Key takeaways
- The global motorcycle market was valued at $124 billion in 2021 and is projected to grow to a $181 billion industry by 2031. In the US, luxury bike brands like Harley Davidson, Suzuki and Kawasaki are among the top 5 manufacturers by market share.
- The scarcity principle – an economic theory that says items high in demand but low in supply will increase in price – drives luxury markets.
- As with other illiquid assets, investing in luxury motorbikes may provide a hedge against inflation.
We might assume a few things about motorcycle enthusiasts – most likely thrill seekers, mavericks, and adventure lovers. But rarely do we see them as wise investors. But with the luxury motorbike industry booming, where collectible models are appreciating to unprecedented highs, two things can be true: an owner of a Harley Davidson can have a devil-may-care attitude about the future and still have an investment worth a lifetime of savings. If not more.
Investors are increasingly viewing illiquid assets like luxury motorbikes as a hedge against the inflationary pressures of today’s economy. Driven by economic theories like the scarcity principle, luxury motorbikes can also appreciate over time, with today’s new models becoming tomorrow’s classics.
While the return on luxury investments vary, trends are looking up for this particular luxury market, with the industry’s bellwethers – Harley Davidson, Kawasaki and Suzuki– paving the way.
Market stats
The luxury motorbike market is at the crossroads of the motorcycle and luxury markets, both of which are expected to grow in the next few years.
The global motorcycle market was valued at $124 billion in 2021 with projections for it to balloon to $181 billion by 2031. In the US, luxury bike brands like Harley Davidson, Suzuki and Kawasaki are among the top 5 brands driving this growth. Globally, Suzuki and Kawasaki made the top 5 but the American made Harley Davidson is at number 6 by market share.
Meanwhile the overall luxury industry – where vehicles, goods and hospitality account for 80% of the total market – is expected to reach $412-435 billion by 2025, with a sustained growth of 6-8% annually, according to Bain and Company in their 2021 report.
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The big three
The prominence of the big three luxury names in the industry go way back.
One that’s almost synonymous with the word “motorcycle” in the US is Harley Davidson, the American manufacturer notorious for having survived the Great Depression. Its bikes, which are known as Harleys, have become an iconic American symbol, featured in countless films, songs and literature over the years. First manufactured in 1903, it’s safe to say that the brand has a cult following among its riders. It inspired an entire culture around its motorcycles, resonating with thousands of people on themes of freedom, rebellion and independence. Today Harleys range in price but collectibles have sold for over $2 million.
Kawasaki motorcycles, often sportbikes, are manufactured by the Japanese company, Kawasaki Heavy Industries. The company arrived in the US in 1969 with little marketing and almost no following but in three short years, earned the title of a trailblazer in the industry with their innovative Mach III 500cc two stroke triple, which they released in the early 70s, followed by the production of the 1973 900cc Z. These and later innovations – all groundbreaking in speed and engine technology for their time – firmly landed Kawasaki as a leading global name, a title they’ve held on to over the years.
Suzuki followed a similar trajectory to its country mate. It also began in Japan as an industrial company before segwaying into engineering vehicles. Today its off-road bikes and roadracers have won world titles, and its street machines range from the cruiser Boulevard series to the legendary GSX-R series of sportbikes.
Pay the price
Headline grabbing sales of specific bike models for exuberant prices can be attributed to the scarcity principle, which says items high in demand but low in supply will increase in price. Intuitively, many of us know that rare items in high demand will sell for higher prices. This underlying principle just delves further into the dynamics between supply and demand and proposes that when the two are at a disequilibrium, price compensates for the discrepancy by going up. You can read about the scarcity principle in detail here.
Hold off on the cash
Like with other luxury items, the illiquid nature of high value motorbike investments is also viewed as a plus, especially in times of volatility. Luxury motorbikes would qualify as an illiquid asset, which is defined as an asset that can’t easily be converted to cash, as there’s a barrier to the seller in immediately listing on the market – the process would have to include third party sellers, authentication processes and the right medium. Other examples of illiquid assets include real estate, private equity investments and luxury goods like cars, watches or handbags.
Liquid assets on the other hand are usually the securities traded at major exchanges, such as stocks, ETFs, mutual funds, bonds, and listed commodities, which can easily be converted to cash without incurring significant expense on the side of the investor.
Financial advisors usually recommended both types of assets to properly diversify a portfolio. At times when markets are down however, illiquid assets can provide a better hedge against the volatility. Because they can’t easily be sold off (liquidated) immediately, luxury motorbikes for example, wouldn’t be the first investments put to immediate action in times of stress. As they’re also usually high in value during time of purchase, they come with the potential to appreciate over time. Investors often buy into illiquid assets because they see a prospect of getting reliable returns at a relatively low level of risk.
Yieldstreet and luxury Motorbikes
Yieldstreet is offering its third Motorcycle Loan Portfolio, backed by brands such as Harley Davidson, Suzuki and Kawasaki. Each of the loans in the portfolio have been performing in line with expectations for at least 12 months.
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2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]