To some degree, the rapid rise is a result of lessons learned from 18 years of building the Victory brand. “That was the school of hard knocks,” said Scott Wine, chief executive of Polaris Industries. “Indian’s share of its segment is already higher than Victory’s was.”
Polaris, long known for snowmobiles and off-road vehicles, expanded into motorcycles with the introduction of its Victory line in 1998. Victory’s big V-twin engines, combined with layouts that favored a relaxed riding posture — what bikers classify as the cruiser genre — crib somewhat from Harley’s playbook. That approach attracted a devoted following, but not the volume and profits needed to sustain production in a mature market.
Though not apparent at the time, Victory’s fate was sealed by Polaris’s purchase of the Indian brand in 2011. The original Indian company, which opened in 1901 and failed in 1953 despite a history of innovation and racetrack success, had been the subject of previous revival attempts. But no modern owner had the industrial clout of Polaris.
The rebirth started well, with attractive bikes earning positive reviews from enthusiast publications, and the potential for growth was greater with Indian than with Victory.
“Victory ended 2016 up 7 percent in sales, but it wasn’t profitable,” Mr. Wine said. “Winding it down made sense in terms of allocating capital and engineering resources.”
All Indian motorcycles are built in Spirit Lake, Iowa. While its bikes like the Scout and the just-released Scout Bobber are aimed at younger buyers, most models revel in heritage, with styling and names that hark back to the company’s prewar glory days. They represent, as Karl Brauer of Kelley Blue Book, an auto research firm, put it, “a cool theme married to a modern chassis” and particularly appeal to buyers with a “what have you done for me lately” outlook on brand loyalty.
Inevitably, Indian’s retro approach makes the brand a head-to-head competitor for Harley-Davidson, offering bikes in the touring, cruiser and midsize classes as well as the popular bagger category, or bikes carrying saddlebags but not the full windscreen and gear of a long-distance touring machine.
History has taught Harley that taking a wait-and-see attitude to this development could be painful. Even if competitors haven’t beaten Harley, they have whittled away at its market share — most notably Japanese brands, which have created model lines like the Kawasaki Vulcan and the Suzuki Boulevard.
Michael W. Kennedy, Harley’s vice president and managing director for the United States, points to the company’s ambitious programs for the coming decade, including introducing two million new riders to motorcycling through its Riding Academy and the release of 100 new models. There is also the matter of affordability: “We’ve got nine bikes under $12,000 in the United States and a Street Rod model that’s $9,000,” Mr. Kennedy said, addressing a perception that Harley-Davidson products carry a big price tag.
Robin Farley, who leads leisure-market analysis at UBS Investment Bank, said Harley’s problem was not a simple matter of shifting loyalties. Sales have been declining for the last three years, partly because an aging rider population is shrinking Harley’s core customer base.
The slide is not just a recent development. “Harley’s sales were declining in 2007, before even the recession hit the industry,” Ms. Farley said. “Harley-Davidson dropped more than Indian gained, and new entries like the middleweight Street models have lower margins that cannot offset declines in the core business.”
Adding to its woes, the company was fined $15 million last year for selling engine control devices that violated exhaust emissions regulations, though the Trump administration in July dropped a $3 million portion of that settlement that required Harley to fund an antipollution program.
Another wild card in the industry is the future of Ducati, a brand that shuffled among various owners until landing in the Volkswagen corporate portfolio, under Audi’s supervision, in 2012. Despite reports that Ducati is up for sale, analysts have expressed skepticism about how much it could improve the results for a new company. The economics would be hard to justify as well: Motorcycle sales in the United States have not nearly recovered to pre-2008 levels, and Harley recently lowered its forecasts for 2017 sales.
Indian’s product plans call for eight new models in 2017, and Mr. Wine hinted broadly about entering new market segments. The company’s successful dirt-track racing program — another direct challenge to Harley — may offer some clue. Polaris also acquired an electric motorcycle maker, Brammo, in 2015, but the company has said it is not yet satisfied that the bikes meet its standards for performance, range and price.
To be sure, there is little chance that Indian will run Harley-Davidson out of business anytime soon. Harley’s sales last year, some 260,000 motorcycles worldwide, generated revenue of $6 billion.
Polaris does not release sales volume figures, but motorcycles in 2016 accounted for just 16 percent of the company’s $4.5 billion revenue. Indian’s growth is bound to look strong, at least in percentage terms, given its modest baseline, and that will be especially true for international markets.
But to Steve Menneto, president for motorcycle operations at Polaris, the reality of a market that has seemingly topped out means that cannibalism is unavoidable.
“As you go up in engine size, you have to take share from your competitors,” Mr. Menneto said. The corollary — one formula for growth — is then to engineer motorcycles with smaller engines like the Bobber and the Scout 60. “That’s where you’ll find the chance to bring in new riders,” he said.