CNBC Unique: CNBC Transcript: Harley-Davidson Inc (NYSE:HOG) CEO Matt Levatich Speaks with CNBC’s “Squawk Alley” At present
Picture supply: CNBC Video Screenshot
WHEN: In the present day, Monday, Might 20, 2019
WHERE: CNBC’s “Squawk Alley”
The next is the unofficial transcript of a CNBC EXCLUSIVE interview with Harley-Davidson CEO Matt Levatich on CNBC’s “Squawk Alley” (M-F 11AM – 12PM) in the present day, Monday, Might 20th. The next is a hyperlink to video of the interview on CNBC.com:
Harley-Davidson CEO Matt Levatich on commerce, electrical bikes and extra
MORGAN BRENNAN: Talking of roads, iconic American model Harley-Davidson launching its first electrical motorbike this summer time and now the model is trying to proceed these investments into electrical with new fashions that it’s hoping to draw the subsequent era of riders with. Harley additionally continues to be on the entrance strains of the President’s commerce warfare, seeing the impression of tariffs on lots of its merchandise in a lot of nations. And becoming a member of us now unique is Matt Levatich, the CEO of Harley-Davidson, at post-nine. Welcome.
MATT LEVATICH: Thanks. Nice to see you.
MORGAN BRENNAN: So, 5 years in the past, you and I have been standing outdoors this constructing speaking about Harley’s potential new electrical motorbike Venture LiveWire on the time. The truth that the corporate was contemplating going into this market. And now, as we speak we now have considered one of these bikes behind us right here at post-nine. Let’s speak concerning the evolution and who you’re anticipating to focus on with this new mannequin.
MATT LEVATICH: Yeah, so 2014 we did Venture LiveWire. We constructed 33 of a product that we have been very enthusiastic about. However wanted to check the assumptions, proper? Put these within the palms of actual clients and did that worldwide. Once we met it was the kickoff of that tour about 18 months lengthy. We demoed the product with about 12,000 to 13,000 individuals, in nations everywhere in the world. They have been riders from throughout the spectrum: younger, previous, present buyer, potential clients. And the common suggestions was ‘That is a tremendous product. It’s executed. I would like it now.’ And so, we stepped again and stated, ‘What do you actually need, you already know, from a variety perspective and worth perspective?’ And we received numerous different helpful enter about extra work that we would have liked to do. And it wasn’t fairly prepared for primetime from a know-how and price perspective and a variety perspective. So, between then and now the group has been working very exhausting to convey what you’ve gotten referenced right here to market this summer time, in August. And we’re pleased with it. It’s some of the thrilling merchandise I’ve ever skilled of any type, not simply within the motorbike area. And we expect it’s going to encourage lots of people already riders to provide EV a glance and in addition to encourage new riders, who perhaps are simply interested by what motorcycling is all about. And EV presents an incredible kind of ease of entry and an inspiring method for individuals to hitch us.
MORGAN BRENNAN: I need to get extra into the brand new riders piece of this in a second, however first, there’s loads of focus at the least from buyers and analysts on the worth level, slightly below $30,000, which is greater than lots of your rivals on the market within the market. What do you say to the critics which might be involved about the place it’s priced?
MATT LEVATICH: Yeah, so, to start with, from the worth level standpoint it’s a super-premium product. All of the elements, the dynamics, it is likely one of the greatest engineered merchandise available on the market, definitely that we’ve seen within the area. So, we’re main in electrification. That’s our goal. Not simply with LiveWire however with a full portfolio of EVs. We’re additionally trying to be worthwhile on a gross margin foundation with each motorbike we promote, which is essential. And we consider this product is value each penny of its $30,000 worth level and we goal to show that when individuals get on it.
JON FORTT: Are there good engineering specs, issues like torque and vary that we might need to hear about?
MATT LEVATICH: Yeah, ones that have been quoting most frequently is zero to 60 in three seconds and 60 to 80 in one other 1.eight seconds. So, this can be a excessive efficiency halo product. And clearly electrical is all about torque. And so, metering out that energy and torque to the rider is essential in a motorbike and we’ve received a unbelievable stability of all that efficiency. And balancing additionally with vary and regenerative braking as a result of vary is essential to individuals. And as infrastructure and charging builds out, that’s an essential a part of the equation. We get 80% cost on a Dc quick cost in about 40 minutes. So, you already know, we’re within the candy spot that individuals are beginning to sort of let go of a few of their considerations.
MORGAN BRENNAN: That is a part of the long run multiyear technique, the Extra Roads to Harley-Davidson technique. You’re recruiting extra riders over the approaching years. Extra fashions just like the EV. But in addition, rising worldwide enterprise about 50% of gross sales. Begs the query, loads of give attention to commerce. Tariffs, Harley, prefer it or not has actually been on the forefront of that. With 25% tariffs on some items imported into the U.S. right here from China, additionally retaliatory tariffs in that nation, how will that have an effect on Harley?
MATT LEVATICH: So, our publicity to China each on the import aspect and truly on the gross sales aspect is far lower than perhaps different corporations. We don’t import plenty of elements from China. Most of our merchandise are made and sourced right here in the USA. So we’re fairly nicely protected and the newest spherical of tariffs didn’t have an effect on us in any regard on the import aspect. On the gross sales aspect it’s truly just like Europe, though our quantity is far decrease so from a monetary perspective it’s — not pleased about it nevertheless it’s manageable. Europe is the large problem for the corporate. About $100 million a yr run fee that we’re masking with a purpose to shield our enterprise in Europe, shield our market share, shield our quantity, shield the viability of our distribution channel. Essential for us whether or not the tariffs go away or not, we’re simply working with the information and circumstances in entrance of us. In mild of the truth that a few of our different new merchandise, together with some very potent conventional bikes that play very properly into robust and rising segments internationally, particularly in Europe, they’re popping out about lower than 18 months from now. So, they rival these merchandise. It is rather essential to have that distribution channel and have that velocity and to ensure that these tariffs be mitigated in the event that they don’t in any other case go away.
JON FORTT: Now, it retrospect, how badly did the President harm your model and the way a lot have you ever recovered?
MATT LEVATICH: You realize, we don’t see any influence.
JON FORTT: None.
MATT LEVATICH: And one of the simplest ways to measure that’s by way of market share. You understand, we grew market share zero.6 within the first quarter, it’s – we’re over 51% market share in the USA. It definitely didn’t assist. There’s no query that you simply don’t need feedback like that made. No firm needs feedback like that made about their firm. However, we did a pleasant job, I consider, serving to clients and sellers who have been on the entrance strains of retail –
JON FORTT: What did you do and the way a lot demand was that?
MATT LEVATICH: Simply clarifying what the information are. That this can be a European Union Tax imposed vital impression to the corporate, impedes our capacity to take a position or return to shareholders and that we would have liked to seek out methods to mitigate it properly and fewer and till the tariffs go away by different political means. And right here we’re 11 months after the EU elevated the tariffs. They’re on the books to go, we have been at 6%, we went to 31%, two years from now they’ll go to 56%, until one thing else modifications within the commerce surroundings. And clearly we will’t sit by and look forward to one thing to occur. We’ve to behave and make it occur. We simply assist individuals perceive that. There was misinformation we labored to make clear so that folks obtained snug. And our sellers inform us as soon as they have been capable of inform clients, clients say, ‘Oh, I perceive,’ they usually type of relaxed.
CARL QUINTANILLA: Talking of planning, “The Journal” has a Web page 1 story about CapEx in the present day, the place they undergo all of those regulatory filings. And CapEx progress has gone from 20 a yr in the past to plus three in Q1. They usually cite Cat, FedEx, you identify it as saying, ‘Confusion over commerce is making us be extra cautious.’ That needs to be having an–
MATT LEVATICH: Properly, in fact, I imply I feel enterprise thrives on predictability. Uncertainty robs companies of the type of readability that they should make investments and most of those investments for many corporations are long-term in nature. They’re for Harley as nicely. We’re having to make investments that we didn’t ponder a yr in the past due to this commerce state of affairs. We don’t want further motorbike capability. However with a purpose to get into Europe, whether or not it’s by way of our Thailand funding or if the EU doesn’t approve our software, by means of one other funding probably inside the European Union, that’s capability we don’t want. That’s funding we don’t want. So, this uncertainty to me is actual and impacts each enterprise and each enterprise chief making selections about how one can deploy capital.
MORGAN BRENNAN: Given the truth that, and we now have a number of people which might be on our air and simply within the press typically, who say tariffs routinely translate to a tax on the buyer. I feel simply by what you laid out right here right now that’s not essentially the case. It impacts somebody, somebody has to pay these further levees. However given the very fact you haven’t essentially raised costs in your key markets however you’re promoting– you’re pushing ahead with Extra Roads to Harley-Davidson, what’s your tackle the buyer, whether or not it’s right here or overseas?
MATT LEVATICH: I feel just like enterprise, shoppers are — have a excessive diploma of alert about what’s occurring of their economies, whether or not it’s right here within the U.S. or Europe. They’re spending however they’re spending, I feel, cautiously, pulling again perhaps on some massive ticket discretionary gadgets. I feel you see a few of that in housing and I feel you see a bit of little bit of that within the motorbike cycle business in the USA. So whereas there are plenty of markers that recommend the financial system could be very robust, there are features of it that I consider the state of affairs impacts as properly.
MORGAN BRENNAN: Matt, thanks for sitting right here with us at post-nine. Matt Levatich, the CEO of Harley-Davidson. We aren’t finished. After the break we’re going to take a better take a look at Harley’s newest fashions which are proper right here behind us on the New York Inventory Change. That’s subsequent. Stick with us.