Thursday, 12 September 2024

Comment by Editor, Robin Bradley

The records are not tumbling anymore

This month marks an important anniversary for the motorcycle industry in Europe. We are now ten years on from the post Lehman apocalypse Great Recession motorcycle industry business cycle nadir in September and October 2014.\That was the point when, having hit rock bottom and been bouncing along the rocky bottom of a broad U-curve, the market started to see the first green shoots of recovery.
Founded in 1844 by German immigrant Henry Lehman, Lehman Brothers was a Wall Street stalwart. A storied, revered and hugely respected investment bank, stockbroker and financial services conglomerate. The fourth largest investment bank in the USA was also a mortgage underwriting powerhouse. Therein lay the toxin surging through its balance sheet.
That was when the sub-prime home loan industry in the USA, and the chicken-into-steak derivatives trading smoke and mirrors on which it was based, brought global financial markets crashing down and set in motion a cascade of system failure that still shapes the business expectations of the world in which we trade today.
Lehman saw its stock lose some 97% of its value on Friday, September 12, 2008, as it became clear that it, and the Wall Street partners it traded with, couldn't cover their debt obligations. The dreaded 'margin call'. The result was a bankruptcy filing on Monday, September 15, 2008, and who can forget the sight of overpaid traders walking out of their offices clutching their leaving boxes.
The financial shocks reverberated around the financial capitals of the world, and in the shape of Basel I, II and III and other 'too little, too late' New Gen banking regulations that are supposed to protect liquidity, literally still do shape the contemporary banking culture that drives lending and credit policies worldwide.
The Lehman collapse wasn't the only 'trigger' that brought the global financial system down like a deck of cards. It wasn't even the first in that 'Great Unwind', nor was it the last. But the resulting 'Great Recession', as it quickly became known, was deep and intense - often referenced as the most severe recession since the Great Depression that followed the 1929 Wall Street collapse. 

looking through the lens of now

However, in the United States at least, it didn't really last all that long, certainly not relative to that depth and intensity. By 2010, the good ship USA had righted itself, with shares and much else recovering the lost ground by 2012. The process in America was far from pain-free, but in Europe it was especially acute - even the financial morphine of 'Quotative Easing' took years to restore growth, jobs and the flow of capital.
Europe was slower into it than the USA, but was also much slower to recover from the much deeper turmoil it unleashed here. It destroyed lives, it destroyed whole industries. Those (like ours) that are dependent on discretionary leisure Dollar spending were bang in the crosshairs.
In terms of new motorcycle registrations, the market in Europe basically halved and very nearly halved again in the course of six years. It may have been a slow haemorrhaging, but that didn't stop it being a messy one.
The decline didn't even start to really stabilise until January 2014, and it wasn't until Q3 that year that we started to see those ubiquitous first green shoots of recovery.
To this day I well remember Reiner Brendicke, the (excellent and still) head of the IVM in Germany, standing before a news conference at INTERMOT in October, saying that in its statistical gather it had started to detect the very slightest and lightest evidence of a possible and very modest uptick in registrations in Germany.
So, here we are, exactly a decade later, and how did that early indicator play out? Did the green shoots grow?
Well yes, they did. Relative to the six years that had gone before, the six years until March 2020 saw a spectacular recovery. We gradually saw a return to market growth through the period from 2015 to 2019. It wasn't all smooth riding. The growth stalled a couple of times, but overall, and with no little thanks to the efforts of the national trade associations, the team at ACEM in Brussels and the major European OEMs, the motorcycle industry managed to pull it back - halfway back at any rate.
In that time, Europe's dealers were chronically short of inventory capital though. Banks weren't lending and manufacturers were very slow, careful and deliberate about how they built back, and what kind of machines they built back with.
By the end of 2019, we had started to see regular new highs, new records, at least in post Lehman apocalypse timescale terms, in some cases back to the early noughties and late 1990s.
Then the blind panic of Covid. Followed by a Covid bounce that was especially kind to our industry - irrationally so maybe, but hey, we were happy to take it, right?
Since then though, more panic. Supply chain issues and costs. Freight issues and costs. The little matter of Russia's ongoing invasion of Ukraine. Then energy crisis, inflation, interest rate rises and collapse in growth it triggered. Plus, all the other uncertainties that are still writing our script.
Compared to the rock bottom that sales hit in 2014, a decade later and motorcycle registrations have recovered. But as someone said to me a while ago, don't be fooled, compared to where we were 20 years ago, now all we have is half a recession. It's true.
The industry has still not recovered the ground from when it was a runaway train 20 to 30 years ago, and likely never will, but in most of the major markets we have seen national motorcycle registrations and manufacturer production numbers breaking records - quarter after quarter, year after year.
But oh my, what a delicate balancing act the next 24 months are going to be! As per this month's cover story, the 'Growth Meister Powerhouse' that Stefan Pierer has turned KTM into has seen that growth stall. There's a similar (though not identical) story at BMW, and at Ducati, and at Piaggio. Neither is all yet as rosy as we need it to be in the Japanese factory balance sheets.
Ten more years of continuing record motorcycle sales numbers? Hmmm, at present it is really hard to see that 'through the lens of now', and I haven't even touched on the environmental and electrification issues that confront us.