In recent years, Harley-Davidson has faced challenges with declining sales and a shrinking market share. However, one issue that has gone largely unnoticed is the shortage of repossessed motorcycles in the secondary market, which has led to credit losses and lower sales for the iconic American brand.

Background:

Harley-Davidson is a legendary American motorcycle manufacturer that has been around since 1903. The company has become synonymous with the American biker lifestyle and has a loyal customer base. However, in recent years, the company has struggled with declining sales and market share. In 2019, Harley-Davidson reported a 4.3% decline in sales, with a net income drop of 44%. The company’s financial struggles continued in 2020, as the COVID-19 pandemic led to a global economic downturn.

One issue that has added to Harley-Davidson’s financial woes is the shortage of repossessed motorcycles in the secondary market. When customers default on their motorcycle loans, the lender repossesses the bike and sells it at an auction to recoup some of their losses. Harley-Davidson Financial Services (HDFS), the company’s financing arm, then buys the repossessed bikes back from the auction and sells them as used motorcycles.

The Repo Shortage:

The shortage of repossessed motorcycles in the secondary market has been caused by a few factors. Firstly, the overall economy has been improving, leading to fewer loan defaults. Secondly, Harley-Davidson has been focusing on improving its credit approval process, resulting in fewer high-risk loans being approved. Finally, the pandemic has made it difficult for lenders to repossess bikes due to social distancing measures and court closures.

The shortage of repossessed motorcycles has had a significant impact on Harley-Davidson’s financial performance. According to a report by CNBC, the company’s credit losses have increased by 82% in the first quarter of 2021 compared to the same period in 2020. The report also stated that HDFS has been forced to hold onto more motorcycles as there are fewer repossessions, which has resulted in a decrease in sales for Harley-Davidson.

Impact on Sales:

The repo shortage has not only affected Harley-Davidson’s credit losses but also its sales. As there are fewer repossessed motorcycles available, customers looking for a used bike have fewer options. This has resulted in a decrease in sales for Harley-Davidson’s used motorcycle segment. The company’s CEO, Jochen Zeitz, acknowledged this issue during a conference call with investors in April 2021. He stated that the company is working to address the repo shortage by focusing on expanding its certified pre-owned motorcycle program.

Opportunities for Improvement:

Despite the challenges caused by the repo shortage, there are opportunities for Harley-Davidson to improve its financial performance. One option is to focus on expanding its customer base beyond its traditional demographic. The company has recently launched a line of electric motorcycles, the LiveWire, which could appeal to younger and more environmentally conscious consumers. Additionally, the company could focus on expanding its international sales, particularly in Asia, where the motorcycle market is growing.

Another option for the company is to improve its relationship with its dealers. In recent years, some Harley-Davidson dealers have expressed frustration with the company’s business practices, particularly its focus on selling large, expensive bikes. By working more closely with its dealers and offering a wider range of products, Harley-Davidson could improve its sales and market share.

Conclusion:

Harley-Davidson’s struggle with the motorcycle repo shortage is just one of the many challenges facing the iconic American brand. While the shortage has contributed.