Lifestyle

Hogging From Harley-Davidson


Just entering its 10th year, Victory Motorcycles follows in the footsteps of the biggest domestic competitor to Harley-Davidson of all time

A new line of American motorcycles was the buzz of the 25th annual Cycle World International Motorcycle Show, held in January in New York. But this year, the oohs and aahs belonged not to Harley-Davidson (HOG)—the American motorcycle mainstay with close to a quarter of the U.S. motorcycle market—but to a promising young entrant. Victory Motorcycles, the 10-year-old subsidiary of Medina (Minn.)-based snowmobile and ATV maker Polaris Industries (PII), used the event to unveil two boldly futuristic-looking luxury touring motorcycles dubbed the Vision Street and Vision Tour.

In 2005, the last year for which data exists, sales of new motorcycles were approximately $9.8 billion, according to the Irvine (Calif.)-based Motorcycle Industry Council. Harley-Davidson sales are expected to top $6 billion for 2006, although it doesn't break out numbers on its motorcycle division. Overseas markets like China and Japan now account for more than $1 billion a year in sales, or 22.5% of all bikes sold—up from 20% last year. Retail sales of Harley bikes outside the U.S. have climbed some 16% since the beginning of 2006 (see BusinessWeek.com, 11/6/06, "Harley Just Keeps on Cruisin'").

To Honda (HMC) and BMW, whose Goldwing and K1200LT, respectively, have dominated the luxury-touring category for years, Victory's announcement may have sent ripples all the way to the design boards. But to Harley, this seeming coming of age for Victory Motorcycles portends the return of something the company hasn't seen in nearly 50 years: a significant American rival.

Indian's Legacy

In 1901, two years before Harley-Davidson was founded, George Hendee and Carl Oscar Hedström founded Hendee Manufacturing in Springfield, Mass., which would later be called the Indian Motorcycle Manufacturing Co. For the first half of the 20th century, Indian's bikes went toe to toe with Harley, with such classic models as the Scout and Chief, both introduced in the early 1920s, selling nearly as well as the most popular Harleys of the day.

The two companies created such strong brand loyalties that motorcycle culture became partisan—if you owned an Indian, you rode with other Indian riders, and if you owned a Harley, you rode in a pack of hogs. "Indian and Harley were so different," says Dale Walksler, who owns and operates Wheels Through Time, a Maggie Valley (N.C.) museum that boasts one of the world's premier collections of vintage American motorcycles. "Harley had its throttle on the right and shifter on the left. To preserve brand loyalty, Indian had the shifter on the right and the throttle on the left. It kept Indian riders from buying Harleys."

Both companies survived the Great Depression and contributed vehicles to World War II, but Indian finally succumbed to bankruptcy in 1953. A Gilroy (Calif.)-based company bought and manufactured motorcycles under the Indian name in 1999, but went bankrupt in 2003 after losing an investor. In 2006, London-based private equity group Stellican announced plans to resurrect the Indian Chief bike this year.

Victory Revs Up Sales

Since the 1960s, Harley-Davidson has faced new competition in Japanese makers like Honda and Kawasaki, who could make more powerful bikes for cheaper, but has held the distinction of being the only major American manufacturer of motorcycles—a selling point that has helped the company establish a brand cult that extends beyond motorcycles into many lucrative merchandising arenas.

Few people understand Harley-Davidson's dominant position in the motorcycle market as well as Tom Tiller, CEO of Polaris Industries.

"It's hard to argue with Harley's success in the motorcycle business," Tiller said hours before the New York unveiling of Victory's new line. "A lot of the companies that have failed in the motorcycle business tried to 'out-Harley' Harley. I think that's basically impossible to do. It's a phenomenally strong brand."

After a rocky first few years, Victory Motorcycles managed to gain the interest of riders by designing bikes that emphasized distinctly modern styling and developing a brand identity as "The New American Motorcycle." The Vegas, a 2003 model styled in part by acclaimed custom bike builder Arlen Ness, is the company's best-selling model to date, and helped lead Victory to rapid sales growth. Over the last few years, Tiller estimates, the company has grown at 10 times the rate of the motorcycle industry. In 2006, Victory—which represents less than 10% of Polaris' total sales—was the only division of the company that reported an increase in sales, up 13% from 2005.

"Shocker" of a Luxury Bike

Harley-Davidson, which includes Buell Motorcycle and other properties, grew 9% from 2005 to 2006, according to the company.

"A lot of people were very skeptical when we started that we could ever get one customer. Victory was a brand-new name, nobody had ever heard of us, and the barrier for entry was too big," says Tiller. "But by offering a unique product—positioned around the idea of being new, futuristic, and American—we have become who we are."

When it pulled the velvet cloths off the Vision Street and Vision Tour, Victory showed the world just how committed it is to selling bikes with this truly modern identity. An angular, V-shaped face gives way to sleek, flowing curves that fill out the long-body (65.7-in. wheelbase) bikes. High-tech amenities abound, such as an electronically adjustable windscreen, adjustable side wind deflectors, and adjustable rear suspension. Mentions of Star Trek are not without merit. Tiller himself said the bikes might look more at home in the year 2014.

"It was a bit of a shocker," says David Edwards, editor-in-chief of Cycle World, who was on hand for the Long Beach (Calif.) unveiling of the Vision line last December. "It's a risky step. Motorcycle people tend to be fairly conservative in what they like in a bike."

Rival to Honda and BMW, Too

As Indian did in its heyday, Victory is blazing a trail apart from Harley's. "Polaris is finessing to a less pretentious buyer [than Harley]," says museum curator Walksler. "A lot of people that buy a Harley buy a motorcycle for a store-bought image, while Victory is going after experienced and new riders with more of a desire to own a unique motorcycle."

Does Victory have what it takes to revive a nostalgic American motorcycle rivalry? "They will never approach the rivalry Indian and Harley had in the '20s, '30s, and '40s, but I don't think they even aspire to that. Nobody's going to go after a company that sells a quarter-million bikes a year," says Edwards.

"But they certainly have room to grow," he adds. "It's good to see another company come in to not just challenge Harley, but challenge Honda and BMW in the luxury touring field, where everybody else has pretty much ceded defeat."

Click here to see a roundup of America's greatest motorcycles.


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