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S&P Downgrades Harley-Davidson to BB+ Amid Concerns Over Profit Margins
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S&P Global Ratings has lowered Harley-Davidson's credit rating to BB+ from BBB-, moving its debt to non-investment grade territory. The ratings agency cited expectations that the motorcycle manufacturer's new strategy will keep profit margins depressed for several years.
S&P Global Ratings downgraded Harley-Davidson Inc. to BB+ from BBB- on Tuesday, reflecting concerns about the company's future profitability. The agency anticipates it may take several years for the motorcycle maker's EBITDA margin to recover to levels near 10%. The ratings for Harley's unsecured debt were also lowered, and all ratings were removed from CreditWatch. S&P assigned a stable outlook, citing the company's strong liquidity position.
The downgrade follows Harley-Davidson's announcement of its "Back to Bricks" strategic plan, which prioritizes regaining market share over short-term unit profitability. As part of this strategy, the company plans to introduce more affordable models to attract new riders. S&P forecasts that Harley's adjusted EBITDA margin will remain between 5% and 6% in 2026 and stay depressed through at least 2027.
To appeal to a broader customer base, Harley-Davidson will introduce the new Sprint model and reintroduce the Sportster, which was discontinued in 2022. Both motorcycles will be sold at entry-level price points, with the Sportster priced around $10,000. This move aims to reverse a significant decline in market share, which fell from 49.1% of total U.S. motorcycle registrations in 2019 to 34.5% in 2025.
AdWhile the company targets a gross margin of 25% to 30% and an EBITDA margin of 10% to 12% over the next three to five years, these goals are below the levels seen in 2022 and 2023. The company also faces financial headwinds, including an estimated $75 million to $90 million in tariff costs for 2026 and restructuring expenses related to cost-cutting measures. In the first quarter, Harley-Davidson reported $15 million in restructuring charges.
In a related action, S&P also lowered its ratings for Harley Davidson Financial Services Inc. Despite the downgrades, the stable outlook is supported by the company's substantial cash reserves, which stood at $1.8 billion as of March 31, 2026, along with more than $2 billion available under commercial paper programs.