Are Harley-Davidson Customers Too Old to Carry the Torch?

Source: Harley-Davidson

The Harley-Davidson (NYSE:HOG) message may not have been stated, but it was clear: have a midlife crisis, buy a big bike, and restore that spirit of youth on roaring weekend rides. As the company’s old, white, suburban demographic enters a period of decline in U.S. society, it’s fair to ask whether Harley-Davidson’s consumer base, as constructed, can keep the company afloat. RBC Capital Markets is just one analyst that has its doubts, according to a report by Quartz.

Harley currently holds the lion’s share of the motorcycle market, with 36 percent under its control. The H-D dominance gets even more pronounced in heavyweight bikes, which includes anything 600cc or larger. RBC’s June 25 note put that figure at 50 percent for Harley.

Unfortunately for the iconic U.S. brand, its demographic of white men older than 35 — now making up 65 percent of the company’s consumer base — is not keeping pace with the growth of the rest of the population. Quartz reports that this segment of the population will not decline quite as quickly as the baby boomers that built the Harley brand (think Easy Rider) from the outset. By 2030, the percentage of boomers will shrink by 20 percent.

Perhaps the worst news of all is the decline in income that makes it harder for subsequent generations to buy big bikes that carry a Harley price tag. As many automakers have proven over the years, offering an affordable alternative that tends to guzzle less gas is enough to send legions of consumers to products from Japanese and European bike makers. The new wave of electric motorcycles may complicate matters even further for Harley-Davidson.

Source: Harley-Davidson

To Harley-Davidson’s credit, the company began taking action to confront the demographics issue long ago. Its new wave of 2015 bikes features its first new lightweight models in more than a decade.  In fact, the 500cc and 750cc “Street” bikes come complete with ad campaigns that reflect the company’s desire to branch out to new customers.

Rather than grizzled, older riders cruising through the countryside, Harley has young, urban models that are often female, Asian, and African-American. They sit on bikes parked downtown wearing clean clothes and appear as if they just came back from the hair salon. The message couldn’t be clearer. In fact, Harley caused a bit of a stir in mid-June, when the company announced it was sending its electric concept bikes on a cross-country tour as part of its Project LiveWire.

Will these adjustments be enough to confront the decline of Harley’s consumer base? It will take several years to see whether the top bike maker can pull off this feat. For now, Harley has an approach ready for any curveball the industry throws the company. It is difficult to ask for more than that as an investor.

More From Wall St. Cheat Sheet: