This story originally appeared in the Dealernews August 2010 issue.
“May you live in interesting times” is an old Chinese curse, and one that someone has apparently wished on the motorcycle industry. These are indeed interesting times.
Though the market appears to be on a continual downward slide, we’re still seeing new players coming into the market. By new I mean brands introduced since the peak in ’06, which includes Indian, Norton, electric motorcycles like Brammo, Enertia, Zero, and the seemingly endless number of Chinese brands that come and go. And then there are those brands standing on the edge testing the market. This certainly isn’t inclusive, and I’m sure there are several that have entered the market or are attempting to do so that I’ve overlooked. The point is that in addition to “traditional” brands, there are new companies and types of motorcycles entering the market on a regular basis, despite the still-shrinking number of dealer and consumer dollars.
At the same time, motorcycles seem to be getting more and more expensive, requiring, among other things, more expensive floor plans for fewer products. As we know, higher prices mean fewer potential customers.
Higher prices stem from a lot of things, such as rising costs of labor and materials. Some OEMs combat this by moving factories to parts of the world where production costs are lower — for example, Triumph’s factory in Thailand. Or they’re having sub-assemblies made by subsidiaries in Asia or Eastern Europe to help defray increasing costs in the mother country.
Another contributing factor is the increasing sophistication of some motorcycles, particularly on higher-end bikes. We now have suspensions that can be electronically controlled from the handlebars, and throttle systems and rear wheels that can communicate with one another without necessarily passing through the brain of the rider.
While increasing complication and sophistication is the way of the future, at this time it doesn’t seem to be a smart or practical thing to do. A chronic problem dealers have stated in surveys is the difficulty in finding and retaining qualified, quality help. A future of advanced motorcycle systems, and the finely honed mechanical skills, advanced tech training and high-tech diagnostic equipment needed to maintain them, could lead to higher labor and equipment costs and the possibility of decreased customer satisfaction if the problems can’t be quickly resolved.
The frosting on the cake is the inability to secure financing for customers who come in and want to buy a bike but don’t qualify.
A key player in all of this should be the OEMs. I don’t get invited to many dealer shows anymore, so I’m not 100 percent sure of what they’re doing to help alleviate the situation. I know that most, if not all, of the Japanese OEMs have cut staff, cut back on overseas press intros, and reduced production. All of this works for them, but helps you to a lesser degree. This is because at a time when more visibility is required in terms of advertising, publicity and marketing, less is usually generated as budgets are cut all around.
At least one OEM has suggested that dealers focus on service and P&A sales. While that makes some sense, no matter how you work the math it doesn’t come close to making up for the loss of revenue from vehicle sales.
It’s anyone’s guess as to how much more “interesting” these times will get, but it’s uncomfortable to think that they could get much more “interesting.” The real question is, how long are these times going to last? No one that I know of has an answer. The late Don Brown often said that the sales of motorcycles are closely tied to the building industry — when sales of new homes goes up, the industry follows. Unfortunately, the opposite is also true. It was great when not long ago the industry was selling a million-plus units per year. But can we have a healthy industry at a lesser number as well? The problem is this: If we’re selling a million-plus units, and we have around 7,000 dealers, when sales drop to less than 500,000, what happens to the between 3,500 to 4,000 dealers who are going to be forced out of business?
The same holds true for brands. Back in the last motorcycle-sales depression we had the four Japanese, Harley-Davidson, BMW, and sometimes Ducati, as primary players. There were a number of other brands, (Moto Guzzi, Vespa, Husqvarna, others), but their sales were inconsequential, and their distribution systems pretty shaky. Whether they lived or died usually only affected the dealer or customer and wouldn’t have mattered much to the overall health of the industry.
Now we’ve got Ducati, Triumph, Aprilia, Moto Guzzi, Husquvarna, Vespa, Indian, Royal Enfield and others as secondary brands. In the best of times, their sales numbers weren’t large. Now it remains a question as to how far their sales can diminish before their management decides it’s no longer worthwhile to be vested in this market.
So, how does one survive “interesting times”? Frankly, I don’t think that there’s a silver bullet. Even well-managed dealerships are likely to disappear as their customer base withers due to circumstances beyond their control. The only positive thing is that, there will continue to be a market no matter how it shakes out. But how big will it be and who’ll be left when the dust clears?