Good day, and thank you for standing by. Welcome to the LiveWire and Harley-Davidson Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Shawn Collins, Director of Investor Relations. Please go ahead.
Thank you. Good morning, everyone. This is Shawn Collins, the Director of Investor Relations at Harley-Davidson. You can access the slides supporting today's call on the Internet by going to the Harley-Davidson IR site, or you can click on the link in the press release itself. Our comments will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update information in this call. Management will speak about today's announced transaction, and this will be followed by Q&A. With that, I am going to turn the call over to Mr. John Garcia to get started.
Good morning, and welcome to a joint AEA-Bridges and Harley-Davidson Investor Call to discuss AEA-Bridges, or ABIC, as I should call it from now on, proposed merger with LiveWire, the EV motorcycle division of Harley-Davidson. I'm John Garcia, Chairman and Co-CEO of ABIC. I'm pleased to be joined today by Jochen Zeitz, Chairman, President, and CEO of Harley-Davidson, Ryan Morrissey, Harley-Davidson's former Chief EV Officer, who will become LiveWire's President, and Gina Goetter, Harley-Davidson's CFO, who will serve as acting CFO of LiveWire while a search is conducted for a permanent CFO. Speaking on behalf of AEA-Bridges, the sponsors of ABIC, we are thrilled to be partnering with this team and want to thank everyone at Harley-Davidson and LiveWire for all their efforts getting us to this point.
I will provide a brief overview of the transaction and the reasons we are excited about the opportunity and then hand it over to Jochen and team to go into more detail on the strategic rationale, business, and the financials. Turning to slide four. This transaction brings together three partners to create an attractive risk-adjusted investment opportunity that aligns with a number of the UN's Sustainable Development Goals, which is ABIC's mission. As part of the transaction, ABIC will contribute its $400 million of cash held in trust for an approximately 17% ownership stake in LiveWire, assuming no redemptions. KYMCO, a Taiwan-based leading powersports company with strength across Asia, will invest $100 million through a PIPE transaction and become a strategic manufacturing partner. Harley-Davidson will also invest $100 million.
Finally, Harley-Davidson has agreed to backstop up to $100 million of redemptions should that be necessary. These financings will allow for the minimum cash closing conditions to be met regardless of redemptions. Assuming no redemptions from ABIC shareholders, Harley-Davidson will own 74% of LiveWire, ABIC investors 17%, KYMCO 4%, and the remaining 4% are founder shares. We estimate this transaction will result in approximately $545 million of net cash proceeds, which will be used to accelerate LiveWire's go-to-market strategy, fund new product development, and enhance manufacturing and global distribution. As contemplated, the transaction values LiveWire at an implied pro forma enterprise value of $1.77 billion or 1x LiveWire's estimated 2026 revenues and post-money equity value of $2.31 billion.
On slide five, which I won't go into in detail, you see why an incumbent OEM has natural management, manufacturing, capital, and scale advantages as opposed to an industry disruptor who has to create all of those competitive moats and others within a transitioning industry. However, incumbents rarely disrupt their own industry. In autos, it took Tesla to do that. We believe that in LiveWire and Harley-Davidson, we have found an incumbent management team with the strategic vision and drive to do that to the motorcycle industry. ABIC will just accelerate that journey. In this presentation, we will walk through LiveWire's view of the total addressable market opportunity based on EV penetration over time, as well as the management team's view of their market share opportunity and the long-term earnings potential of the business. The ABIC team has underwritten this transaction with these assumptions as a base case.
We believe that the transaction is very attractive on those projections. However, recent EV history would suggest that almost all assumptions about the speed of EV adoption and the level of sustainable market share has been conservative for a market disruptor. In addition, because of the expected profile of new LiveWire customers and the much easier use proposition of an EV motorcycle, we expect the market will expand, unlike in autos. We have yet to see what a market disruptor who is also an incumbent can achieve. That's why we are so excited to be partnering with Jochen, all the LiveWire and Harley-Davidson employees, and all of you, our shareholders, on this journey. With that, I'd like to thank you and hand it over to Jochen.
Thanks, John. I could not agree more. This really is a compelling transaction for both ABIC and Harley-Davidson shareholders. When Harley-Davidson set its EV ambitions 10 years ago, we did so knowing that the electrification of motorcycles would be a long journey. Our mission from day one was to lead the electrification of the sport of motorcycling.
