NOTHING DRIVES DOWN PRICES of a product more substantially than a large number of used versions. Can you think of a powersports product that fits this bill? It sure isn't hard today, especially if you are a franchised dealer of motorcycles. Better yet, a Harley dealer. Just how long has it been since you can remember seeing a Harley dealer displaying a Softtail price tag at factory list? It's been a while — for sure.
But I'm not going to get into that issue because it's getting a bit stale. With the threat of a recession around the corner, there are more important things to think about than new Harley-Davidsons selling below MSRP.
How about used bikes that are becoming a glut? We estimate there are maybe 6.75 million streetbikes. According to a 2006 Motorcycle Industry Council study, a third of those bikes were cruisers. That proportion is probably larger today.
What about a weak dollar that helped to bury the midrange sportbikes in the '80s? Then, the yen suddenly increased in price by 32 percent and actually increased until 1990. We sure don't need that situation now.
Still, the dollar is weakening once again. Not as much — yet — but it's sure on its way. If it continues to get weaker and weaker, obviously it will be able to buy less and less from foreign countries. Bikes that normally sell for a relatively low price, like midrange sportbikes, will be up against it! Interestingly, the weak dollar won't hurt certain imported high-priced sportbikes quite as much as bikes that need a low (or even lower) price to maintain usual demand.
Where is all of this going? Think back to the '80s when guys driving six-wheelers were traveling the countryside buying up used bikes and unloading them near a port where a partner would place them in a container and ship them to Australia, or South America, or Europe, or even back to Japan. Then at the other end, another partner would unload them and sell them to waiting customers with ready cash in hand.
Today we have a new batch of exporters, similar to the originals of the '80s in that they have plenty of cash. But this time they don't have to travel the countryside. All they have to do is go to the auctions. They collect the merchandise by outbidding someone who has less cash, then they bundle it up in containers and ship it to customers with a currency that scares the U.S. dollar with its strength. Do you know any of these high bidders? Chances are you are doing business with them regularly, albeit indirectly. But think about it — just who are the high bidders these days? — DJB
INTERPRETING THIS INDEX
Index is based on the author's analysis of the MIC Retail Sales Report, SEC filings of quarterly and annual reports, and other information provided by publicly traded companies (such as Harley-Davidson and Polaris). Readers are cautioned that these estimates are subject to error, which can result from changes in seasonal patterns due to unexpected weather conditions and fluctuations in the economy. Interruptions in the supply of popular models can also affect these forecasts. Forecasts are not intended for investment purposes. Questions concerning this index should be addressed to the author, c/o Dealernews, or the author via e-mail at firstname.lastname@example.org. Copyright © 2008 DJB Associates LLC, All Rights Reserved. Composite Index Advisory Board: Lindsay Brooke, Motorcycle Historian and Analyst • Tom Hicks, Owner/President, Southern California Motorcycles • John Matherson, Owner/President, Mission Motorsports • Paul R. Puma, GE Commercial Finance • Craig Southey, COO of Cycle Barn MotorSports Group
* The DJB Index is the square root of the total of our sales forecasts for motorcycles, ATVs and scooters. This index allows readers to look at (and keep track of easily) one number that is a summary of our predictions.