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Panigaliscious
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Discussion Starter · #1 ·
Credit goes to Hell for Leather for the link to the LA Times.
Former Ducati North America CEO Michael Lock talks bikes | Money & Company | Los Angeles Times

Michael Lock is something of a rock star in motorcycle circles. The former chief executive of Ducati North America grew the small Italian sportbike brand from a niche player in the U.S. market into a powerhouse synonymous with sleek and sporty sex appeal. Lock recently left to take over marketing duties for Think, a Norwegian EV maker that will soon start selling plug-in electric cars in the U.S., and stopped by The Times to chat about his new venture. I took the opportunity to also pick his brain about the U.S. motorcycle market, which continues to experience declining sales. Third quarter sales of motorcycles, released Wednesday, were down across all segments versus the same quarter last year.
Q: What’s happened to bikes in the U.S. market?
A: Speaking to some people in the industry last week, September was minus 39%, which was pretty tragic considering September last year was a disaster. So I know the trend is not upward and it’s not slowing down. The industry is still contracting at quite a pronounced rate.
Q: I think a lot of people are surprised that the industry continues to be so hard hit in a supposedly recovering economy. How would you characterize what’s going on?
A: The fall from grace of Harley-Davidson. It was going to happen in some form or another independent of the economic slowdown. Harley was bound to hit a demographic brick wall between 2005 and 2010 because they’d been so completely associated with baby boomers as a buying generation, but their buying power for motorcycles has peaked. Their 401ks and real estate values have been decimated. Harley is such a dominant volume force in the U.S. that it has a disproportionate effect on the market. A motorcycle is a status symbol. It’s a discretionary purchase. You buy it. You feel good about life. Where Harley goes in the U.S., the rest of the industry has to follow in many respects. The shadow Harley casts over the rest of the industry is undeniable and their age demographic issue along with general economic conditions was a perfect storm.
Q: What about the Japanese manufacturers? A: They derive a lot of income from sportbikes, and a completely different set of factors is affecting that. Yes, the sportbike rider is getting older every year, but it’s not like a cruiser. Sportbike riders are a decade or so younger, so the age demographic isn’t an issue there. But the U.S. motorcycle market is driven by consumer credit. No one saves up to buy a motorcycle. They sign up for a credit loan, and when the credit crunch came, many third-party lenders, who were never that happy with motorcycles in the first place because they’re a risky investment for the lender when the motorcycles disappear or crash, the lenders took the opportunity with the credit crunch to run for the hills. Credit scoring got tighter, interest rates went up and the amount dealers could earn on a loan all got squeezed. Sportbike riders are younger, have worse credit scores, shorter credit histories. They found it impossible to borrow money at a reasonable rate. That’s more true for the Japanese brands than the Europeans. After Harley-Davidson, it’s the Japanese that supply most volume for the market, so you’ve got a separate problem.
Q: It’s like everything that could possibly go wrong has, and it’s ganged up on nearly every aspect of motorcycling.
A: And then you’ve got quite an interesting phenomenon which is very American which is multiple bike ownership. Very few motorcyclists in the U.S. own one bike. They own a portfolio. If you own three or four bikes, it’s easy to take a year or two off from buying one. You enjoy yourself with what you’ve got. Technology has slowed down in the last four or five years in motorcycles. It gets to a point where you have 200 horsepower. How much faster does it need to be? So the urgency to go back to the showroom to get the latest, greatest new model has declined.
Q: And the Europeans -– Ducati, BMW, Triumph?
A: The niche European players have all weathered the storm better, but they’re so small and so niche that they can’t turn the business around themselves. They don't have a very significant effect in this kind of economy.
Q: No one has a crystal ball here, but I suspect yours is better than mine. What will it take to bring the industry back?
A: In the U.S., where motorcycling is almost entirely a leisure pursuit, consumer confidence is absolutely essential. If the consumer feels they’re going to still have a job in 6 or 12 months and they’re on top of their mortgage, if they feel confident, you can get them back to the showroom to buy a motorcycle. But that’s patently not the case at the moment. The one thing I do fear is that if this recession goes on for another 12 or 18 months, there’s a great likelihood baby boomers are not coming back, certainly not in the numbers we’re used to. If you look at where the motorcycle market has contracted the most, it’s California, which grew exponentially over the last 10 years, but look at real estate in California. California is taking a hiding in motorcycle sales this year, so there’s no coincidence there.
Q: Will manufacturers just go out of business?
A: There’s no doubt there’s going to be consolidation. The Japanese have pulled back on product development. There’s almost no new bikes this year and there will be few next year. There’s consolidation at the manufacturer level and at the retail level.
Q: When does the industry hit bottom?
A: We’re now at industry levels of sales below what they were 10 years ago, and 10 years ago the motorcycle industry looked a lot different than it does today. I think we’re heading for sales levels back to the early to mid '90s, which was really the modern low point. When I brought Triumph back here in 1994, we had a first-year sales target to sell 1,000 motorcycles. That was a big deal. And we did it. We sold 1,000, but we had to fight for our life to do that. I remember looking up at Ducati selling 1,800 motorcycles. Even the European brands had gotten used to 10,000 sales a year in the U.S. You see what those brands do, the traveling road show that BMW puts on and the events Ducati does. They're serious budget promotions on sales of 10,000 premium priced bikes, but on sales of 5,000? None of it makes sense. The challenge for the industry is how do you justify $15,000 motorcycles no one needs if you’re not able to put on the sizzle factor? If you don’t put on the show, you can’t justify people buying the product. If they can’t justify buying it, they don’t, in which case the market doesn’t recover. You’re selling something no one needs. You have to create desire -- the whole mental, intellectual and emotional interface of “I’ve got to have it” and that is largely driven by technology but also the imagery surrounding it and the promotion of racing and all of that. If all of the hatches are battened down in order to survive, it becomes self-fulfilling. You never recover because you’re not just selling a product. You’re selling the whole lifestyle. Motorcycle manufacturers will need to sell the experience more, and not just the new technology and colors.
Q: And the bottom is?
A: If we’re still looking at month-on-month sales numbers still declining in healthy double digits, that would indicate we’re not at the bottom yet. I remember a year ago, it was minus 30%-40% each month, and if it’s still minus 30% now, then it seems to me that the downward trajectory is pretty strong. It looks to me on the current trend that 2011 from a volume point of view is still pretty tough. It could be another down year.
Q: OK. Where’s the switchblade? This is all pretty depressing.
A: I don’t think it’s terminal. Motorcycles are just too much fun. It’s just such a liberation from normal life. You can make all the rational arguments about safety and cost and resale value, but there’s still that voice in the back of your head saying you’ve got to do it. Motorcycling won’t die, but it has to be substantially restructured. A lot of the fluff marketing has to go away. Maybe motorcycling has to go back to being a simpler pursuit rather than the whole posing thing and all the race replicas. It has to go back to being a simpler pleasure.
 

