Harley Davidson, the iconic American motorcycle manufacturer, has been facing challenges in recent years, as the demand for their motorcycles has dwindled. The company’s recent struggles have been well documented, with declining sales and an aging customer base. However, a lesser-known challenge facing the company is the shortage of repossessed motorcycles, which has resulted in significant credit losses for the company.

Harley Davidson’s financing arm, Harley-Davidson Financial Services (HDFS), provides loans to customers who purchase motorcycles from the company’s dealerships. These loans are then packaged into securities and sold to investors. However, when a customer is unable to make payments on their loan, HDFS is left with the responsibility of repossessing the motorcycle and reselling it to recoup their losses.

In recent years, the number of repossessed motorcycles has decreased significantly, creating a shortage in the market. This shortage has made it difficult for HDFS to recover its losses, leading to significant credit losses for the company. According to a recent report by the Wall Street Journal, the company’s credit losses reached $162.4 million in 2020, up from $78.8 million in 2019.

The shortage of repossessed motorcycles can be attributed to a variety of factors. One of the main reasons is the company’s decision to reduce production in recent years. As Harley Davidson scaled back production, there were fewer new motorcycles on the market, which in turn resulted in a decrease in repossessions. Additionally, the company’s efforts to improve the quality of its motorcycles have resulted in fewer customers defaulting on their loans, further exacerbating the shortage.

The shortage of repossessed motorcycles is not unique to Harley Davidson. According to the National Auto Auction Association, repossessions of all types of vehicles have decreased significantly in recent years, largely due to a strong economy and low unemployment rates. In addition, many lenders have tightened their lending standards, making it more difficult for borrowers to qualify for loans, and resulting in fewer defaults.

However, the shortage of repossessed motorcycles is particularly problematic for Harley Davidson, as the company has relied heavily on the resale market to recover losses on defaulted loans. This has led to a significant decline in the company’s profits and has put pressure on its financing arm to find alternative ways to recover losses.

In response to the shortage, HDFS has been exploring alternative options to recover its losses. The company has been selling fewer repossessed motorcycles at auctions and has been offering incentives to dealers to help sell them. Additionally, the company has been exploring alternative financing options, such as leasing, to help mitigate the credit losses.

Despite these efforts, the shortage of repossessed motorcycles remains a significant challenge for Harley Davidson. The company’s credit losses are likely to continue to rise in the coming years, putting additional pressure on the company to find alternative ways to recover its losses.

In conclusion, while Harley Davidson’s struggles with declining sales and an aging customer base have been well documented, the shortage of repossessed motorcycles has been a lesser-known challenge facing the company. The shortage has led to significant credit losses for the company and has put pressure on its financing arm to find alternative ways to recover its losses. As the shortage shows no signs of abating, it remains to be seen how Harley Davidson will address this hidden challenge in the coming years.