During the first half of the twentieth century, there were two prominent American motorcycle companies: Indian and Harley-Davidson. Motorcycles were subject to frequent breakdowns. The technology was still crude. Riding on dusty roads and frequent repairs left motorcycle riders looking shabby. Mothers didn’t necessarily want their daughters associating with those grungy looking motorcyclists. Indian went out of business in 1947. Although there were a few imported motorcycles, Harley retained nearly 100 percent of the market for bikes with large engines.
In the 1960s and 70s the Japanese invaded the American market. Their bikes had superior technology. They were reliable; they didn’t breakdown. Perhaps, just as importantly, the Honda motorcycle distributors benefited from clever marketing. One of their advertisements was placed in a family magazine. It was a full page photograph of a young man in a tuxedo on a Honda motorcycle. There was a young lady in white attire behind him—side saddle, of course. They were shown at the entrance to an elegant hotel. The caption read: “You meet the nicest people on a Honda.” That advertising campaign made motorcycles acceptable to a broad customer base, and it gave Honda a significant share of the American motorcycle market. By the early 1980s, Harley-Davidson’s share of the market for motorcycles with large engines dropped to 15 percent. The company was close to failure.
At that time, there was a 4.4 percent import tax on foreign motorcycles. The administration of President Reagan raised the import tax on large motorcycles to 49.4 percent. The rate was set to decrease each year for the next five years until it was back to 4.4 percent. Government intervention is generally credited with saving Harley-Davidson from extinction. The tariff placed on imported bikes gave Harley the time it needed to modernize. The company wasn’t especially important to the American economy, but Harley-Davidson was and remains an American icon. The company retooled and started producing modern, high quality machines. Harley marketed their revived, expensive bikes to prosperous middle age buyers. The company became immensely successful during the next two decades, both domestically and internationally. Now Harley-Davidson has a new challenge.
Tariffs on imported steel will increase the cost of the motorcycle. Worse, retaliation by U.S. trade partners for U.S. tariffs imposed on the trade partners will diminish Harley’s foreign sales. The absence of trade agreements between the U.S. and other foreign countries allows those countries to establish punitive tariffs. That forces Harley to outsource manufacturing to those countries or forego sales. Manufacturing in foreign countries doesn’t diminish Harley’s profits, but it certainly does diminish employment in the U.S.
America’s recreational desires are changing. Fewer of us golf, bowl, play tennis, ride horses, practice target shooting sports, hike in the woods, or ride large motorcycles. The previous generation of Harley jockeys are riding off into the sunset. The wages of younger people haven’t kept pace with the rising cost of living, and that makes it difficult for them to purchase the relatively expensive Harley-Davidson motorcycles.
The company once tried to patent the unique sound of their motorcycle. We may not be hearing the “Vrrrooom” of a Harley quite as often in the future unless Harley-Davidson reinvents itself again.