This is Part 2 of the Cycle World interview with Matt Levatich, the new President & CEO of Harley-Davidson. To see Part 1 of our interview with this 50-year-old engineer who’s now at the helm of The Motor Company, click here. Cycle World: How do you rate the success of the Street 500 and 750? Matt Levatich: I couldn’t be happier. The Street 500 is unique to the United States. We also supply it to Australia. The 750 is what we are selling internationally, and it’s doing incredibly well. The Street 750 was The Bike of the Year for 2015 in India. That’s an amazing achievement right out of the box. And the Street doubled our sales volume in India last year. And we didn’t even have the product in the market for the full year. Like in the United States, the 500 in Australia can serve as a bike that supports rider training. I was in Australia in December and our dealers are absolutely thrilled to get the Street 500. Just like in the US, it gets people coming into the sport though our brand, not through somebody else’s brand, through our Rider Academy program, learning how to ride and getting connected to all the great things that are Harley. So, we are very pleased with the success globally of the Street.
CW: How are domestic sales of the Street versus international sales? ML: We aren’t sure yet. Because of the targeted customer, it is a more seasonal product than the rest of our product line. We supplied it after the season last year. If you talk to dealers, up until now they’ve been a little bit worried. Floor traffic and interest wasn’t necessarily there. They had a lot of inventory. One dealer recently had 10 or so Streets, and 2 weeks later he had none. Spring hit, and they are all sold. That was in the mid-Atlantic region. And you know they had a tough winter in the Northeast. Spring came a little late. It’s new. We haven’t even been through a full year with Street. It is serving as intended as a fantastic vehicle for our Riding Academy. People are learning to ride on a Harley. A quick anecdote: 2 of the people [who learned to ride last year] were my 19-year-old son and my wife. I won’t declare her age. On their own initiative, because I don’t push this stuff, they wanted to learn how to ride. They each took 2 different classes last summer. They each took it on the 500, and they each passed. We went in together and I sat back and sort of watched them explore the world of Harley product in the dealership, and we settled on a Slim that would work for both of them. Actually, I like it too, so that was a really smart purchase. But my wife went out on the Slim several times to continue her learning on the road, and just kind of said, “You know, I like it, but I want a Street. I learned on that motorcycle, I am confident on that motorcycle, I want to continue to get more experience on a bike that I have confidence in.” For us, when you think about the power of bringing new people into the sport, through a great program like the Riding Academy, on a great motorcycle like the Street, and they can buy it when they are done, and they want to buy it when they are done, and they are in the family from day one, it’s a fantastic program. So, retail will unfold as it will over the coming year.
CW: Do you think the Street is the main path toward attracting young, millennial, buyers, or is it the more traditional product? ML: We want to reward the Core customer who has been with us. Rushmore clearly speaks to the needs of our traditional Core customers. We have the Outreach Segments in the United States: Women, 35 and up; Hispanics, 35 and up; African-Americans, 35 and up; and young adults, 18 to 34, of all genders and ethnicities. And these young adults are very important, because they represent what’s incoming into the sport. Every one of those segments is very important in our thinking. In fact, when we developed Rushmore, it had to be a payoff for Core customers and their passengers. But we wanted to use the Rushmore investment to do more internationally and with Outreach. And we’re very, very pleased with Rushmore in the sense that it has led to a 27 percent increase in sales in Asia last year, and 33 percent in Europe. The Rushmore product led to that kind of sales growth. It hit the international opportunity that we were trying to reach with it. A Rushmore model is the number 1 seller to Outreach. A lot of people think, oh, to get young adults, you need a cheap bike. Or a small bike. But no, it’s actually a Street Glide or a Street Glide Special that is the number 1 seller to Outreach. And young adult sales for Harley are 3 times that of our nearest competitor. So we’re doing well with young adults. And we’re doing well not just with products like Streets, or Sportsters, Iron 883s, and 48s. Surprisingly, there are a lot of people with Rushmores. It is not an inexpensive bike. It is not a small bike. And these Outreach customers love it, young adults in particular. You asked your question in a traditional way: What motorcycle do you need to build to reach young adults? We’re answering a different question: What are young adults looking for from Harley? And how do we bring it with product, with the experience, with the dealers. What does a dealer do, or a salesman do, when a young adult crosses the threshold of the store? Are they prepared to meet that customer on their terms? Or are they going to treat that customer like a Core customer. We’re doing a lot of training within the dealerships for the dealers to understand that they have different needs and expectations. Are they trained and prepared to meet all those customers on those customers’ terms? Again, that’s customer-led thinking. Not product-led thinking, And of course Street plays a role, when you think of people new to the sport, and Riding Academy. Livewire, when it’s a product for sale, will play a role in captivating a different imagination for maybe a millennial, as well as being an easier motorcycle to ride.
