👉 Background: Harley-Davidson is the motorcycle company that’s been deafening neighbourhoods since 1903. It's known for its cult-like fanbase that often dress head-to-toe in black leather. Over the past few years, Harley Davidson has struggled with declining revenue as well as its electric bike company, called Livewire, which is burning cash.  

👉 What happened: This quarter, Harley-Davidson reported a 35.5% year-on-year revenue decline. As a result, it withdrew its 2025 guidance, claiming the global tariff situation as well as macroeconomic conditions were just too hard to predict. But, despite all of this, Harley Davidson’s share price rose 16%. Turns out, Harley’s secret weapon is the Harley Davidson Financial Services (HDFS).

👉 What else: Harley Davidson announced plans to sell off $5 billion worth of loans from HDFS to finance firms KKR and Pimco as well as small minority stakes in the HDFS business. But, they will not be selling the HDFS business because its finance arm is running smoother than their core operations. Nothing quite like a captive finance arm of a business.

What's the key learning?

💡A captive finance arm is basically a finance company that’s owned by the product business itself. So instead of sending you off to a bank for a motorcycle loan, Harley Davidson lend the customer the money themselves.

💡This allows brands to keeps the whole buying experience in-house. And it means they make money not just from selling you the bike, but also from the interest on your loan. We see this type of captive finance in car or manufacturing industries quite often. Think: Toyota Financial Services or Ford Motor Credit Company.  

💡And, these arms can become very very lucrative… sometimes even more than the product business. In fact, HDFS accounts for roughly 20% of Harley Davidson’s total revenue and it’s believed that Harley Davidson will earn close to $1.25 billion USD for the sale of the existing loan book. So at least one part of the Harley Davidson business is still purring.