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I have seen some first hand stuff in the bike market this week that scares the shit out of me....

In some ways I feel if they stopped building bikes for 2 years there would still be too much supply of perfectly capable bikes out there.

Take a look at WERA forum, you can buy great turn key track bikes all day long for $3k.... :eek:
 

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There was a time at the local lake I would see many 20 somethings hauling their $60K Master Craft, pulled by a $50K SUV, not much of that anymore. As Lock said, credit has dried up and some powerful forces want it to continue that way for the next couple years. Real Estate equity was the main source of luxury purchases, which motorcycles are part of that category. Now that most homeowners that bought in mid 2006 to 2007 are now upside down by 50% and more, they can't pull money from their house as they used to in the past. The banks played some silly ponzi schemes with the buying and selling of mortgages, like playing hot potato, the last guy to hold the potato looses. Screw them. Lastly, instead of buying new bikes and I would agree with Lock that the bikes are over the top now in technology, just buy used because buying new is a crappy purchase in terms of values falling off quickly. This started when the 1098 was introduced and actually got traction when Ducati lowered the price dramatically on their bikes. This forced older bikes to loose value as well and when you throw in a down economy you have an incentive to buy a used bike, thats what I did. As I always say, let someone else take the hit.
 

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"No one saves up to buy a motorcycle."

this guy is obviously an accomplished businessman, but completely out of touch with the fuucking reality of vehicle trade in the us. the majority of motorcycle buying and selling is done on a cash basis between owners second hand. for every single time a bike is financed, its bought and sold 5-20 times after that.

been buying and selling bike for almost 10 years now. inventory fluctuates between 10 and 30 units. shiitloads of people do this, because not everyone is stupid enough to buy a bike the 2-4+ times you do when you compare financing to buying outright cash from owner to owner.

engine builders must be happy.
 

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Motorcycling needs this sort of thing every decade or so, filter out the posers and let the true blood get their love on.

Unfortunately for Ducati, they've just entered the poser market with the Divelwhatever.

Although I agree in saying a motorcycle is a luxury item, I couldn't imagine not having one, even in the worst of times.

"it's the economy stupid."
 

