Motorcycles, Bicycles, and Parts

SIC 3751

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing motorcycles, bicycles, and similar equipment, and parts. Establishments primarily engaged in manufacturing children's vehicles, except bicycles, are classified in SIC 3944: Games, Toys, and Children's Vehicles, Except Dolls and Bicycles. Establishments primarily engaged in manufacturing golf carts and other similar personnel carriers are classified in SIC 3799: Transportation Equipment, Not Elsewhere Classified.

Industry Snapshot

The largest segment of this industry was motorcycles, which, after experiencing a downturn during the 1980s and early 1990s, posted consistent growth in popularity through the middle of the first decade of the 2000s. Sales reached levels not seen since the motorcycle boom of the 1970s, topping the 1 million-unit mark in 2004 compared to 278,000 units sold in 1992. Sales dropped in 2007 for the first time in 15 years, followed by another drop in 2008 to 880 million units sold. As the economic recession gripped the nation, sales of motorcycles fell more than 40 percent in 2009. Not until mid-2011 did signs of an upswing in sales appear.

Harley-Davidson is the dominant U.S. manufacturer of motorcycles, competing primarily with foreign-based companies that have final assembly operations in the United States. According to Hoover's, about 70 motorcycle and bicycle companies in the United States generated about $4 billion in sales in 2010, down from more than $7 billion in 2008. U.S. bicycle manufacturers were not as successful as Harley-Davidson. The U.S.-based bike manufacturers that survive the brutal price competition from the surge of low-cost competition from China-made bicycles, do so primarily by marketing high-end performance and BMX bicycles.

Organization and Structure

In the early twenty-first century, Harley-Davidson Inc. of Milwaukee, Wisconsin, the dominant U.S. motorcycle manufacturer, sold more than bikes. The image of the Harley as America's motorcycle had become integral to the company's marketing success. Its extensive national dealer network sold motorcycles, parts, and service, and it also promoted Harley-Davidson's line of "MotorClothes" in "designer stores." The company sponsors a motorcycle enthusiast club, the Harley Owners Group (HOG), and organizes rallies and product demonstrations.

The Asian financial crisis in the mid-1990s allowed Japanese motorcycle manufacturers to lower prices because of the favorable exchange rates. The lower prices, in turn, increased production at two Japanese motorcycle makers--Honda and Kawasaki--which had facilities in Ohio and Nebraska, respectively. Like other Japanese and European motorcycle manufacturers, these manufacturers maintained their own dealer networks and generally enjoyed a price advantage over comparable Harley models. Nevertheless, the effectiveness of the Harley-Davidson lifestyle marketing campaign made the "Hog," as the Harley-Davidson is affectionately known, a desirable status symbol in the biking world.

By the middle of the first decade of the 2000s, the mass market for bicycles was dominated by Asian competitors. The vast majority of low-end bicycles marketed at mass outlets such as Walmart, which sold the most bicycles in the United States, were products of Asian manufacturers. The remaining U.S. segment of the bicycle industry sold much of its product through specialized dealer networks. These dealer networks generally carried the sophisticated, higher-priced models for the cycling enthusiast.

Cutthroat competition, especially from China and rapid innovation in the bicycle segment of the industry forced many firms out of the market. Chicago, once the world's bike manufacturing capital with more than 90 manufacturers, had only Schwinn and that was in name only. Schwinn, established in 1895, sold 25 percent of bikes in the United States during the 1960s, earning it the reputation as America's bicycle manufacturer, although it was never the largest. A 1981 labor dispute prompted Schwinn to phase out its U.S. manufacturing operations in favor of overseas facilities. That move created a new competitor, Giant Bicycles of Taiwan, which eventually drove Schwinn out of the market after supplying 70 percent of Schwinn's product in 1984. Schwinn was absorbed into Pacific Cycle of Madison, Wisconsin, which was purchased by Montreal-based Dorel Industries in 2004.

Background and Development

Bicycles.
The bicycle originated in France when Paris carriage maker Pierre Michaux fitted cranks to the front wheel of the German-designed draisienne, or hobby horse. By 1867 a bicycle craze was sweeping Europe. Boston merchant Albert A. Pope is credited with introducing the device to the United States. Pope began importing the British High-Wheel, also known as the "Penny-Farthing," in 1876. By 1878 he was producing his own version at the Weed Sewing Machine plant in Hartford, Connecticut.

The new product tapped a growing demand in the United States for increased mobility and provided work for the idling U.S. arms industry. Much of the industrial expertise developed for the weapons industry during the Civil War was transferred to the production of bicycle components. In 1890, 27 bicycle manufacturers produced 40,000 "safety" bicycles, featuring two equal-sized wheels.

