Harley-Davidson Jumps Onto The Green Bandwagon With An All-Electric Motorcycle

The iconic American manufacturer of heavyweight motorcycles Harley-Davidson (NYSE:HOG) has been committed to evolving with the shifting market trends. The company launched its first lightweight motorcycles after nearly four decades this year, with the launch of the Street 500 and 750 in the U.S. and India. In addition, the motorcycle maker also offered technological upgrades such as voice-activated and touch-screen GPS systems in its Touring line, which rolled-out last year. With a contracting proportion of the core middle-aged Caucasian men demographic, Harley has increased focus on sales to young adults (ages 18-34), women, African-Americans, and Hispanics, also known as its outreach customers, in order to add incremental volumes. In 2013, the volume growth rate for outreach customers in the U.S. was more than twice the growth rate for core customers. Another step taken by Harley in line with current market trends is the introduction of a plug-in electric motorcycle. ^[1] Demand for environmentally-friendly electrical vehicles has been on a rise in the last few years, mainly due to growing concerns regarding rising carbon-footprint and also due to lower running costs and battery prices for these vehicles.

The new Harley-Davidson electric motorcycle dubbed LiveWire is strictly a concept as of now, but could go into production in 2016. This move will not only add a new model to Harley’s lineup, but also enable the motorcycle-maker to tap into a completely new market, resulting in additional sales. We have a $67.49 price estimate for Harley-Davidson, which is around 4% lower than the current market price.

See our full analysis for Harley-Davidson

Project LiveWire To Gauge Customer Response

Harley-Davidson’s LiveWire will not be available for purchase for at least another couple of years, as the company looks to step up the technology for the electric bike, which isn’t mature enough at this time, according to the company. But rather than launching the motorcycle as a concept model in Auto shows, Harley will take 22 electric bikes on a 30-city tour in the U.S., and follow it up with tours in Canada and Europe next year. ^[2] Starting June 24 in New York, the company will handover the LiveWire motorcycles to customers for test-drive or provide the riding experience in simulators, in order to gauge their response to the new Harley model. The tour in the domestic market will also expand to more cities in 2015, as Harley looks to “mock test” the LiveWire before considering mass production. With the possible introduction of the LiveWire in the U.S. by 2016, Harley will enter the electric motorcycle market, and could see its volumes rise in the country. The company shipped 167,016 bikes in the U.S. last year, and we currently estimate this figure to cross 200,000 units by 2017.

With the launch of the electric motorcycle in sight, we list out three major factors that could impact sales of the Harley-Davidson LiveWire.

• Slight Deviation From Harley-Davidson’s Brand Image

Harley-Davidson motorcycles are known for their muscle power, feisty undertones, and large displacement engines. Loyalists of Harley’s traditional heavyweight motorcycles might not be persuaded to purchase the much lighter lithium-ion-battery-run electric motorcycles. However, the company has looked to design the bike without compromising many characteristics of the iconic brand. Harley has described the LiveWire sound to be similar to that of a fighter jet landing on an aircraft carrier, high-toned, but still strong. In addition, apart from the core market base, the company could attract more millennial customers with the environmentally-friendly lighter electric motorcycle.

• Electric Motorcycles Typically Have Lower Ranges

Electric bikes will need to be charged at regular intervals and offer limited range at one go. The Harley-Davidson LiveWire is estimated to have a range of 53 miles, and a charging time of three-and-a-half hours. ^[3] Just for comparison, the best-selling electric car in the U.S., Nissan Leaf has a range of 84 miles, whereas the Tesla Model S has an impressive range of up to 300 miles and charges within an hour if charged at the Tesla Supercharger station. ^[4] Lower range will limit the use of electric motorcycles to short distances within the city. Apart from the need to charge frequently, this could act against the electric motorcycle as most Harley-Davidson customers, particularly who own Touring motorcycles, use these bikes for long distances and travel purposes. Touring motorcycles form over 40% of Harley’s volume mix, and together with Cruiser bikes constitute 79% of the U.S. heavyweight motorcycle market (601+cc). ^[5]

• Market For High-Power Electric Motorcycles Is Very Small

With the launch of the LiveWire, Harley-Davidson will compete in the electric motorcycle market with Zero Motorcycles and Brammo Inc. Although global electric motorcycle sales are expected to reach 1.2 million units this year, this number mainly comprises electrical scooters and small low-powered bikes. Zero Motorcycles, the highest seller of high-power full-sized electric bikes, is expected to sell only 2,400 units in 2014. ^[6] But given the market muscle and global reach of Harley-Davidson, the company aims to create demand for high-power electric motorcycles going forward. The motorcycle maker has already started countrywide marketing campaigns centered around the LiveWire, including a product placement in the next Avengers movie. Even Zero Motorcycles believes that the entry of Harley in the electric motorcycle market could bring more consumer attention to this segment. Harley-Davidson will aim to lower costs, ramp-up technology, build charging networks, which could act as an impetus to the overall electric motorcycle market in the coming years.

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1. Harley-Davidson developing an electric motorcycle, LiveWire, June 2014, bizjournals.com [↩]
2. Harley-Davidson testing electric motorcycles, June 2014, driving.ca [↩]
3. LiveWire range and charging time [↩]
4. Tesla range and charging time [↩]
5. Harley-Davidson 10-k [↩]
6. Harley-Davidson rolls out electric motorcycle, June 2014, usatoday.com [↩]