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There was a time at the local lake I would see many 20 somethings hauling their $60K Master Craft, pulled by a $50K SUV, not much of that anymore. As Lock said, credit has dried up and some powerful forces want it to continue that way for the next couple years.
The marina outside my place is having boats seized all the time! Like this monster that was seized for "Child Support Delinquency". What a man!:clapper

 

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I am writing a paper about the big bubble in motorcycle sales for a local study group... let's just say that while lot of what Mr Lock says makes absolute sense he (like many other in the automotive business) fails to see the ultimate reason why sales are dropping in double digits all over the world and won't stop for at least another year.
One thing he's absolutely spot on is this "The Japanese have pulled back on product development". They started doing this around 2007, when the market peaked. While the going was good they could afford the sales hemorrhage of big, high profit models since they could make up the difference by selling in bulk. One of the reasons BMW became such a huge player is because it aimed straight at former Honda and Yamaha customers by offering models the Japanese weren't selling anymore because they weren't deemed "profitable enough".
Now sales are tighter than ever and Big Four dealers are stuck with same old models. The Honda VFR1200F and the Yamaha Super Tenerè 1200 were made to show dealers something was being done about their plight, not in hopes of beating the Bavarian at their own game. Honda has announced dealers they are fighting back with "eight completely new models" to be introduced at the Milan bike show. Leaked details say these models consist of three scooters (two, apparently, are made in India by Hero), the aforementioned "crossover V4", the new Hornet 600 and the return of the CBR600F. Since Honda has already shown new paint schemes for the 600RR, 1000RR, Transalp and Varadero one is left t wonder what the two other new models will be... :rolleyes:
 

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Unfortunately for Ducati, they've just entered the poser market with the Divelwhatever.
Precisely when Ducati entered the poser market is debatable. I think it was pre 999. But that's a charged issue - any motorcycle company looking to grow NEEDS to be in the poser market. Posers make the motorcycling world go around.
 

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Lock is on point. Especially with these points:

Q: What about the Japanese manufacturers? A: the U.S. motorcycle market is driven by consumer credit. No one saves up to buy a motorcycle. They sign up for a credit loan, and when the credit crunch came, many third-party lenders, who were never that happy with motorcycles in the first place because they’re a risky investment for the lender when the motorcycles disappear or crash, the lenders took the opportunity with the credit crunch to run for the hills. Credit scoring got tighter, interest rates went up and the amount dealers could earn on a loan all got squeezed. Sportbike riders are younger, have worse credit scores, shorter credit histories. They found it impossible to borrow money at a reasonable rate. That’s more true for the Japanese brands than the Europeans. After Harley-Davidson, it’s the Japanese that supply most volume for the market, so you’ve got a separate problem.
Motorcycling IS a status symbol in the US. Or at least it was up until a point. I think that's why we see them in the movies all the time and in some cases use bikes that are nearly unobtainum for the general populace like Desmos, MVs, and Ducati R models. (Movies: Fled, XXX, Gone in 60 seconds, Mission Impossible II, SALT, I Robot, etc)

Personally, every motorcycle I have EVER owned was paid for in cash but I'm considered a white collar professional and my guess would be that the average motorcycle rider as of late is not.

Q: It’s like everything that could possibly go wrong has, and it’s ganged up on nearly every aspect of motorcycling.
A: And then you’ve got quite an interesting phenomenon which is very American which is multiple bike ownership. Very few motorcyclists in the U.S. own one bike. They own a portfolio. If you own three or four bikes, it’s easy to take a year or two off from buying one. You enjoy yourself with what you’ve got. Technology has slowed down in the last four or five years in motorcycles. It gets to a point where you have 200 horsepower. How much faster does it need to be? So the urgency to go back to the showroom to get the latest, greatest new model has declined.
He's on target with this. The buying craze that started with the R1 back in 98, to the 929RR, 954RR, to the BUSA, ZX-12R, GSX-R1000, ZX-10R, CBR1000RR, and the horsepower wars which followed made everyone flock to the dealers year after year after year.

I have not had the desire to buy a new bike since my MV in 2006. I can't us 150hp and most new bike chassis don't suit my 210lb frame. It's pointless, even senseless for me at this point. Motorcycles are no longer functional and cater to TRUE roadracers or the street posers with the latter being unable to sustain their buying pace with the development of new bikes due to the economy.