By 1897 production increased to 1.2 million bicycles annually. Demand evaporated, however, as the horseless carriage began to make an impact. Auto manufacturer Hiram Percy Maxim noted that the bicycle revealed the advantage of quicker personal transportation but failed to answer the challenge. He claimed the bicycle created the demand for the automobile and provided the technology needed to mass-produce it.

Bicycles retained a steady but small popularity through the first half of the twentieth century. The baby boomer generation fueled the resurgence of the bicycle starting in the 1950s. The single-speed child's bike gave way to multiple speed versions and, eventually, the popular lightweight 10-speed. Throughout the 1970s, the 10-speed dominated the market with a market share of 56 percent. However, a U.S. innovation, the mountain bike, changed everything. Initially designed for climbing the scrubby hills north of San Francisco, mountain bikes and all-terrain bikes sported fat tires, sturdy frames, and multiple gears. By 1991 they had boomed in popularity, even in areas miles from any mountain, and commandeered a 50 percent market share.

Many traditional companies like Schwinn and Murray failed to react quickly enough to the popularity of the mountain bike, leaving the door open for small innovators to carve a niche and for large foreign firms like Taiwan's Giant and China's CBC to gain control of trademarks. The showroom models still sported familiar brand names, but many were foreign-made while others used components no longer made in the United States. Those firms that did react, like Trek and Cannondale, recorded great success in the export market, especially in Europe and Japan. In 1998 Cannondale was the leading manufacturer of aluminum bicycles with combined sales of more than $171 million for its bicycles, accessories, apparel, and components.

The phenomenon of the mountain bike dwindled in importance as the sales of these bikes decreased in 1996 for the first time in 10 years, dropping from $1.6 billion in 1995 to $1.5 billion in 1996. Once again, baby boomers were considered to comprise a key market, as shown by the introduction of expensive "nostalgia" bicycles by companies like Schwinn. Some automobile manufacturers started producing bicycles under their own logos, hoping to appeal to customers who wanted to lead an active lifestyle or project that image. These companies included Mercedes-Benz, Volkswagen, BMW, and Jeep. Bicycles also were being used more frequently by non-recreational riders, such as commuters, couriers, and police officers.

At the end of the first decade of the 2000s, Walmart was the nation's leading retailer of bicycles. Remaining true to the company slogan of "Everyday Low Prices," Walmart turned to low-cost imports from China to stock its shelves. Unable to compete on price with the low production cost of Chinese manufacturers, U.S. bicycle makers were effectively shut out of the mass market for low-end bicycles. In 2008 the United States imported 18 million bicycles, 96 percent of which were Chinese-made. The United States retained several manufacturers of high-end performance, BMX, and mountain bikes.

Bicycle manufacturers Huffy and Cannondale filed for bankruptcy during the first half of the first decade of the 2000s. However, the financial problems for both companies were primarily caused by ill-advised forays into diversified acquisitions as Huffy moved into sports equipment and Cannondale moved into the motorcycle sector. By 2005 both companies had shed their poor investments and were refocused on bicycle production. Huffy introduced a line of chopper models, and Cannondale sold its power sports division.

Along with these developments, U.S. bicycle exports plummeted, but export revenues increased because remaining production was largely focused on high-end bikes. At the start of the year 2000, bicycle exports averaged $41 per unit shipped, resulting in $7.2 million in revenue. During the first four months of 2007 alone, however, exports averaged $696 per unit, and revenue was nearly three times that for all of 2000.

In the late 1990s, a reported 45 million bicyclists were active in the United States. High demand for U.S. mountain bikes overseas accounted for an estimated 17 percent increase in exports in the late 1990s. Improved quality without significant price increases occurred because of the competition's ability to mass produce their product. Electric bicycle technology was at the forefront of the industry in the new millennium. As a result, Schwinn and Currie Technologies created a partnership in an effort to be the worldwide frontrunners in the electric bike market early in the first decade of the 2000s.

Motorcycles.
The motorcycle represented a first step from the bicycle to the automobile. The simple expedient of attaching a gasoline-powered engine to a bicycle frame produced a device that was at once exotic and affordable. During the early 1900s, more than 100 companies began manufacturing motorcycles, including Harley-Davidson, Indian, Orient, Excelsior, Cyclone, Henderson, and Marsh. By 1915 they produced models that could exceed 100 mph. The 1915 Cyclone, designed specifically for racing, could reach speeds of 124 mph, but had no throttle and no brakes. Harley-Davidson began production of its first model, the Silent Grey Fellow, in 1903, the same year Henry Ford unveiled the Model A. When Ford introduced his mass-produced Model T in 1913 and sold it for $500, most motorcycle manufacturers could not compete. After World War I, only Harley-Davidson, Indian, and Excelsior remained. By 1953 Harley-Davidson was the lone U.S. producer.

