Harley-Davidson Faces Brutal Reality Check as Tariffs and Declining Sales Hammer Iconic Brand
The thunder of V-twins may be getting quieter in Milwaukee. Harley-Davidson's latest earnings report paints a sobering picture of an American icon struggling to find its footing amid a perfect storm of tariff pressures, waning demand, and a core customer base that isn't getting any younger.
The company posted a staggering $279 million net loss in the fourth quarter of 2025, more than double the $117 million loss from the same period a year earlier. Consolidated revenue plummeted 28% to $496 million, while full-year revenue declined 14% to $4.47 billion. Global motorcycle sales to consumers dropped 12% to just 132,535 units for the year. Perhaps most telling, the motorcycle division swung from $278 million in operating income in 2024 to a $29 million operating loss in 2025.
CEO Artie Starrs, who took the helm in October after previously running Topgolf, isn't sugarcoating the situation. He acknowledged on the company's earnings call that Harley is experiencing "choppiness and volatility" in its global retail results. However, he framed 2026 as a deliberate reset year aimed at stabilizing the business and restoring dealer confidence.
The Tariff Squeeze
The Trump administration's tariffs have become a significant headwind for the Milwaukee-based manufacturer. New and increased tariffs cost Harley $67 million in 2025, and the company forecasts that number climbing to between $75 million and $105 million in 2026. Steel and aluminum tariffs alone accounted for $31 million of the 2025 impact, with additional pressure coming from regional tariffs involving China, Mexico, Canada, the EU, and several Asian markets.
The irony isn't lost on industry observers. Harley-Davidson is perhaps the quintessential American motorcycle brand, with three of its four manufacturing facilities located in the United States and 100% of its core products built domestically. Yet the company still faces substantial tariff exposure through supplier costs and international trade dynamics.
A Shrinking Customer Base
Beyond the immediate financial pressures, Harley faces an existential challenge that no amount of tariff relief can solve. Despite years of effort to attract younger riders, the company hasn't been able to stem the decline in interest from its traditional demographic of middle-aged male riders who once embraced the brand's carefully cultivated outlaw image.
The numbers tell the story: gross margins fell from 28% in 2024 to 24.2% in 2025, driven by the combination of tariff costs, negative operating leverage from lower volumes, and pricing pressure as the company resorted to incentives to move inventory. The touring segment remains a bright spot, with North American retail actually up 5% in Q4, but international markets continue to struggle significantly. European sales dropped 24% in the fourth quarter alone.
A Financial Lifeline
One notable bright spot came from Harley's financial services division. Through a creative transaction with investment giants KKR and PIMCO, the company sold approximately $6 billion in retail finance receivables and shifted to a capital-light business model. This deal facilitated a $1 billion dividend from the financial services unit to the parent company in Q4 and helped deliver record-high full-year earnings of $490 million for that division.
However, this represents a one-time restructuring rather than a sustainable growth engine. The company expects financial services operating income to drop dramatically to just $45 million to $60 million in 2026 under the new model, though executives believe it could eventually reach triple that range over the next two to three years.
The Road Ahead
Harley's stock, which plunged more than 10% in premarket trading after the earnings release, ultimately closed up 4% as investors digested Starrs' turnaround narrative. But the company now trades near its pandemic-era lows, down 63% from its 2017 levels. Management is projecting flat retail sales of 130,000 to 135,000 units in 2026, with motorcycle division operating results ranging from a $40 million loss to a modest $10 million profit.
A new strategic plan is expected in May 2026, which Starrs says will include lighter, more affordable bikes aimed at broadening the brand's appeal. The company is also counting on a new Trike launch to help stabilize its product lineup.
For now, Harley-Davidson finds itself at a crossroads. The brand retains powerful market positions, holding 76% of the U.S. touring segment and 58% of the cruiser market. But whether those strongholds can sustain a company facing generational shifts in consumer preferences and ongoing macroeconomic headwinds remains the billion-dollar question rumbling through Milwaukee.
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