As we look at the progress achieved since 2010, what is evident is that LiveWire's achievements are the result of significant investment into electric, coupled with the capabilities of Harley-Davidson, the most desirable motorcycle company in the world. Not only delivering the best electric motorcycle on the road today, but setting LiveWire up for future success as we pioneer the sector. With commercialized technology and a strong brand that resonates with consumers, we are at an inflection point and believe now is the time to launch LiveWire as a pure EV company for a new generation of riders. As a separate company with the investment needed to execute its strategic plan, LiveWire will be able to operate with the same agility and speed as a startup and have greater flexibility to capture the opportunity ahead of it.
As LiveWire dedicates its focus on the rapidly growing two-wheel EV market, Harley-Davidson will focus on executing the other pillars of the Hardwire, its five-year strategic plan. We believe in the potential for the high-growth EV segment, which is one of the reasons why we are retaining a significant ownership in LiveWire, ensuring that future technology is applicable to Harley-Davidson's core segment at the right time. John touched on how the partnership between Harley-Davidson, ABIC, and KYMCO creates a unique opportunity, and I'd like to go into that a little further. When LiveWire launches as a separate company, it will be fueled by deep support from three world-class partners. Uniquely, LiveWire benefits from immediate at-scale manufacturing and global expansion expertise through the complementary capabilities of Harley-Davidson and KYMCO.
Harley-Davidson will provide LiveWire access to an established supply chain, a world-class dealer network, technical services, and access to financing insurance products through Harley-Davidson Financial Services. KYMCO, one of the world's leading powersports companies, will provide LiveWire with credibility and reach in the fast-growing Asia-Pacific market. Importantly, with its specific capabilities and expertise in scooters, light motorcycles, and side-by-sides, in addition to state-of-the-art supply chain and manufacturing capabilities, KYMCO provides many future growth opportunities for LiveWire. Last, but importantly, ABIC provides the LiveWire with additional investment capital that, together with the strategic investments from Harley-Davidson and KYMCO, will fund LiveWire's strategic plan that is built with sustainability at its core. A key element of LiveWire's strategy is inclusive stakeholder management. This approach prioritizes long-term profitable growth and value for all our stakeholders, including our planet and people.
As part of this approach, we focus on five key sustainability priorities, as you can see from slide eight. However, we remain conscious that true sustainability is broader than just these priorities and needs to be woven through all facets of how we operate and interact with the world around us. Sustainability is not an option for LiveWire. It's part of the brand's DNA. The one point I would like to highlight is our commitment to net zero in particular. By leveraging a scalable platform architecture with a focus on sustainability, we want to be the first electric motorcycle company of size to reach net zero emissions and have set a target of 2035 ahead of many of our peers within the industry.
LiveWire may be a new company, but it is a powerful and unique brand built on a decade of EV motorcycle experience backed by 118 years of Harley-Davidson heritage. The LiveWire journey began in 2010 when Harley-Davidson launched its electric motorcycle initiative, an initiative that I personally helped pioneer at the time as a board member and chair of the sustainability committee of Harley-Davidson that I helped create. Reflecting on the progress achieved since 2010, it is evident that LiveWire is the result of significant investment into electric and the unmatched capabilities of the Harley-Davidson Motor Company. After many years of development and prototyping, Harley-Davidson began deliveries of its first production model, the Harley-Davidson LiveWire, in 2019.
Our commitment to electrification saw LiveWire becoming a standalone division of Harley-Davidson in 2021, combined with the launch of the LiveWire ONE, our flagship product, in July of this year. As we reflect today on our achievements, it is clear that LiveWire ONE is the best electric motorcycle on the road today and sets LiveWire up for future success as we continue to innovate in and lead the sector. More than just a motorcycle, LiveWire is the ultimate future-forward brand for the next generation of EV riders. Defined by the soulful connection between human and technology, ride and machine, LiveWire is a catalyst for change. The power and purpose of authenticity resonates with the next generation of riders, and that is what LiveWire stands for in its purest form as a brand. LiveWire is a change agent.
We have the once-in-a-lifetime opportunity to change the future of motorcycling by means of innovation, design, and personalization. LiveWire delivers a soulful experience, recognizing the importance of emotional connection with the products we build, a unique proposition in electric that we are able to shape as we define and lead in redefining the sport. LiveWire will be the leading brand with a distinct personality, with the DNA and lineage of the most iconic motorcycle brand in the world, Harley-Davidson. Before I hand over to Ryan, I would like to summarize the compelling opportunity this transaction presents as detailed on slide 12. First and foremost, this is an exciting and rapidly growing segment. Growth in demand for EV motorcycles is accelerating dramatically.
