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Harley-Davidson (HOG) Halts Production of LiveWire Motorcycle

Zacks Equity Research

Harley-Davidson, Inc. HOG temporarily stopped production and delivery of its new LiveWire electric motorcycles, after discovering an issue related to the vehicle's charging equipment. The company discovered a “non-standard” condition during the final quality check of LiveWire, which it already started shipping to dealers in late September.

Glitches found in the model prompted additional testing and analysis. The tests are progressing well. But the company did not offer a timeline when the production would resume.

Harley-Davidson has assured customers, who already purchased LiveWire motorcycles, stating that they can continue to ride. However, it informed the current owners not to charge the bikes through standard home outlets and use only direct-current charging stations that can reload the battery in almost an hour.

The company turned to electric vehicles to attract young and environmentally conscious customers to alter declining sales in the United States. With motorcycles losing its appeal, especially among the youth, Harley-Davidson’s motorbike sales are witnessing a decline. The company is having difficulty attracting new buyers as millennials do not value the motorcycle status symbol. As millennials prefer convenient modes of transportation and ridesharing platforms like Uber, they don’t see owning motorcycle, electric or others, as an attractive option. Thus, the company’s retail sales have been declining domestically as well as internationally.

Harley-Davidson has been witnessing declining sales trend for the past four years. Its sales are anticipated to decline in fiscal 2019 as well. Notably, over the past year, its shares have underperformed the industry it belongs to. Over this period, shares of the company have declined 14.6% against the industry’s growth of 1.7%. Further, Harley-Davidson is bearing the brunt of rising costs due to new tariffs on raw materials (steel and aluminum). Additionally, the imposition of high tariffs on imports from China is impacting the company.

Zacks Rank & Stocks to Consider

Harley-Davidson currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Auto-Tires-Trucks sector are BRP Inc DOOO, currently sporting a Zacks Rank #1 (Strong Buy), and Lithia Motors LAD and Standard Motor Products, Inc SMP, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BRP has an expected earnings growth rate of 17.2% for 2019. The company’s shares have gained 52.8% year to date.

Lithia Motors has an expected earnings growth rate of 12.9% for 2019. The company’s shares have gained 65.8% year to date.

Standard Motor has an estimated earnings growth rate of 21.9% for 2019. Its shares have declined 2% year to date.

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