With the OPEC oil embargo of the early 1970s, motorcycles became popular for commuting, with the exception of the Harley. Consumers wanted inexpensive, reliable bikes, and those came from Japan. In 1973 sales of motorcycles reached an all-time high of 1.5 million. In 1983 Harley-Davidson sought and received tariff protection from the Reagan administration to help it battle Japanese competition. Even with the 45 percent tariff protection, the company was almost bankrupt by 1985 due to poor quality and inefficient production. By applying Japanese management techniques, Harley-Davidson finally reversed its situation and asked for the tariff to be removed one year before it was due to expire. Meanwhile, Honda miscalculated the heavyweight motorcycle market, concentrating instead on small bikes and high-priced, high-tech super-bikes. Honda's market share dropped from 44 percent in 1985 to 32 percent in 1989.

There was a surprise for the industry in 1994 when Polaris introduced its heavyweight Victory V92C cycle, the largest V-twin engine on a cruiser-style cycle. Polaris was the first new U.S. motorcycle manufacturer since 1960. The Victory V92C was chosen Best Cruiser of the Year by Cycle World.

The average motorcycle rider at the turn of the century looked little like the stereotypical biker depicted in popular movies like Easy Rider. At the end of the first decade of the 2000s, a biker was more likely to be an aging baby boomer who bought an expensive, heavy-duty "cruising bike," most commonly a Harley-Davidson. While the median age of a Harley rider was 34 in the mid-1980s, the two fastest growing groups were 55- to 64-year-olds and 45- to 54-year olds. Many Harley buyers were professionals who spent weekends and vacations on their bikes. From the late 1990s through the middle of the first decade of the 2000s, smaller and faster sport bikes were marketed to baby boomers, who had more disposable income, as well a new generation of riders in their twenties.

According to the Motorcycle Industry Council, new motorcycle sales surpassed 1.19 million in 2006, a 2 percent increase over 2005. That was the highest number of motorcycles sold in a year since 1973, when 1.5 million motorcycles were sold. However, sales declined over the next two years, reaching 880 million units in 2008. Street bikes continued to be the major seller in 2008, with 611,133 units sold, a decrease of 5.6 percent from 2007. Scooter sales increased more than 41 percent in 2008 at 76,748 units compared to 2007 units shipped. Dual Sport bikes also registered a healthy increase in 2008 at a whopping 23 percent, with 45,250 units sold. Off-road bike sales plummeted 30 percent to 146,779 units. Harley-Davidson was the biggest seller in the U.S. market in 2008, with 28 percent of all sales, followed by Honda with 25 percent.

As predicted, the demographics of the U.S. motorcycle industry became dominated by the baby boomer generation. Over 61 percent of owners in 2008 were over 40, compared to 21 percent in 1985. The average age of motorcyclists in 2008 was 43 years, up from 32 years old in 1990. As further evidence of The graying of motorcycle riders was underscored by the shift from about 25 percent of motorcyclists in 1980 being between 18 and 24 years old, which fell to 8 percent by 2008. Owners under 18 years old comprised less than 1 percent of ownership in 2008, compared to 14.9 percent in 1985. About 33 percent of motorcycle owners were college graduates (nearly double since 1990), and 12.6 percent were women, a growing sector of motorcycle owners.

Current Condition

Like most other manufacturing businesses, the industry suffered during the economic recession at the end of the first decade of the 2000s. In 2009 sales of motorcycles were down more than 40 percent according to Motorcycle USA. However, signs of a recovery had appeared by 2011. According to webBikeWorld.com, overall sales of motorcycles in the United States improved slightly in the first half of 2011 as compared to the same period in 2010. Scooter-type bikes showed the largest increase, up almost 29 percent, whereas the sale of dual-sport bikes rose 13 percent.

A September 2011 report by IBISWorld was not as optimistic, noting that aging baby boomers and imports would impede growth into the second decade of the century. According to the report, "low disposable income is keeping spending on the industry's discretionary products at bay." Two positive factors for the both the motorcycle and the bicycle sector of the industry were the price of gas and environmental concerns, as Americans looked for alternate energy and cost-efficient ways of getting around, as evidenced by the leap in sales of scooters in the first half of 2011.

