Will Road Bike Brands conquer the Dirt Bike Market?

History repeats itself, as a famous quote from Karl Marx goes. He did not say exactly those words but was close to it. And we are currently seeing motorcycle road brands developing MX dirt bikes.

Will they succeed? That is the question. I will answer it right at the start and give arguments for it afterwards. To succeed, they have to overcome multiple challenges. Based on the history of the last few decades, they will most likely not.

But a few words to me. I've started my career in the motorcycle industry. For over 10 years, I've worked in 5 countries and two continents. Even when I left the industry, I worked on special projects and never really lost touch with it. When it comes to the motorcycle industry, you can say it is quite established. With the first bikes hitting the roads around 1903, nothing really changed since then, you have an engine, two tyres and some gear around. The motorcycle has not evolved much. Yes, of course, everything, like brakes, tyres, suspensions, electronics, has improved a lot, but in the end, it is still an engine with two tyres riding around.

I also learned, that when it comes to distribution and what the industry does is the same. When you start as a newbie coming up with new ideas, the veterans say, done that, tried that.

But let's get into the story of Road bike brands developing dirty bikes, using the Australian market as an example, a blueprint for many other markets.

The question is, why are they doing it? There are multiple reasons why, for example, expanding the brand and going into new markets to sell more bikes. Still, it keeps the question, why dirt bikes? I have a hinge. The cross-profit margin of dirt bikes must be high. Ultimately, it is just a 1-cylinder engine with two wheels, unlike a 1000cc road bike with many more parts and costs. When I asked the manufacturers why the prices for dirt bikes are so high, they always answered we do not have the economy of scales for the engine. I never believed that. Of course, there are more Road bikes sold than dirt bikes, but that is why Dirt bikes are so expensive? Which gets to the next point. Many components of the bike are from suppliers: brakes from Brembo, suspension from KYB, rims from Excel, tyres from Michelin, air filter from Twin Air, plastics from Acerbis, handlebar from Renthal, grips from ProTaper, exhaust system from Akropovic, as an example shopping list. That leaves the frame, most likely manufactured by suppliers, too, and the engine, which the new player needs to develop.

To sum the paragraph up, I think the management looks at the worldwide MX figures and the gross-profit margin of dirt bikes, consults the crystal ball, picks a random number they think they will sell and decides we need to develop a dirt bike as an easy way to improve the company bottom line.

Easy, right? Let's look at the challenges for the new kids on the block.

Market:

I spent most of my time in the motorcycle industry in Down Under. That is the market I know the best. From 2003 – 2022, the dirt bike market was around 40,000 retail units a year. A little bit over and under the mark. Let's disregard the spike in 2020-2021 because Australians were locked in the country and couldn't leave the continent. Based on the data, the market is stable at around 40,000 units. Not increasing but also not losing. But what does the picture look like when we consider the population? In 2004, Australia's population was 19.8 million, compared to 25.9 million in 2022, an extra 6.1 million people.

Interestingly, the amount of sold Dirt bikes has not increased. Or in other words, in 2004, 0.20 % of the population bought a new dirt bike, compared to 0.15 % in 2022. The total should be 52,000 units for the status quo and even higher for a growing market. Considering the figures, the dirt bike market is going backwards and is really declining based on the population growth in Australia.

I do not want to go into details for the reasons, only list a few which could explain it:

• Reduced places to ride
• More difficult to be able to ride,
• MX is an expensive hobby
• Rise of cost of living, fuel, insurance
• Deemed too dangerous
• Shift of interest of younger generations, watching screens instead of playing outside, not riding bicycles

?

Overestimating Sales

When BMW launched the G450X in Australia, BMW's headquarters in Munich predicted to sell 450 – 750 units, I was told. I cannot confirm, but as mentioned before, I know they looked in their crystal ball and pulled that number. When I heard it, I looked at my data and estimated 100 - 120 units, maybe 140 when they are doing well. In the end, BMW sold 142 units because they registered 20 as a demonstrator at the end of the year, to be included in the statistics. Knowing how more prominent road manufacturers operate, I trust Ducati and Triumph have similar overestimated calculations.

