through rallies and bike shows.
The company had a reasonably successful year in its Asia-Pacific region with retail sales up 6.1% for its most recent quarter and 9.8% for 2013.
Polaris' international expansion
Polaris, the company that recently relaunched Indian Motorcycles, has had success overseas with international sales up 46% in its fourth quarter and 29% for 2013. This high growth outpaces its core business which is part of the company's business strategy.
Polaris gains an advantage with the diversity of its products. In addition to heavyweight motorcycles, the company's overseas growth was helped by the recently acquired Aixam. Aixam produces small on-road vehicles; it drove sales in the EMEA region up 61% during the most recent quarter. While Polaris shined in the EMEA market, its Asia-Pacific sales were down 4% for 2013. The company hopes to boost results in this region when it launches an joint venture plant with Eicher Motors in India during 2014.
It's not yet clear how much the launch of Indian Motorcycles will affect Harley's business overseas, but for now most of Polaris' international business doesn't cut into Harley's.
Facing the challenge
Harley-Davidson faces economic and legal headwinds as it continues to expand overseas. With the launch of the new Street and Rushmore motorcycles, the company will hopefully reach a larger, more diverse market. Specifically the Street 750 and 500 bikes should offer better maneuverability in foreign cities. Moving forward, the company should facilitate the growth of motorcycle culture as a whole while it develops a strong brand abroad.
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The article This Motorcycle Maker Faces Headwinds Abroad originally appeared on Fool.com.Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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