A little bit more than 2 months ago Polaris unveiled in Sturgis the new Indian Motorcycle lineup, the Indian Chief Classic starting at $18,999, the Indian Chief Vintage at $20,999 and the Indian Chieftain at $22,999. The media, including myself, have been unanimous in stating that this time, Polaris got it right with the Indian brand. If most were expecting the Chief Classic and Vintage based on Indian’s heritage, we were all surprised by the Chieftain bagger with its bold design and power windshield on a fork-mounted fairing.
A good marketing approach for 2 reasons: 1- Baggers represent one of the fastest growing segments in the heavyweight motorcycles category, 2- Indian never had a bagger in its lineup and by producing one, Polaris shows to the motorcycle world that, while respecting Indian’s past, the company is able to bring forward thinking technology to its new Indian models.
Polaris has very significant capital, financially, in terms of engineering experience and of manufacturing facility setup. Owning one of the two companies with the strongest international brand equity (yes, Harley is the other one), what damage can Indian do to the competition?
But first, what is the potential for cannibalization of Victory by Indian? Recently Steve Menneto, Vice President of Polaris Motorcycles, disclosed that third party consultants were hired to research this possibility. Their answer? A low-digit possible cannibalization. So, the fight is not internally, but mainly with Harley-Davidson although there is no hope, short term, that Indian will dethrone the Milwaukee company whose brand loyalty is also the company’s biggest strength. And even if Harley would fail to innovate (a low probability), its brand loyalty would save it for several years.
Today, Harley-Davidson holds a commanding lead in the U.S. heavyweight motorcycle market with an estimated 55% market share and primary competitors in that segment having an average market share of just 5%. Still, Polaris Industries hopes that the introduction of the 3 Indian models will create enough momentum for a full-year motorcycle sales growth of 15%-20% and for a market share (including Victory models) of 10% by the end of 2015, resulting in $750 million in annual sales over the next five-to-seven years.
Nobody can challenge the fact that Polaris has already succeeded in kick-starting the Indian Motorcycle brand. The company is also on track to get between 120 and 140 dealers before end of the year. Indian dealers report that there’s been a very strong and enthusiastic response to the 3 Chief models launch. Although dealers expected to keep a certain number of floor models for test rides, some have sold all but one or two of those bikes. Buyers order from online pictures without being able to test ride them at their local dealership. Some Victory dealers have sold more Indians since August than Victory bikes all year. Orders coming from Europe and Australia are also reported to be strong. Some dealers told me that about 80% of those ordering are Harley riders… Waiting list for a new Indian seems to be around 6 to 8 weeks. Indian Motorcycle’s biggest problem seems to be supply constraint, a good problem when you just (re)launched a brand. And at this time I see almost no risk that some orders are going to be cancelled. For those investing in motorcycling via Wall Street, several analysts rate Polaris (PII) as a strong long term investment and predict 15,000 to 18,000 bikes sold in 2014 and 25,000 to 27,000 in 2015.
Looks to me that Indian Motorcycle is mounting a significant challenge to Harley-Davidson, a rivalry that will probably amplify when the 2015 Indian’s lineup include other models than the Chiefs, appealing to a wider range of bikers. Choice is here, but of course, don’t expect Harley-Davidson to flinch easily, here in the US and abroad…