HDFS Incentives Unlikely to Spur Retail Sales, Analysts Says

Harley-Davidson Financial Services’ latest promos — 3.99% for new motorcycles and 4.99% for used — will likely do little to spur retail sales, James Hardiman, managing director of equity research at Wedbush Securities, told Powersports Finance.

“Having followed [Harley-Davidson] for a long time, at least half the time there’s some sort of major financing promotion underway, and [current rates] don’t strike me as exceedingly promotional,” Hardiman said. “I’ve seen much lower. If financing rates are really what people are waiting for, I think consumers could probably find even lower rates if they had a little bit of patience.”

There is a clear relation between financial services and retails sales, Hardiman added. Harley-Davidson reported that third-quarter 2018 domestic retails sales dropped 13% year over year. However, Harley-Davidson Financial Services originations grew 9% in that period, to $893.4 million, in part spurred by used-bikes sales. Smaller credit losses also contributed to the growth, Hardiman added, with losses dropping 18 basis points to 1.55%.

The U.S. motorcycle market continues to be a challenge for Harley and, while Wedbush currently rates the OEM’s stock as “neutral,” there a few factors that will influence the ranking in the near future, Hardiman said.

“There are increasing concerns that a recession is not too far off,” Hardiman said. “If you believe that a recession is going to happen within the next one to two years, [Harley is] an unknowable stock,” he added, meaning that there is still uncertainty about when the recession would occur and how that would affect Harley.

Additionally, consumer reaction to new products will impact Harley’s performance. The OEM has announced plans for new models, one of which is the electric LiveWire. The electric motorcycle, slated to arrive in August, will have a $29,799 price tag.

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