Another fact: how can you estimate the market if you do not know the actual numbers? Unfortunately, the Federal Chamber of Automotive Industries [FCAI] is not releasing detailed figures anymore. In addition, they do not know how many MX1 and MX2 bikes are retailed in Australia. Nobody knows because brands not part of the FCAI, like Sherco and Beta, are not submitting their figures. How do you estimate sales if you do not even know the exact retail units in a year? It's similar in Germany because MX bikes are not road-registered. I believe that is true for other markets as well. The best figures I could find are the Top 10 MX bikes sold in Australia from 2019. Not published figures beyond that year.

Specialities of the Dirt Bike Market

Another fact is that you need to release something new for the dirt bike market every year. And if that's just some new stickers. But with new stickers, you get away with one or two years, so you really need to have something new. I'm not sure if the Road bike brands are aware of that and if they are considering the development to be done.

Distribution and Range

Of course, riders living in both worlds, the road and the dirt. However, they will always have a preference: more road or more dirt. And we can agree both are two different customers.

Road brands are known for Road bikes. Now, they have one off-road bike. Most likely, they will use their existing dealer network to distribute the MX bikes. However, the dealer network is focused on selling road bikes; a dirt bike is just a distraction. The manufacturer may entice them with a cool-looking stand, some aftermarket parts, but there is just one Dirt bike in a showroom with road bikes, looking like an alien. Also alienated will be the dirt bike customer going into a road bike shop. No dirt bike parts, merchandise, or gear on display. And how many dealers will take on the dirt bikes? For them, as mentioned before, the MX bike is a distraction from the main business. Dealers are independent businesses. There are one or two shops run by the brand themselves; however, that is not a considerable number. Imagine a customer is interested, goes down to the local dealer, and the dealer does not have the bike on display.

Additionally, a customer can already choose from the following already established brands, in alphabetical order:

• Beta Motor
• Gas Gas [owned by KTM]
• Honda
• Husqvarna [owned by KTM]
• Kawasaki
• KTM
• Sherco
• Suzuki
• TM
• Yamaha

There are many more challenges, but I leave it at that. I made my points.

That leaves me my prediction:

The new bikes will be hyped; the manufacturers will pour massive amounts of money into marketing for the first few years. Trying to get dealers to stock the bikes with flashy stands, going to shows presenting the bikes, hiring riders, but not getting the top ones, the championships in various series will not come. But even with all the effort, sales will stay behind the estimates. Then, a new board or the financial department will crunch the numbers and conclude that the MX Adventure is losing money, resulting in the project being shelved with the losses written off.

An interesting fact: in the equation, Ducati is owned by Audi and Triumph by John Bloor. Audi has shareholders; John has the cash to burn. The result will be Ducati will fault 1st, with Triumph holding on longer to burn more cash.

Everything goes back to how it was before. Another star appeared and burnt out like a Supernova.

No magazine or online motorcycle page will report that. For them, having more brands in the market for advertising revenue is excellent. However, deep down, they know it too and would agree.

One last thought: When I started to write the article, I had many different thoughts on tackling the topic. One thought came only at the end after more research into Triumph. Of course, you do not care about economics if you have almost unlimited funds or money to play. You go into the Dirt bike market because it is maybe sexy and an ego thing to do. However, imagine going from Road bikes to Dirt bikes, similar to a start-up, and you are trying to get venture capital on board.

There is no novelty idea, no product differentiation from existing products, a declining market considering the population growth, at least in Australia, with already many established players.

The Motorcycle Industry is mainly driven by enthusiasts, which explains perfectly how some decisions are made.

I will finish with one question and one question only:

What is the value proposition of another MX bike in the market?

Cover photo by Greg Smith