Q: OK. Where’s the switchblade? This is all pretty depressing.
Motorcycling won’t die, but it has to be substantially restructured. A lot of the fluff marketing has to go away. Maybe motorcycling has to go back to being a simpler pursuit rather than the whole posing thing and all the race replicas. It has to go back to being a simpler pleasure.
I agree with this as well. For me personally, motorcycling isn't just as attractive to me anymore because it's so race replica oriented. There needs to be a balance. The 90s was the perfect era of motorcycling because we raced street bikes.... we didn't put race bikes on the street. I'd go as far to say that NO bike produced after 2008 could see 100K miles without a major service. But I could name more than a few bikes that did it in the 90s.

Go farther back into the 70s and even the 80s. Those bikes were practical for their time. Nobody gave a crap what you rode either, just as long as you were riding.
 

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Panigaliscious
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Discussion Starter · #10 ·
I was raised with my parents never driving a nicer car than they could afford to pay cash for and the thought of financing such a purchase was simply not acceptable. I graduated college and three weeks later signed the papers and financed 80% of my $8500 851. Actually the three bikes I have bought in the last 15 years: 851, new '02 955 Daytona, and demo '03 999, were all financed. Why should I save up for the bike I want for 2-3 years when I can use some else's money for 1.9%? I financed $13,000 of the 999 and my payments were $238/month. I got to enjoy the bike for years before I would have saved up enough, at least in my house as soon as you have a few extra thousand in the bike fund my wife starts thinking of all these pieces of furniture or vacations we just have to have. Much less conflict to finance in my case.

I suppose there is some truth in what Lock is saying about younger buyers not being as creditworthy for sportbikes, but I don't think that tells the whole story. I have no intention of buying another brand-new bike in the forseeable suture, financed or otherwise, and I can borrow as much as I want. Far too many used bikes made in the past few years that are stupid fast for the street and way beyond my abilities. Why spend $12k to be scared silly when you can spend $5k on a used bike? I don't think I am alone in this, bike performance seems to have have hit a plateau and it is far beyond what is needed in the real-world. Bikes are almost too good and have been for a few years, the used market is where the best buys are regardless of 0% on new bikes at MSRP. Dealers can move new bikes, but only after they price them like used bikes.

With $10,000 new cars that get 40 mpg, and $10,000 600 sportbikes that get 35 mpg, the argument for a motorcycle as cheap transportation also is moot. Maybe back in the Carter days when your dad's Chevelle got 9 mpg and your Honda 350 did 60 mpg. Not now. So they are basically luxury toys without exception. Toys suffer in sales when people are scared about their future.

Ironically one of the best things that could happen to bike sales is when the world economy turns around and the price of oil reaches $140/barrel again. People will likely make the incorrect knee-jerk purchase of a bike as cheap transportation. I know several people that did that in 2008. Now these bikes just sit in their garage, waiting to be sold at a huge discount on the used market when these guys get sick of seeing them next to their 25 hp lawnmower.
 

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I was raised with my parents never driving a nicer car than they could afford to pay cash for and the thought of financing such a purchase was simply not acceptable. I graduated college and three weeks later signed the papers and financed 80% of my $8500 851. Actually the three bikes I have bought in the last 15 years: 851, new '02 955 Daytona, and demo '03 999, were all financed. Why should I save up for the bike I want for 2-3 years when I can use some else's money for 1.9%? I financed $13,000 of the 999 and my payments were $238/month. I got to enjoy the bike for years before I would have saved up enough, at least in my house as soon as you have a few extra thousand in the bike fund my wife starts thinking of all these pieces of furniture or vacations we just have to have. Much less conflict to finance in my case.

I suppose there is some truth in what Lock is saying about younger buyers not being as creditworthy for sportbikes, but I don't think that tells the whole story. I have no intention of buying another brand-new bike in the forseeable suture, financed or otherwise, and I can borrow as much as I want. Far too many used bikes made in the past few years that are stupid fast for the street and way beyond my abilities. Why spend $12k to be scared silly when you can spend $5k on a used bike? I don't think I am alone in this, bike performance seems to have have hit a plateau and it is far beyond what is needed in the real-world. Bikes are almost too good and have been for a few years, the used market is where the best buys are regardless of 0% on new bikes at MSRP. Dealers can move new bikes, but only after they price them like used bikes.

With $10,000 new cars that get 40 mpg, and $10,000 600 sportbikes that get 35 mpg, the argument for a motorcycle as cheap transportation also is moot. Maybe back in the Carter days when your dad's Chevelle got 9 mpg and your Honda 350 did 60 mpg. Not now. So they are basically luxury toys without exception. Toys suffer in sales when people are scared about their future.

