Harley's Near-Term Throughput Compressed by Higher Borrowing Costs for Dealers and Consumers

With a long history of manufacturing experience, Harley-Davidson has brand strength and a dealer network that give the firm a wide economic moat and solid position in the US motorcycle market. However, there are no switching costs to protect Harley's brand when consumers replace their bikes, and the premium price Harley commands relative to its peers has proven problematic during cyclical downturns and periods of competitive pricing, hurting Harley's retail sales and shipments. In 2020, as a result of temporary factory shutdowns, dealer closures, and shifted product launches, Harley ceded massive market share. While still a key market player, Harley's market share fell around 800 basis points, to 42% in 2020 from above 50% in 2019. And while it recovered 3% of share in 2021, it had again ceded share to 38% in 2023. We plan to monitor Harley's market share to help determine the strength of Harley's brand intangible asset.