Industry Leaders

In 2011 Cannondale Bicycle Corp. of Bethel, Connecticut, was a leader in the manufacture of aluminum bicycles. The company's wide range of bikes included designs for dirt biking and urban free-riding, cross-country racing, mountain biking, cyclocross, performance, triathlons, touring, and tandem riding. In 2003 Cannondale filed for bankruptcy and was purchased by Connecticut-based Pegasus Capital Advisers as a privately held company. In 2010 the company operated as a division of the diversified Dorel Industries and reported $50.5 million in annual revenues.

Schwinn began making bicycles in 1895. In 2005 the company remained intact as a segment of Pacific Cycle of Madison, Wisconsin, which was purchased in 2004 by Dorel Industries. Schwinn marketed a range of road and mountain bikes, dirt and freestyle bikes, and kids' bikes, as well as updated versions of the company's vintage Cruiser and Sting Ray models.

Huffy Corporation, best known for its all-purpose and kids' bicycles, began making bicycles in 1892 and became, with Schwinn, another national trademark in the U.S. bicycle industry during the 1960s. However, Huffy was unable to keep up with overseas competitors and closed its last U.S. production site in 1999. The Huffy brand continued to sell close to 5 million bicycles annually, with most of those manufactured in Asia.

With annual sales of $104 million in 2010, Trek Bicycle Corp. of Madison, Wisconsin, was the nation's top producer of high-end bicycles. Specialized Bicycle Components, of Morgan Hill, California, was the first company to produce the mountain bike for the mass market in 1981 and by the 2010s was a leading producer of high-end models, with annual sales of around $50 million in 2010. Both Trek and Specialized Bicycle Components made a range of other bicycle styles and were both privately controlled.

The leader in the U.S. motorcycle industry remained Harley-Davidson of Milwaukee, Wisconsin, the top seller of heavyweight motorcycles. Thirty models were sold through about 1,300 authorized dealers. Harley-Davidson reported consolidated revenue of more than $4.8 billion in 2010 with 6,300 employees. The five families of motorcycles produced by the company were Touring, Dyna, Softail, Sportster, and VRSC.

Polaris Industries Inc. of Medina, Minnesota, made the Victory line of motorcycle cruisers, which included seven product styles. The company was also a world leader in the production of snowmobiles and four- and six-wheel all-terrain vehicles. Sales in 2010 exceeded $1.9 billion with 3,000 employees.

Other leaders in the motorcycle manufacturing industry in the early 2010s included Viper Motorcycle Co. of Hopkins, Minnesota, and Ultra Motorcycle Co. of Temecula, California.

America and the World

Exports of motorcycles, bicycles, and parts from the United States totaled $2.4 billion in 2008. The primary recipients of U.S. exports were Germany, Canada, the Netherlands, Thailand, and Brazil. Imports of motorcycles, bicycles, and parts into the United States in 2008 totaled $5.7 billion. China accounted for nearly 65 percent of all imports, followed by Taiwan with 25 percent and Japan with 9 percent.

Bicycle Retailer and Industry News reported that imports of bicycles fell about 18 percent in 2009 compared to the previous year, while exports increased barely 1 percent in the same period.

Research and Technology

The mountain bike continued the technological revolution that had started with the 10-speed bicycle by reducing cost and increasing comfort levels. Innovators in bicycle design use new materials and electronic gadgets to bring the century-old "safety" bicycle into the computer age. The molded carbon fiber metals that made stronger, lighter frames possible, for example, came from missile technology, while Special Bicycle Components' three-spoke wheel, which combines carbon fiber, epoxy resin, Kevlar, and aluminum, was designed on the Cray Supercomputer. In addition, hydraulic brakes were replacing the familiar cable systems, and electronic shifters made changing gears easier. Some manufacturers were investigating a new enclosed automatic transmission system, which could banish "gear fear" forever. The most visible innovation in bicycling may be a completely new design. The new recumbent bicycle places the rider in a sitting position with the pedals in front, providing a low center of gravity, which improves cornering and pedaling efficiency.

The manufacturing expertise of Harley-Davidson grew steadily after the introduction of its first 1903 model, which used a tomato can for a carburetor. Faced with sophisticated competition from Japanese manufactures in the 1980s, the company adopted just-in-time inventory management and computerized information systems. It retrained its production workers to use statistical monitoring methods and re-educated managers to work as team leaders instead of bosses. New production line techniques included a state-of-the-art robot assembly system and a $23 million paint center in York, Pennsylvania. The result was the vastly improved quality and productivity needed to overcome Harley-Davidson's reputation as unreliable and expensive.

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