Over the next 10 years, we expect the market to grow approximately 10 x, and we believe there are tailwinds that can drive growth well beyond that. Second, we are already a leader in EV motorcycles with a successful leading product in market today. Third, our core technology is proprietary and modular. Developed in-house, our technology creates a unique rider experience that we believe is unmatched by other EV motorcycle companies. In today's presentation, you'll hear more about our Arrow technology, the core of our motorcycles, which will be instrumental in fueling our future growth. Fourth, our tech-forward approach also extends to the way we interact with our customers. With a digital-first model, we have created a hybrid sales approach that combines a virtual and physical retail presence, allowing customers to choose their purchasing path and engagement model.
Fifth, and this is a key point, with the strategic support of Harley-Davidson and KYMCO, we have a competitive advantage our competitors can't match, at scale manufacturing, global distribution, and decades of technical experience. Sixth, as a result of our overall tech-forward approach, we have a product roadmap that we believe positions us to drive compelling long-term financial performance and future profitability. Finally, we have the right team to execute our vision and to lead LiveWire into its next chapter as a standalone company. With that, I will hand the call over to Ryan Morrissey, who will become the president of LiveWire following the close of the transaction.
Thank you, Jochen, and hello, everyone. I'm going to go deeper into the points Jochen introduced, starting with the market opportunity. We evaluate the future of the EV motorcycle market. We assess four primary factors, as described on slide 13. Considering each of them as of today, we see how these tailwinds will drive the next decade of market growth. The drivers behind the acceleration in other EV sectors apply similarly to motorcycles. First, technology. The heavy investment into improving battery technology and charging infrastructure continues. Our motorcycles leverage the same cell technology as cars and plug into the same charging infrastructure. This allows us to benefit from the dramatic improvements in EV technology that comes from the third-party investment flowing into the space. Second, customer preferences show the continued increases in awareness and consideration of electric vehicles.
Performance benefits are increasingly understood, costs are coming down, and convenience is going up. This combination is leading to increased interest in EVs across sectors. Third, regulation and government support. Over the last several years, more and more governments around the world have made sustainable technologies a priority and taken stronger positions to promote electric vehicles. These positions are making electric vehicles even more attractive for both customers and for OEMs. Finally, product availability and desirability. The commitment and funding behind EV, the technology advancements in the last decade of learning means that over the next several years, you're going to see more products covering more segments and more price points. While the products in the market today are quite advanced in their own right, they will become better and better going forward.
These factors combine to drive significant growth in the global electric motorcycle market over the next decade, which at present is still very much in its early stages. We estimate the total addressable market will grow to over $20 billion over the next decade. If EV adoption rates trend higher, we believe the TAM could be $30 billion in 2030. That market growth is broad-based across geographies. We expect EV penetration rates will accelerate in North America, in Europe, and in China, a key driver of the growing EV market. As the EV motorcycle market grows, LiveWire is uniquely positioned to capture that growth, as described on slide 16.
Due to Harley-Davidson's early recognition of the EV opportunity in 2010 and the commitment to backing a long-term play, we believe LiveWire has a four to five-year lead over other major motorcycle OEMs who do not have electric motorcycles in market and have only more recently begun development. Versus the pure-play EV motorcycle OEMs, LiveWire has distinct cost, scale, and production advantages as a result of the manufacturing capabilities, supply chains, and distribution networks of its strategic partners, Harley-Davidson and KYMCO. As a result, we believe LiveWire has the ability to grow more quickly and with greater capital efficiency than many of these pure-play EV competitors. Looking at the opportunity for LiveWire, we see early adopters are finding that electric delivers not only outstanding performance specifications, but completely transforms the riding experience.
The power delivery and the linear acceleration when you take away the gears, the ease of use with no clutch and no shifting, the flying sensation that comes with hardly any noise, vibration, or heat. The ability to feel and hear your surroundings transforms the ride, whether you're in the city or out enjoying nature on the open road. For longtime riders, after decades of incremental innovation in the market, their first ride on a LiveWire is often the first time in a long time that they've encountered an entirely unique riding experience. The feedback we've received from the media, from bloggers and vloggers, from experienced and new-to-sport riders has been outstanding. Most of them start with that feeling of what it's like to ride a LiveWire. That LiveWire experience wouldn't be possible without the full range of technology investments, including the development of our Arrow architecture.