Ironically one of the best things that could happen to bike sales is when the world economy turns around and the price of oil reaches $140/barrel again. People will likely make the incorrect knee-jerk purchase of a bike as cheap transportation. I know several people that did that in 2008. Now these bikes just sit in their garage, waiting to be sold at a huge discount on the used market when these guys get sick of seeing them next to their 25 hp lawnmower.
Good post.

Except you forgot to mention that a $5,000 used bike can still scare you silly. Think 2004-2005 ZX-10R. The used market is really the biggest market right now. Companies are hurting because of NEW Bike sales.

When I was younger my credit was crap but I made enough at my job to pay cash for my bikes so I was very fortunate. Most can't. So they're confined to the used market until they build credit or save enough cash.

Good points you made about financing. I guess financing does have it's place in some folks lives. If it takes you 3-4 years to save $20K to own a Ducati you can finance it and be enjoying the bike during that time. At the end of the day it all depends on how patient you are.
 

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yep, economy and everything else is in the toilet and will continue until the gov't lets the economy play out vs injecting fake money into it.

until then, i'll keep buying new bikes like i did in january, 09 kawi 6r monster edition for $7k otd.
 

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Dust off that '89 Rebel 250 , the one you were embarrassed to ride ! :D The flip side of this dismal prognosis , of course , is that anyone with disposable income can get a screaming deal on a new bike (except Honda and H-D which might give you a bonus "collector mug" .) Btw does Lock contradict himself in the last 3 paragraphs where he seems to say that manu's need to sell the emotion and lifestyle of motorcycling and not just the tech , but at the end states that the "fluff marketing" needs to end ? You can't sell the sizzle w/o ... selling sizzle ! Promotion/advertising companies have always made BILLIONS and will continue to do so .
 

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Panigaliscious
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Discussion Starter · #14 ·
Good points you made about financing. I guess financing does have it's place in some folks lives. If it takes you 3-4 years to save $20K to own a Ducati you can finance it and be enjoying the bike during that time. At the end of the day it all depends on how patient you are.
In my particular case it is easier to "save" money to pay off debt already incurred than to save up money to pay cash.

Any windfall or bonus I may receive my wife assumes is hers to spend. Maybe she should try to earn more money, or not spend all of hers on clothes...

Against my wishes we borrowed to buy a Cayenne last spring, when I sell my 851 the money will either be immediately used to pay it down or the "discussions" will start within a month what BS home improvement we could do with it. At least with option 1 we are closer to having it paid off, probably late next year it will be done when some other expected windfalls happen in '11. No way am I selling that bike for some f*&^ing paving stones and patio furniture.
 

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In my particular case it is easier to "save" money to pay off debt already incurred than to save up money to pay cash.

Any windfall or bonus I may receive my wife assumes is hers to spend. Maybe she should try to earn more money, or not spend all of hers on clothes...

Against my wishes we borrowed to buy a Cayenne last spring, when I sell my 851 the money will either be immediately used to pay it down or the "discussions" will start within a month what BS home improvement we could do with it. At least with option 1 we are closer to having it paid off, probably late next year it will be done when some other expected windfalls happen in '11. No way am I selling that bike for some f*&^ing paving stones and patio furniture.
Yeah, scratch the patio furniture. To date, I have never discussed my bonuses with my spouse. :twocents
 

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Panigaliscious
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Discussion Starter · #16 ·
Yeah, scratch the patio furniture. To date, I have never discussed my bonuses with my spouse. :twocents
That is a dangerous road to go down. I have always tried to avoid keeping those things from her. That doesn't mean we agree on how to use it.
 

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Don't forget the effect that insurance costs have on young new buyers, I don't know how how anyone under 25 can afford to insure anything over 750 cc's.
 

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Personally, every motorcycle I have EVER owned was paid for in cash but I'm considered a white collar professional and my guess would be that the average motorcycle rider as of late is not.
Hell, paying cash nowadays can actually COST you some money. If you found a sweetheart 0% rate, it would make money to finance the bike @ 0% and put your $10k in a 5 year CD yielding 1.5-2%. Could bring the net cost of your bike down by nearly $1k. Or if you didn't have the funds to make payments, you could still step it down $8k cd for the first year, $6k c/d the 2nd year etc etc.

But what you're saying is true. The people that come into the local shop and try to get approved are special. It's quite common for a family of 4 to come in and just go down the line, one after the other, trying to get approved so one of them can buy the bike. The people that were being approved 4-5 years ago were unworthy, at best. And then take into account that Honda Finance required full coverage on a financed bike while Suzuki didn't, so Suzuki was moving so many more units just based on the "I gotta have it now for the lowest expense possible" mentality.:wacky
 
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