With the first quarter results in from major OEMs, the impact of the coronavirus has created a rippling effect that will reflect well into the remainder of the year.
Harley-Davidson’s global retail motorcycle sales in the first quarter were significantly impacted by the virus. U.S. retail sales were up a strong 6.6% until the pandemic took hold in the U.S. in mid-March. For the full quarter, U.S. retail sales finished down 15.5% compared to prior year for the Motor Company. International retail sales were down 20.7% compared to 2019 and Europe 601+cc market share was 7.6% in the first quarter.
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Harley-Davidson is executing a set of actions, referred to as The Rewire, that will lead into a new five-year strategic plan. This will incorporate key products and initiatives from the More Roads plan, but will focus more on the markets and products that can drive performance in terms of profitability and growth.
“COVID-19 has dramatically changed our business environment and it is critical we respond with agility to this new reality,” said Jochen Zeitz, acting president and CEO of Harley-Davidson. “The crisis has provided an opportunity to reevaluate every aspect of our business and strategic plan.”
These actions are part of a comprehensive playbook designed to address top priority opportunities, drive consistent execution and reset the company’s operating model in order to reduce complexity, sharpen focus and increase the speed of decision making. Harley plans to share more about The Rewire in its Q2 update.
Harley-Davidson’s U.S. 601+cc market share was down 2.2 percentage points to 48.9%, but still leads in the U.S. Indian Motorcycle trails behind, even after reporting an increase in sales in part because of customer response to the 2020 Challenger.
Polaris reported motorcycle segment sales, including PG&A, at $127 million. This is up 7% compared to the first quarter of 2019, driven by increased sales of both Indian Motorcycle and Slingshot. Gross profit for the first quarter of 2020 was a loss of $1 million compared to a profit of $4 million in the first quarter of 2019.
North American consumer retail sales for Indian Motorcycle increased low-single digits percent during the first quarter of 2020 in a weak mid- to heavy-weight two-wheel motorcycle industry that was down high-teens percent. North American consumer retail sales for both Indian Motorcycle and Slingshot increased low-single digit percent during the first quarter of 2020, while the North American motorcycle industry retail sales for mid- to heavy-weight motorcycles including three-wheel vehicles, was down mid-teens percent in the first quarter of 2020.
“Polaris opened 2020 on an upswing, with retail demand significantly outpacing our expectations, but the abrupt impact of COVID -19 in mid-March drastically altered our momentum,” said Scott Wine, chairman and chief executive officer of Polaris Inc. “Since then, we have honed our focus to four goals which will guide us through this crisis: the safety of our employees, the viability of Polaris, the strength of our dealer network and stewardship for our shareholders and other stakeholders. Through fast action and bold decisions, we enhanced workplace safety and re-aligned our operations to match evolving demand trends.
“We also moved aggressively to optimize our cost structure, preserve liquidity and augment our financial strength and flexibility, and we are actively supporting our dealers as they find innovative ways to serve customers and reignite demand. We expect the COVID-19 pandemic, and its corresponding shock to the economy, to be a substantial challenge for the global economy and our business through the remainder of the year and possibly longer.”
With the upheaval of our industry in early March, OEMs have gotten creative in order to reach customers, even with the stay at home order in place.
Indian Motorcycle introduced its Click.Deliver.Ride program in April, providing riders with of the option of purchasing a motorcycle from the comfort of their own home. While riders have long had the ability to search for their desired model and customize it to their preference, they can now work with their local dealer, either online or via phone, to complete their purchase and have their bike delivered right to their doorstep.
“Over the last month, we’ve all had to adjust to a new way of life and have had to alter the ways in which we conduct our business,” said Mike Dougherty, Indian Motorcycle president. “Our hope is that Click.Deliver.Ride. will help bring peace of mind to both our loyal customers and our network of dealers.”
Consumer purchasing habits for parts and accessories have also changed as a result of the virus, according to Hedges & Company, a digital marketing agency serving the powersports, automotive aftermarket and OEM parts industries. The company analyzed 7.7 million online user sessions and online purchases from parts and accessory websites in the U.S. and Canada. The analysis included retailer websites and manufacturers selling direct to consumer. In the analysis, the company gave online sales from the week of March 1 an index of 100, before wide-spread shutdowns were in place. The week of April 12-18 had an index of 140, or a 40% overall increase in online sales of parts and accessories from six weeks earlier.
As an industry, we will wait and see how Q2 plays out, although we do expect hits from COVID-19 to continue into summer. The increased uncertainty surrounding the virus makes a timeline near impossible to pin down, unsure of whether or not we will be back to “business as usual,” but our sources do anticipate demand in the coming months. Stay optimistic, because we are ready to ride out the storm.