Harley-Davidson has unveiled its new strategic plan for the next five years to revive the brand. Called The Hardwire, the new five-year plan lays down Harley-Davidson's goals from 2021 to 2025, and include a mid single-digit annual growth in revenue and a steady improvement in operating margin from motorcycle sales as well as a double-digit growth in Harley-Davidson Financial Services (HDFS). The company is also looking to expand into new segments and to create a new division dedicated to electric motorcycles in the next five years.
The Hardwire plan builds on the previous Rewire strategy and focuses on investing in the touring and heavyweight cruiser segments, the most profitable segments for Harley-Davidson. There will be selective expansion into new segments, and aims to establish a new electric vehicles division. The company will also look at growth in non-motorcycle businesses, which will include apparel and accessories but not limited to those, and will focus on increasing connect with customers going forward. So, as far as products are concerned, Harley-Davidson will focus on heavyweight cruisers, touring bikes and new segments like adventure touring with the upcoming Harley-Davidson Pan America.
According to Jochen Zeitz, chairman, president and chief executive officer of Harley-Davidson, the company will establish a 70-20-10 construct, with a 70 per cent focus on its core segments, 20 per cent on new segments and 10 per cent on other opportunities including small displacement models. So, 70 per cent of the company's focus will be on its traditional heavyweight cruisers and touring models, and 20 per cent will be on new segments, such as adventure touring, spearheaded by the Pan America. Harley sees potential for growth in this segment, and believed adventure-touring will be an extension of Harley-Davidson's touring heritage.
Harley-Davidson however seems to have given a pass to the streetfighter segment, which was to have had a new model in the Harley-Davidson Bronx. But there's no mention of the Bronx, so if that model's future remains uncertain. The 20 per cent focus on new segments will also include middleweight cruisers, where Harley-Davidson is expected to introduce new models in the next five years. This segment will also use the same Revolution Max engine used in the Pan America.
For emerging markets, such as India, the remaining 10 per cent of the company's focus will be on low-displacement models with partnerships. Harley-Davidson already has a partnership with China's Qianjiang Group for a small displacement model, possibly a 338-350 cc model. As for India, with a new business model for India, Harley-Davidson has signed a licencing and development deal with India's Hero MotoCorp. Where that partnership leads and the details of any product development efforts under that collaboration are yet to be announced.
For the next five years, Harley-Davidson expects $190-250 million in capital spending annually, and the leadership is aiming for a 20-25 per cent growth in revenue from the motorcycle segment in 2021. However, 2020 has not been a good year. The final quarter of the calendar year saw a net loss of $96 million, resulting in a year-end net profit of just $1.3 million for the 2020 fiscal year. Motorcycle shipments in 2020 fell 32 per cent to 1,45,200 units.
So, what has changed from the More Roads to Harley-Davidson plan, to The Rewire and now The Hardwire? CEO Zochen Zeitz's predecessor Matt Levatich envisioned making 100 new models in 10 years, which will attract more women and younger riders into the Harley-Davidson family, at the same time expanding the brand's international reach. With The Hardwire, Zeitz has laid the ground for a narrower model line-up, a leaner organisation, and exiting markets and segments entirely, like the made-in-India Street series. Harley-Davidson's future, will be interesting to watch, and where this new roadmap leads, will be worth watching.