Harley-Davidson's Tariff Dilemma: A Storm Brewing in the Motorcycle Market

The iconic roar of a Harley-Davidson engine may soon be drowned out by the clatter of collapsing financial forecasts. On February 5, 2025, Harley-Davidson Inc. (HOG) announced it was withdrawing its 2025 financial projections, citing “unprecedented uncertainty” caused by global trade policies. The move underscores a deepening crisis for the American motorcycle giant, as retaliatory tariffs and shifting consumer preferences threaten its core business model.

The Tariff Trap

At the heart of Harley’s woes are the European Union’s retaliatory tariffs, which took effect on April 1, 2025, targeting U.S.-origin motorcycles with engines over 500cc. The 50% duty—added to the EU’s existing 6% import tax—has made Harley’s flagship touring bikes prohibitively expensive in key European markets. For example, the Road Glide now costs over €124,000 in Denmark, a 350% markup over its U.S. retail price.

The EU’s measures, part of a broader counterstrike against U.S. steel and aluminum tariffs, have left Harley scrambling. While the company attempted to mitigate costs by shifting production to Thailand, the EU closed loopholes in 2021, ensuring tariffs apply to U.S.-origin parts regardless of assembly location. This has left Harley’s European sales in freefall, with global motorcycle shipments dropping 17% in 2024.

Financial Bleeding

The financial toll is staggering. Harley’s 2024 revenue fell by a breathtaking 60%, with its motorcycle division (HDMC) reporting a $214 million operating loss in Q4 alone. Even its electric subsidiary, LiveWire, faltered, posting a $110 million annual loss after a 31% revenue decline.

The company now projects flat-to-5% lower 2025 revenue for HDMC, with margins squeezed to 7.0%–8.0%—a stark drop from pre-tariff levels. These figures signal a dire reality: Harley’s pricing power is evaporating, and its once-loyal customer base is fleeing to cheaper alternatives.

Governance Crisis and Strategic Missteps

Adding to the turmoil is a leadership vacuum. CEO Jochen Zeitz resigned in late 2024 amid criticism of his handling of the tariff crisis, while investors like H Partners—a 9% shareholder—pushed to oust three board members. The boardroom chaos mirrors Harley’s broader strategic failure: its stubborn focus on large-displacement touring bikes (which account for 74.5% of U.S. sales) has left it unprepared for a market increasingly drawn to smaller, cost-effective models.

Harley’s delayed entry into the 350cc segment—a category booming in Europe and Asia—has ceded ground to rivals like BMW and Yamaha. Meanwhile, its premium-priced bikes (often exceeding $30,000 in the U.S.) are bucking against shifting consumer preferences toward affordability.

The Crossroads Ahead

Harley’s path forward is fraught with risks. The EU’s proposed second-phase tariffs, targeting motorcycles under 500cc and electric models, remain a looming threat. If implemented, they could erode Harley’s remaining profitability in Europe. Domestically, the company faces pressure to pivot to smaller bikes, a shift that would require costly retooling and brand repositioning.

Yet glimmers of hope exist. Harley’s Thailand factory, now its primary export hub, could serve as a bridgehead into Asia-Pacific markets. Additionally, its U.S. sales remain resilient, with loyal customers willing to pay a premium for the Harley name.

Conclusion: Riding into Uncertainty

Harley-Davidson’s withdrawal of 2025 forecasts is more than a temporary setback—it’s a warning of structural vulnerabilities. With a 60% revenue collapse in 2024, a $214 million operating loss, and governance chaos, investors face a high-stakes gamble. The company’s reliance on a shrinking segment of large-displacement bikes, coupled with its inability to adapt to global tariff regimes, paints a bleak picture.

For now, the stock’s valuation—trading at just 5x forward earnings—reflects this pessimism. But unless Harley pivots decisively toward smaller, affordable models and secures tariff relief, its iconic reputation may fade faster than its engines’ exhaust. Investors would be wise to heed the storm clouds on the horizon.