[ad_1]
Polaris Industries (NYSE: PII) managed to get yet another quarter of increased sales of its Indian Motorcycle brand, but continuing to outperform its competitor Harley Davidson (NYSE: HOG) or industry trends could become more difficult.
Sales in India grew to less than 10 percent, even as the market for motorcycles with engine sizes greater than or equal to 900 cubic centimeters fell by 10 percent and sales of Harley-Davidson dropped by more than 13% for the period. But the pressure exerted by President Trump's tariffs on steel and aluminum imports could soon make its effects felt.
US producers are taking advantage of the situation by raising their prices and, with three-quarters of Polaris' suppliers being domestic producers, the manufacturer of motor sports vehicles continues to experience rising costs.
Source of the picture: Indian Motorcycle.
Track where the market leads
Polaris has been able to sell more motorcycles despite many negative factors that have disrupted the motorcycle industry, with consumers reacting positively to its smaller and lighter motorcycle range, which includes Scout, Sixty Scout models. and Bobber Scout. While heavy truck sales dropped in the third quarter, this trio of motorcycles was still able to record gains, especially abroad, where sales jumped 18%.
With the upcoming release of the new FTR 1200 motorcycle, a flat street style race that has generated a lot of excitement, Polaris' mid-size motorcycle range can continue its momentum in 2019. This could getting lost the next set of higher fares takes its toll.
Polaris has already raised prices to pass on some of the costs of the tariffs, which shows that consumers are still paying for a trade war, but if they are not able to negotiate exemptions from the enhanced tariffs, they are ready to put more "aggressive" measures. pricing, which could be detrimental to growth.
Harley-Davidson has been faced with a problem: his motorcycles are too expensive. They have a very high price, prices worthy of a manufacturer with a 50% market share, but their cost has resulted in a sharp drop in sales during 14 of the last 15 quarters.
But trends impose a cost
The evolution of the dynamics of the industry has also affected the profitability of Polaris. Because new buyers are looking for smaller and lighter motorcycles, which carry lower price tags and narrower margins. Polaris saw its average selling price fall by 4%, while the adjusted gross margin has been rising since the beginning of the year due to lower warranty and promotion costs, but now expects its gross profit volume and product mix.
Polaris initiated several strategic initiatives a few years ago to ensure its ability to properly manage inventory at dealerships, helping the leader of motorsports to weather this difficult period. Because motorcycles tend to adopt smaller motorcycles, its production capabilities are now geared in this direction, even though the company has not abandoned the big motorcycle market. The new Chieftain Limited motorcycle, which starts at just under $ 26,000, is an exception, but you'll always find more scouts flock to dealers than other models.
It was the Scouts, however, who helped the Indian surpass 25% of the mid-size motorcycle market in the third quarter. more.
Key to take away
Indian Motorcycle is incredibly popular since Polaris resurrected from bankruptcy a few years ago and has been able to inspire continued enthusiasm for the brand despite the industry downturn. While it could have sold a few more bikes because of Harley-Davidson's deal with Trump on the transfer of production abroad, it is based on the production of a product from quality that Indian sales continue to grow.
Until now, Polaris has weathered the storm, but more and more clouds are moving and it is highly likely that it will be dragged down, as did Harley- Davidson because of them.
[ad_2]
Source link
