After listening to the quarterly conference call by Polaris Industries, the first substantive comments by the company's management team since it shut down Victory Motorcycles, I came away with three thoughts:
- Polaris is less of a motorcycle company than it has been in years.
- CEO Scott Wine is saying all the right things about the future of Indian, promising that new models will be coming and that the lessons learned from Victory will be put to good use. (He also said he plans to "make Polaris great again." Yes, he really said that.)
- Given the overall picture of Polaris, I'm very skeptical that the promises of innovation in the Indian line will come through.
By any measurement, Polaris had a tough year in 2016. The company suffered through recalls of multiple products, most notably the RZR off-road vehicles that are an important part of its mix, but also some ATVs, the Slingshot and some Indian motorcycles. The company put both internal and external resources to work to try to solve the problems that were leading to the recalls. Considering all those problems, the financial results could have been much worse. Total sales were down 4 percent year over year to $4.5 billion.
Motorcycle production nearly stopped entirely in the fourth quarter as the production line at the Spirit Lake factory in Iowa was shut down so improvements could be made to the paint system. Despite that, for the entire year, motorcycle sales (Polaris includes the Slingshot in its motorcycle statistics) were down 6 percent. The positive news came from Indian sales, which increased by about 20 percent and offset a drop in Victory and Slingshot sales.
Where to for Indian?
That difficult financial backdrop pushed Polaris to give up on Victory.
“Our recent announcement to exit the Victory brand was undeniably the right strategic and financial decision,” said CEO Scott Wine. “With cumulative losses exceeding $100 million and growing, we could not continue to invest in the brand.”
Wine said Victory sales peaked in 2012 and were down 20 percent. So with Victory living up to the opposite of its name, Polaris is betting its future in motorcycling on Indian, a brand that for the past 60 years has been more about the past than the future. Considering that we have well over 300 comments on Lemmy's recent analysis of this move by Polaris, there is clearly a lot of reader interest in the future of the brand.
On those lines, Wine said all the right things to try to make customers feel better.
“I view the 18 years of blood, sweat and tears we poured into Victory as the investment in education required to successfully bring the legendary Indian motorcycle brand back to industry prominence," Wine said. "We will invest more in Indian to accelerate and expand our product introductions and innovations, and you will see the proof of that investment over the next few years.”
I know there are plenty of people out there who want to see Indian be more like what it was a century ago, not 60 years ago. Indian was originally an innovative company built on competitive engineering, not a company built around nostalgia. Those who want to see an adventure-touring motorcycle built by a U.S. company or want to see the Empulse electric motorcycle developed further can look at words like "expand" and "innovations" and take hope.
I seriously have my doubts. There's nobody left alive (at least no one who's going to buy and ride a new motorcycle) who witnessed the days when Indian was the world's largest motorcycle manufacturer because it built modern, competitive products. It would be a daring move by the custodians of the brand to come out with an Indian sport standard or a modern electric motorcycle. In the short term, it is probably best to keep Indian focused on what it is: cruisers like the Scout and big throwback baggers. In the long term, however, I think that market will disappear. Today's young people, when they move on to different motorcycles later in life, will not be looking to the same old nostalgic cruiser styling their fathers and grandfathers preferred. They will have their own version of nostalgia. They already do.
I really don't expect Polaris to stray far from the recipe with Indian or truly innovate and expand the line, and here's why. It goes back to the first point I made above. Polaris is not becoming more of a motorcycle company. In 2016, Polaris shut down Victory and acquired Transamerican Auto Parts, which is a company that interests you if you want aftermarket parts for off-roading your Jeep, but has little relevance if you want a Project 156-based performance motorcycle. I think the best we can hope for is maybe a street tracker spun off from the FTR750 Indian built to race in the American Flat Track series this year.
Right now, Polaris has the look of a company that has been hit hard and found out that it's armor had some weak points. It's a company that's focused on getting its main products (off-road vehicles) right. It's a company that took a chance with the Slingshot and, based on Wine's comments in the conference call, has yet to achieve success. A company on the mend, a company with that recent history, is not one likely to take risks with a popular brand and truly innovate.
It will be fun if I'm wrong.