Harley-Davidson, the iconic motorcycle maker, reported worse-than-expected domestic sales on Tuesday. U.S. retail sales trended down 13% in the third quarter from a year ago — analysts called the figure “disappointing.”
This is Harley-Davidson’s first earnings report since it was thrown into the political spotlight. After it announced it will move some of its U.S. production overseas because of tariffs, President Donald Trump backed boycotting Harley-Davidson tweeting “Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great!” Trump even trolled the company in a speech in June.
It’s hard to tell how much of the sales decrease is due to Trump’s call to boycott the company. Harley-Davidson has faced a decrease in sales in the U.S. for years, as overall demand for heavyweight motorcycles has been on the decline. The Milwaukee-based manufacturer managed to gain some market share, up from 48.4% to 50.9% in the third quarter, but soft sales industrywide adversely impacted the company.
Motorcycle demand growth in the U.S. has slowed, partly due to limited interest from the younger generation. In December, a study prepared by a focus group of motorcycle industry long-timers suggest sales are flat or falling in almost every area and the industry has failed to attract new riders out of women, minorities and millennials.
While Trump’s boycott call may have been pure talk, his full-blown trade war has squeezed Harley-Davidson’s bottom line. The company estimates the tariffs will cost it $90 million to $100 million annually.
Tariffs could cost HD $100 million
Since the beginning of this year, Harley-Davidson was among the first companies hit by Trump’s tariffs on steel and aluminum. The company had to absorb the higher cost of raw materials.
“Unless something dramatically changes, aluminum and steel prices are just gonna be higher,” Harley-Davidson CFO John Olin warned on Tuesday.
After Trump imposed tariffs on imports from Europe and China, both retaliated. The tit-for-tat tariffs between Washington and Beijing will cost Harley-Davidson $7 million to $12 million. Harley-Davidson expects tariffs from the EU to increase its cost by $43 million to $48 million on an annual basis. So far, Europe has been a bright spot for Harley-Davidson as domestic sales plunged. Sales in EMEA was up 4.6% in the third quarter. Harley-Davidson owns 10.4% of the EMEA market.
“We’re looking at all the things we need to do to move the production of our EU volume to plants outside the United States,” said Matt Levatich, Harley-Davidson’s President and CEO, on Tuesday’s earnings call. “This is something we’ve never contemplated on doing. We have never imagined moving production for European customers outside the United States, and here we are.”
The company estimates in total the tariffs will cost $90 million to $100 million annually. Caught in the center of Trump’s trade war, the 115-year-old bike maker now needs to figure out the logistics of relocating production. It expects the process to take 12 months to 18 months and will share more details about its plans in the first half of next year. It is also lobbying government and trade officials to minimize the impact of tariffs.
Harley-Davidson’s shares (HOG) were down 3.3% after Tuesday’s earnings announcement.
Krystal Hu covers technology and economy for Yahoo Finance. Follow her on Twitter.