Moneybox

Scorpio Falling

How Harley-Davidson went from Trump’s favorite motorcycle to an American pariah.

A Harley-Davison motorcycle is seen in the middle of a stocks chart.
Photo illustration by Slate. Photo by John MacDougall/AFP/Getty Images Plus.

The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s new podcast about companies in the news and how they got there.

If you tour the motorcycle exhibits at Smithsonian’s American History Museum, you’ll see quite a bit of notable memorabilia, including that of stunt riding legend Evel Knievel.* The daredevil biker donated some genuine artifacts from his career to the Smithsonian, including the 1972 Harley-Davidson XR-750 on which he performed some of his most famous jumps. That piece of history is now one of the crown jewels of the Smithsonian’s motorcycle collection.

It’s not hard to see why: Harley-Davidson is one of those storied brands, like Levi’s or Coca-Cola, that represent America to itself and to the rest of the world. But over the past few years, Harley’s traditional strengths, including this quintessential Americanness, have become its biggest liabilities.

It goes back to Donald Trump. The arrival of a new president with a fixation on American manufacturing seemed like good news for Harley: Company executives were invited to the White House less than a month after Trump’s inauguration. It seemed like the beginning of a beautiful friendship. But being a symbol of America turned out to be a problem for Harley when Trump began trade wars with other parts of the world. In 2018, when Trump imposed 25 percent tariffs on European steel, Europe wanted to strike back, looking to hurt something that represented America. According to Gabrielle Coppola, who covers automakers for Bloomberg News, Europe’s mindset ended up being, “If you’re going to do that to us, we’re going to place a tariff on imported Harley motorcycles.”

That tariff would have added thousands of dollars to the cost of buying a Harley in Europe, but only if that Harley were made in America. So Harley started making more bikes in Thailand to sidestep the tariff—which meant Trump’s effort to protect American manufacturing, à la Ronald Reagan in 1982, had the opposite effect. As a result of that, Coppola says, Harley “went from being this darling of Trump—because they represent American manufacturing and history and heritage—to, in his eyes, not supporting that narrative and his trade policy. So that caused some brand trauma. There are a lot of Harley riders that are Trump supporters because one of the main values of the brand is riders say, ‘I want to buy American.’ So anything that insults or dents that image is bad for them.”

Harley found itself paying a price for being a treasured piece of Americana. And, at the same moment, it also found itself paying the price for its longtime romance with the baby boomer generation. The boomers who long to take to the highway with Peter Fonda haven’t abandoned Harley, but they’re causing the company problems in a few ways. Because boomers are its core customers, Harley caters to them almost exclusively. At this point, that means making huge, comfy touring bikes, which are more expensive to buy, and good for Harley’s profit margins, but not a winning play in the long term. Plus, boomer motorcyclists keep getting older. Some have quit riding; some are no longer here. Either way, Harley can’t count on their business forever. Yet the company has been desperate to hang onto older customers. The downside of that: Younger riders prefer cheaper, sportier bikes, and Harley hasn’t focused enough on that segment of the business to make it work.

The result has been an accelerating death spiral. The beginning of 2020 saw the company’s worst sales numbers in 16 years. And that was before the pandemic, during which dealerships started to shutter. All those dismal results led Harley’s CEO to step down and a longtime board member, Jochen Zeitz, to fill in. Zeitz is different from previous Harley CEOs: He’s German, making him the first non-American to lead Harley, and he comes from the footwear industry, having gained prominence for lifting Puma from bargain bin sneaker to stylish fashion brand. Harley boosters are hoping that Zeitz’s marketing aplomb can do the same thing for Harley that it did for Puma: give a moribund brand some new cachet.

He’s already working on it. Zeitz’s play has been to cut costs and slow down production, in part by eliminating more than 700 jobs. In the short term, he needs to get Harley’s bleeding under control, but in the longer term, he has a bigger problem: How can he reshape Harley’s brand so it can appeal to people under 50? And who will those new younger customers be?

Part of this will be about marketing and image shaping. Harley’s now trying to reach beyond white guys with tattoos—it now has ads featuring people of color with professional incomes. And part of it will be about making new products that these new customers really want. Harley’s first stab is the LiveWire. It’s an amazing machine in many respects, an electric-powered motorcycle that goes from zero to 60 faster than any bike Harley has made before. But, starting just under $30,000, it’s at least three times more expensive than most sporty entry-level bikes. And, it’s a radical departure from the gasoline-soaked divide that Harley spent more than a century cultivating. Reconciling the electric bike with the Harley brand is little tough—it doesn’t quite seem on brand for Harley, with its roaring growling combustion engine. How will Harley make that fit its image?

“I think it’s a real marketing challenge,” says Coppola. “Jochen thinks it’s great—he says, Who would ever think that our Harley rider would want an electric bike? But when you ride it and you feel it, it’s totally Harley. I don’t know if everybody agrees with that. It’s quiet, and I think the people that want the growl are always going to want the growl.”

Listen to the full episode using the player below, or subscribe to Thrilling Tales of Modern Capitalism on Apple Podcasts, Overcast, Spotify, Stitcher, or wherever you get your podcasts.

Correction, Sept. 23, 2020: This post originally misspelled Evel Knievel’s first name.