Is the U.S. motorcycle industry facing tough times in the near future? An expert says “Yes”

It’s not an optical illusion: The U.S. motorcycle industry (and to some extent the global industry) is sending mixed signals.

On one hand, some premium brands are doing well. Ducati reported record global sales for the first half of 2023, including double-digit percentage gains year over year in its top three markets: up 10 percent in Italy, 11 percent in the United States, and 13 percent in Germany. Polaris just announced quarterly earnings that showed Indian motorcycle sales up a huge 40% year over year, though it seems that mostly had to do with the company finally returning to optimal inventory levels, whereas a year ago dealers couldn’t sell motorcycles because they didn’t have them on the floor.

On the other hand, while unemployment remains low, household budgets are getting more and more tired from the effects of inflation, high interest rates, and high debt loads. Large retailers such as Home Depot, Target, and Walmart have reported declines in purchases of discretionary items as consumers are pinched by inflation and high interest rates. Of those three examples, Walmart came out looking the best because grocery sales offset the declines elsewhere. That’s not good news for the motorcycle industry, because while eating is not discretionary, just about everything associated with motorcycling is discretionary, for U.S. consumers.

Companies like the one where I have my “day job,” at RevZilla, get pinched by inflation because most of the items it sells are discretionary. Some are consumables, such as tires, that riders have to have in order to keep riding, but it’s very easy for most riders to put off buying a new helmet or motorcycle jacket for another year if the budget is being squeezed just by buying groceries.

On top of that, motorcycling in general is discretionary for most people in the United States. Few of us (I’m an exception) actually rely on motorcycles for our primary transportation. For the majority, it’s a recreational vehicle, and therefore one of the first areas where someone can easily cut back on spending.

For a year or so, many economic analysts have been predicting a recession, both domestically and globally. So far, it hasn’t really materialized, despite several economic indicators continuing to suggest it’s coming. My take? Now, just as the stock market is getting back near the highs and people are starting to believe the calls for a recession were false alarms, it will be in that environment of complacency that the recession finally does hit. And the motorcycle industry will do worse than most sectors because of that discretionary nature mentioned above.

An expert opinion

But don’t take my analysis when you can listen to people with actual credentials and track records. In a recent webinar sponsored by the Motorcycle Industry Council, the organization’s consulting firm, Competitive Analytics, projected tougher times in the second half of 2023. Competitive Analytics CEO David Savlowitz explained that the company monitors numerous economic indicators to assemble what it calls its TPSI, which stands for “Thousand Point Strength Index.” Above 500 is relative strength. The lowest reading ever was 184 during the financial crisis 15 years ago (which put an end to a decade of booming motorcycle sales growth). The TPSI peaked at 550 in December of 2021 and was at 401.7 when Savlowitz made his presentation last month. In other words, shrinkage, not growth.

That trajectory, from late 2021 to the middle of 2023, is the real warning, he said. “It’s a black diamond ski slope going down,” said Savlowitz.

Savlowitz and his firm are advising motorcycle dealers and others in the industry to tighten the belts for the second half of the year. He predicts the consumer mood will go from cautious optimism in the third quarter to just plain cautious in the fourth quarter.

Dealers have rebuilt inventories of new motorcycles from the unusually low levels caused by the pandemic and the prices of used motorcycles have finally started to ease from the extremely high levels caused by the scarcity of new bikes and an influx of new riders in 2020 and 2021. (I wrote about the decline in used bike prices earlier this year, but the same trend is still in place in the latest figures from June.) In other words, the U.S. motorcycle market is starting to normalize — which really means going back to the decade-long stagnation of sales growth we saw after the financial crisis. Will the Competitive Analytics analysis turn out to be right and will a recession hit the motorcycle industry harder than most?

I’m guessing the answer is “yes.”