​Why Harley-Davidson isn't high on the hog

Harley-Davidson (HOG) may be running out of gas.

The iconic motorcycle manufacturer appears to be losing market share, with consumers either opting for used bikes or rival vehicles from Polaris Industries, according to two analyst reports. The company, which reports first-quarter results on April 19, has seen its shares drop by more than 7 percent this week.

"Our research indicates retail trends were weak in March for Harley-Davidson," wrote ITG Investment Research analyst John Tomlinson in a report. "After relatively stable market share in the first two months of the quarter, Harley-Davidson appeared to lose market share at an accelerated pace Y/Y in March, resulting in an overall market share decline in the first quarter."

So what's throttling sales? That appears to be related to two trends: the emergence of Polaris' line of motorcycles, sold under the Victory and Indian brands, according to a separate report from Longbow Research, and a shift toward used vehicles. Medina, Minnesota-based Polaris has been taking direct aim at Harley-Davidson, even running a promotion several years ago called the "Victory Challenge," where dealers set up their bikes versus Harley-Davidson's, allowing consumers to test-drive both brands. One trade magazine noted that "die-hard Harley riders .. are finding themselves attracted to Victory" because of their design and performance.

There are other issues on the horizon that could impact Harley-Davidson, as well as its rivals. For one, the demographics of motorcycle riders isn't exactly on their side. About 40 percent of motorcycle owners are 51 to 69 years old, and Harley's core customer base is men who are white and over 35 years old, according to the Milwaukee-Wisconsin Journal Sentinel.

While that group tends to be wealthier than younger generations, the millennial generation now stands as the largest demographic group in the U.S., which is putting pressure on companies across all industries to find ways to market to the generation. At the same time, Harley and rivals are developing new vehicles to appeal to senior riders, such as three-wheeled motorcycles known as trikes.

Still, the share decline might be a temporary phenomenon, one analyst told Bloomberg News.

"We don't think the share losses are sustainable based on just price discounting," Morningstar analyst Jaime Katz told the publication, adding that Harley could grow in markets such as China and Brazil. "It's a near-term phenomenon that should alleviate itself over time."