CW: One of our editors rode the Livewire and was impressed. He said it had a production level of fit and finish. How far off until we see one in production? ML: I am not going to give you an exact date, and here’s why: We made a tremendous investment in Livewire because we wanted to get customer feedback, and we didn’t want a mediocre product. To understand the interest, we had to make a great motorcycle, and we did. And everybody who has ridden it—6800 demo rides last year here in the US, of all kinds of customers—gets off it and says, “Wow, I want one! I want it just the way it is. But, I want it to go twice as far on a charge, and I want it to cost half as much as what Harley could sell it for and still make money.” So, there’s a problem there. Our objective is a no-excuses electric Harley-Davidson motorcycle. Livewire is a no-excuses electric Harley-Davidson motorcycle, but it doesn’t yet meet customer requirements in production commercial technology. We could address the range by making the battery bigger, but then it wouldn’t be as light. It wouldn’t be as narrow. It wouldn’t be as nimble. So we need battery technology, energy density, to improve, in order to deliver customer expectations for that package with more range. There are bikes right now that will go 150 miles on a charge, but they are not Livewire. People want that product. And that was our objective—to show people what was possible, so that we could get real feedback on potential. We have technology we’re seeing developed; we have capabilities were building internally to do it; we have to have the cost of that technology come down to make it affordable enough for enough people to buy it. And we see all those things happening.
The third point I’d like to make: There’s a convergence out in the future of product, technology, and infrastructure. Somebody says right now, “I need 100 miles, not 50.” Why do they say that? Because they ride it to work. Work is 25 miles away. They have to get home at night. That’s 50. They want a little margin for error. That’s another 25. And maybe have to run an errand, so they want 100. That dynamic changes when infrastructure develops and there is a charging station at work. Then, all the sudden, they only need 50 miles. So, that wild card is in the mix as well. We may not get to 100 miles, but we may get to the point where 75 is enough. There’s a lot of moving pieces. What we do have is this: We have a product that is in demand. And that’s exciting. It’s exciting because we’ve made a pretty strong statement about what our brand can be, and what our company can do. And that we are willing to do it, and that we are not compromising. And that to me in a way is more valuable than the motorcycle itself.
CW: There was a recent recall involving 54,000 Harleys. Our 2014 Street Glide was even recalled during a tour last year, and we were told we could not ride it. Can you shed light on this? ML: As a company, there is nothing more important than the safety of our riders. In our high integrity recall investigation process, we are seeing what is going on in the marketplace through dealer feedback, customer feedback, our call center, our warranty data, and we’re looking for patterns. We’re looking for problems, because we don’t want problems. Particularly problems that can put the rider in harm’s way. When we see patterns emerge, we have an unbelievable team that acts swiftly to deal with it. To give you a glimpse of how that works, they come forward to me and Keith Wandell, and they presents the facts and the data, the issue in the field, and we sign off on the recall. Period. There has never been a case where we haven’t followed their recommendation. Because they’re reading the data and they’re making a recommendation to do a safety recall. In some cases it might be a non-compliance issue, like a reflector that might be placed wrong. Those are regulatory non-compliance issues versus safety issues. It’s not hard for us to do that (decide on a recall) because we understand. We can imagine the situation and say, right, done. It is only then that I’ll talk about the cost of the recall. It’s not a financial decision; it’s a safety decision, period. And we will act swiftly in the interest of customer safety. We have always done that. We’re not happy. It’s very frustrating to have these sorts of issues with the clutch system. They are different issues with the same system and same supplier. And we’re frustrated. This is not a new design. This is a design that we actually developed for CVO in the early 2000s. When we turned into high-volume production, that supplier and supply chain started demonstrating capability problems. Which, unfortunately, we are still dealing with. We have people living at that supplier, and have had, because of these issues. Unfortunately, we’ve continued to see these problems, and we’re tired of it. We’ll just leave it at that. In Part 3, our final installment of this interview with Levatich, we ask Harley’s CEO about what The Motor Company is learning from Voice of Customer, and who that customer really is today. We also asked him about the changing American V-twin landscape, and we think you might be surprised by his candid response. Check back soon.