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Harley-Davidson Really Misjudged the Electric Motorcycle Market

Harley-Davidson (NYSE: HOG) had the opportunity to upend the motorcycle industry with its new electric LiveWire bike. Because of its size, production capabilities, and vast dealer network, Harley could have had a transformative impact on how high-performance electric motorcycles were perceived by the public by bringing an electric motorcycle to market that offered technical relevance and affordability.

Instead, Harley chose to maintain its premium image and offered up a motorcycle of the sort that has doomed the bike maker to four consecutive years of falling sales. The LiveWire may be a technological marvel, but its $30,000 price tag may doom it to be a bike few can afford or will want to purchase. Now, a new bike by the competition may grab even more of the electric market out from under it.

Image source: Harley-Davidson.

A bolt out of the blue

Lightning Motorcycle -- home to the world's fastest production motorcycle, the electric LS-218 -- knows a thing or two about high-performance bikes, and it is teasing yet another electric model that surpasses the LiveWire on virtually every metric.

Though details are still light, the new Lightning Strike promises a 150-mile range, 150 mph top speed, and a 35-minute charge to 80% at a DC fast-charge station -- and will do it all for under $13,000. So far, we only have an image of the Strike's headlights, but we won't have long to wait for more, as Lightning says it will debut in March.

Image source: Lightning Motorcycle.

In comparison, the LiveWire offers only 110 miles of city driving, has a top speed of 110 mph, and takes about 40 minutes to recharge. Saving five minutes on your charge time isn't a big deal, but a finely tuned engine that gives you the raw power you need when you need it is going to turn heads. And that's not to mention the LiveWire's hefty price tag, which means you could buy two Lightnings with superior performance and still have change left over.

The Lightning Strike has the potential to steal all of LiveWire's thunder.

Size matters, though

There are, of course, caveats to this promotional reveal. We haven't seen the Strike's full list of specs, so actual performance can't be competently judged, and Lightning is a small electric motorcycle maker without the distribution, dealer network, or marketing heft of Harley-Davidson. Advertising muscle alone could propel more LiveWire sales than Lightning could hope to achieve.

And in a way, Harley is following the same path as Lightning. The LS-218 is the bike maker's prestige motorcycle and carries a price tag of around $39,000. Having validated its technology and craftsmanship, the company is now coming out with the Strike, which will bask in the rays of its predecessor's halo.

The difference is that Lightning is a boutique motorcycle and is introducing a new model that builds on the legacy of its premiere bike. While Harley could come out with a new model at a lower price point in the future, that's not how it usually operates. Despite motorcycle sales being in a tailspin, it maintains its premium pricing strategy.

Moreover, the LiveWire will be used to sell a completely different kind of electric bike: Harley has revealed a new scooter and an off-road bike that will be developed over the next few years.

E-bikes need a power surge

Having declared that the future is electric, Harley should have introduced a motorcycle that was more affordable. According to data from Polk, analysts at BMO Capital Markets say industry leader Zero Motorcycle only sold 750 electric motorcycles in the U.S. in 2018. If Zero's SR model, which also offers better performance than the LiveWire at half the price, is struggling, than a high-priced Harley-Davidson, even allowing for the nameplate to attract buyers, is going to be a hard sell.

Lightning, on the other hand, is moving with the market, where buyers are looking for more for less. Even with gas-powered motorcycles, buyers are looking at manufacturers with price points much lower than the premiums Harley charges. These high-performance e-bikes with realistic price tags will be the best hope to recharge the electric bike market.

Short-circuiting its chances

This is where Harley-Davidson needed to be. The LiveWire has the right specs and the right nameplate, which means it could have owned the high-performance electric motorcycle market, but its price tag cedes the playing field to Lightning and Zero,and may even boost their sales further.

Prospective buyers will suffer sticker shock from looking at the LiveWire and will look to see what else is available. What they'll find are competing electric motorcycles that offer better performance at half the price or less, and that is a miscalculation Harley-Davidson shouldn't have made.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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