Harley-Davidson is looking to increase focus on the used motorcycle market in the United States, in the brand's latest efforts to increase customer base. And to do this, Harley-Davidson plans to roll out a certified pre-owned bike program, known as H-D Certified, to position well-tended bikes as a substitute for entry-level models. The strategy is similar to what carmakers have been following to position well-maintained used vehicles as a substitute for low-margin, "entry-level" new models. The used bikes program is part of a new five-year turnaround strategy outlined by new Harley-Davidson CEO Jochen Zeitz, part of the latest efforts to expand the brand's appeal beyond middle-aged and affluent riders.
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The 118-year-old American brand has been steadily losing market share in the brand's domestic US market amid declining retail sales for six years. Harley-Davidson's latest five-year plan has been dubbed "The Hardwire" and under the new plan, Harley is following a "70-20-10" structure, with 70 per cent of its efforts going to the core business, 20 per cent into expansion into new segments that offer clear potential for more profit, and 10 per cent for testing ideas for long-term growth, including plans for smaller displacement models in new markets, like in China, with the Qianjiang Group, and in India, with Hero MotoCorp.
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The used bike program is expected to build brand loyalty and attract new customers
For Harley-Davidson, the used bike program will offer a way to build brand loyalty and attract new customers, without engineering and manufacturing new lower-cost bikes, which have lower profit margins. Under the H-D Certified program, Harley-Davidson will certify motorcycles up to five years old with upto 40,000 km mileage, and these bikes will be inspected and backed by a 12-month limited warranty, and can be financed by Harley-Davidson's financial arm.
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While Harley-Davidson has a similar program in the United Kingdom for used bikes, this is the first time the brand is entering the used marketplace in the United States, the company's biggest market. The program will be launched in late April, and over 300 dealerships have expressed interest in participating so far, according to Harley-Davidson.
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Harley-Davidson intends to focus on touring and heavyweight cruisers through the H-D Certified program
In fact, market data show that Harley-Davidson may be onto something with the H-D Certified program. The auto industry is known to offer higher profit to dealers with such programs with faster inventory turnover. According to JD Power, such programs are more effective in cultivating brand loyalty and tend to generate more business for the financial arms of automakers. The value of the used motorcycle market in the US was pegged at $7.5 billion in 2017, with Harley-Davidson bikes accounting for more than half of sales. That 2017 study also showed that customers aged 18-34 were buying three Harleys for every new one sold.
In recent years, a booming demand for pre-owned Harleys has been a drag on the company's US retail sales, which have declined nearly 40 per cent since 2014. Now, under "The Hardwire" Harley-Davidson has done away with some of the cheaper entry-level models and will ramp up investment in touring models, and large heavyweight cruisers which drive up profit for the brand. Sales of ancillary products, like accessories, general merchandise and financial services will also be on focus, which will try to leverage the H-D Certified program.
