Motorcycle Manufacturing
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Industry Overview
The US motorcycle manufacturing industry includes about 60 companies with combined annual revenue of about $6 billion. The industry, which is highly concentrated and is dominated by Harley-Davidson. Other industry participants include foreign-based companies with final assembly operations in the US, parts and accessories manufacturers, or custom builders who make built-to-order products for motorcycle enthusiasts.
Competitive Landscape
Personal income and interest rates drive demand. Motorcycles are considered discretionary items in the US since few are used as a primary means of transportation. About one-fourth of motorcycle purchases are financed. The profitability of individual companies depends on volume and sales of high-margin accessories and add-ons. Small manufacturers compete by offering highly customized products. Annual sales per employee averages about $400,000.
Products, Operations & Technology
Major products include touring and cruiser motorcycles designed for comfort and long distance rides (67 percent of industry revenue); off-road cycles designed for dirt and mountain terrain (25 percent); dual sport designed for both road and off-road usage (3 percent); and scooters (5 percent). Motorcycle engines are measured in cubic centimeters (cc) and range from 50cc to 2300cc. Heavyweight bikes have engines with 650cc or greater.
Motorcycles are typically produced on assembly lines, similar to how the auto industry makes cars. Parts are received from outside sources (either third-party companies or other corporate-owned plants), usually on a just-in-time basis. Beginning with the basic steel or aluminum frame, the product proceeds from station to station where components are added to produce a finished product. These components include telescopic forks for holding the front wheel, handlebars, brakes, engines, transmissions, drive shafts, wheels, seats, and fairings (plastic or fiberglass coverings). Paints and coatings are applied in separate operations.
Raw materials include steel and aluminum forgings and castings, chromed metal parts, plastics, fiberglass, vinyl, leather, paints, epoxies, and other coatings. Material costs represent about 55 percent of revenues.
Low-volume manufacturing by custom bike builders does not justify investment in assembly line processes. The cost of less efficient production processes is covered by the higher selling price of custom bikes.
Engineering and technology advancements have driven assembly costs down over the years. Just-in-time inventory management reduces inventory costs, but requires tighter tolerances on machined parts for assembly. CAD parts and products has reduced the rate of non-conforming parts and increased manufacturing efficiencies.
