Let's Ride
The Journal Sentinel's Rick Barrett is the proprietor of this blog for Harley enthusiasts and anyone else interested in the motorcycle industry and culture.By a 4-to-1 ratio, Harley dealerships griped that inventories of new bikes were too low rather than too high, according to a recent survey by Robert W. Baird & Co., sampling 72 dealers.
"Personally, I would like to have a few more bikes on the ground because we still get people who come in and want a certain model and color that day," said Todd Berlin, sales manager at Suburban Motors, a Harley-Davidson dealership in Thiensville.
"You have to go on the hunt for some bikes now, and that's not easy," Berlin said.
Harley has cut motorcycle production, resulting in shortages of some models and making used bikes more appealing.
The world's largest maker of heavyweight motorcycles has taken the steps to protect the value of its brand.
Harley does not want to flood the market with bikes that dealers have a hard time selling in a troubled economy.
Dealerships trade motorcycles with each other as a way to find bikes for customers but not carry too much inventory.
"Now it's hard to get some bikes because nobody has a huge amount of inventory," Berlin said.
Some of Harley's most expensive motorcycles, including custom models, are in short supply, according to dealerships.
Managing inventories of bikes costing up to $32,000 is a balancing act with many variables, including interest payments and depreciation costs.
The Baird survey found that Harley dealers, on average, had 41 new motorcycles in stock in October and November - down from 67 a year ago and 78 in October and November of 2006.
"I think the balance is coming, and it's a good trend," said Baird senior analyst Craig Kennison.
"Harley is still working on getting the right bikes in the right place at the right time," Kennison said.
The survey found that demand for used motorcycles improved for the fourth consecutive quarter, up 5% as dealers substituted used bikes for scarce new models.
"We have not yet seen a turnaround in the new bike market, but we are getting close," Kennison said.
"A strong used bike market makes new bikes more affordable on trade-ins, supports healthier credit, drives dealer profits and enhances the brand," he added.
Tighter inventories are a sign that Harley's plan of protecting brand value through scarcity is working.
"Still, too many dealers are discounting for our taste," Kennison said. "We aren't seeing prices rise quite as much as we thought. Dealers are still willing to discount, which is a surprise given the lack of inventory."
Industrywide trend
Other motorcycle manufacturers also have eased off production after having too many bikes they couldn't sell when the economy tanked and consumer loans became more difficult to get.Some dealerships closed, partly because of the sharp decline in sales and too much unsold inventory.
"Absolutely, the manufacturers are cutting back. They've learned that they can't build too many bikes and force them on dealers," said Rob Strauss, owner of Rob's Performance Motor Sports, a Honda and Can-am motorcycle dealership in Johnson Creek.
Earlier this year, some dealerships were selling new, leftover 2008 and 2009 motorcycles at huge discounts. That's not a sustainable business model, Strauss said.
"Now we have to re-educate consumers, who are used to getting those rebates. We are back to a normal business cycle, where they won't get all of that," he said.
But dealerships don't want their inventories so lean that they risk losing sales and bikes become unaffordable.
"You need a healthy balance, where customers aren't being abused and dealers can still make a profit," Strauss said.
