US motorcycle sector extends decline

US motorcycle sales shrank by 14.1 per cent in the third quarter from a year earlier, extending the unremitting decline to 15 consecutive quarters.

Sales are now less than half the level at the peak of the market in 2006, according to the California-based Motorcycle Industry Council. Highway bike sales totalled 383,000 last year, down from 660,000 in 2008 and 724,000 in 2007.

Keith Wandell, Harley-Davidson’s chief executive, told analysts last week that “the economy has yet to turn around in a convincing way and many consumers remain on the sidelines”.

Harley forecast that its shipments would be 5 to 7 per cent lower this year than 2009. Besides the 107-year-old Milwaukee-based company, the main players in the US market are Honda, Kawasaki, Suzuki, Yamaha and, to a lesser extent, BMW.

One factor contributing to the malaise is that in the US bikes are ridden mainly for sport and recreation, putting the two-wheelers low on most households’ shopping lists. Far more Asians and Europeans use motorbikes for commuting and running errands, making them an essential item even in tough economic times.

Some Japanese bike makers did not produce 2010 models. Excess inventory and heavy discounting contributed to a plunge in used-bike prices, further denting demand for new bikes. Many prospective buyers have also struggled to obtain financing.

Mr Wandell said that one of Harley’s priorities was “to aggressively manage supply in line with demand”.

Harley has closed about 40 dealerships so far this year and is seeking a further contraction in its retail network, especially in urban areas.

It has shipped almost 50,000 fewer bikes in recent years than its dealers have sold in a drive to bring down inventories and halt the slide in used-bike prices. Craig Kennison, analyst at RW Baird, estimates that Harley’s US dealers have more than halved their average inventory over the past three years.

Besides an economic recovery, the industry is pinning its hopes on an improving image, and rising ownership among women and young men.

The industry council says it is buoyed by a growing willingness among mainstream businesses, such as financial institutions, to feature bikes in advertisements, helping to dispel their “bad boy” image. The council estimates that women now make up 12 per cent of US bike owners.

Another glimmer of hope is that while bike sales continue to decline, demand for motorcycle tyres was 7.7 per cent higher in the first nine months of this year than in the period January to September 2009. This could mean that Americans are finding new uses for their bikes and that replacement demand is building.

Mr Kennison predicts that sales will start to improve next summer.