Arrow is the scalable modular architecture at the foundation of our future product portfolio. We've developed the EV systems in-house to meet the unique needs of the motorcycle market, where spatial constraints and the impact of battery weight on handling are more important factors. By controlling the IP on the motor, the battery pack, and the power electronics, we can innovate faster without the concessions that come with third-party alternatives. With the simplicity of an EV powertrain and the benefits of a scalable modular architecture, we are able to readily expand horizontally into new segments and vertically into heavier and lighter bikes. This approach means we get to market faster with less bespoke engineering required for each incremental model. Beyond the powertrain and our investments in EV systems technology, we are bringing new tech to the entire LiveWire riding experience.
The LiveWire ONE is a connected motorcycle, allowing the rider to engage with the bike through the LiveWire app. LiveWire ONE owners can check their charge status, monitor their bike's location, and build rides all from their mobile device. In the near future, we plan to further elevate the customer's experience by using over-the-air capability for updates, content, and the release of new software features as they are developed. As we reshape the riding experience with innovative product technology, we are also reshaping the customer experience. Our hybrid model puts the rider in control of their journey, allowing customers to engage on their terms. Many will choose a more digital-first path, particularly at the early stages of their journey, knowing that the local expertise of our retail network is there to help with test rides, bike purchases and delivery, and service.
Our physical presence in local markets will come from four retail formats, as laid out on slide 22. We are working with our retail partners to build out LiveWire spaces within their stores. We will operate standalone LiveWire galleries and pop-ups to build the brand. This includes our first location, which will be opening in the Los Angeles area in the first quarter. We've also started taking LiveWire on the road, which allows us to get out and connect with riders and introduce them to the brand. We're going to the most popular motorcycle shows and partnering with our retailers on local events. As we map out our global channel strategy, we are focused on three regions, the U.S. and Canada, the major motorcycle markets in Europe, and APAC. These are the markets with the greatest opportunity for the LiveWire brand and product portfolio.
We're excited to continue partnering with Harley-Davidson's global retail network, which consists of approximately 1,400 dealers globally, to represent the brand in key target geographies. Our wave one partners in the U.S. are active today, helping us bring the brand to the largest U.S. markets. In the process of establishing LiveWire as a brand, we've spoken to a number of potential partners. Of course, Harley-Davidson and HDFS are natural partners and already supporting the LiveWire business in a number of important ways. We also found KYMCO to be a perfect complement as we assess the strengths of the two companies. We're excited about the benefits we'll see from our strategic partners, from brand association to distribution and financial services on the front end, from supply chain to manufacturing and technical services on the back end.
Most importantly, having access to this built-in scale and reach will allow us to execute our growth plan more quickly and with lower investment than we could achieve on our own. We talked about the Arrow architecture and how it unlocks an ability to grow our product portfolio more quickly and with greater efficiency. Going forward, we'll expand on the statement we've made with LiveWire ONE, starting with our System Two or S2 platform. That platform is going to open up somewhat lighter motorcycles matched to a number of segments. From there, we intend to scale down the architecture with the S3 platform before scaling up to S4. With those three platforms in place in a single architecture, we'll be able to cover quite a range of segments with desirable products for a broad set of riders.
These product variants touch different price points, different riding types, and different geographies, positioning us to capture that market growth. Much like at Harley-Davidson, we know the motorcycle business comes with several complementary streams which meaningfully contribute to the overall economics of the business. Outside of the motorcycle itself, we expect to develop secondary streams of revenue related to customer financing and protection through Harley-Davidson Financial Services, to accessories and apparel, or even deploy our technology into powersports categories outside of two-wheel. In fact, one of our current revenue streams is e-bikes. STACYC E-bikes for Kids launched in 2017 and pioneered a new category. With all the players that have rushed into the adult e-bike space, STACYC has focused on families and built an amazing brand that is far from the full potential of its core product and well-positioned to expand its lineup.
These related products and services join together to create an ecosystem with the LiveWire brand at the center, boosting profitability and deepening our engagement with the customer. With that, I'll hand over to Gina, who will speak to how the factors I covered translate into financial results and discuss the transaction valuation.
Thanks, Ryan, and hello, everyone. At this point, you've heard why we are excited by the LiveWire opportunity and the rationale behind this transaction. I'll spend the next few minutes sharing a bit more detail about the financial profile. We are still in the early stages of the broader EV motorcycle market's development and at the beginning of the journey for LiveWire. Our future unit and revenue projections include the sales of LiveWire One, additional EV motorcycle models, and other products, including STACYC electric bikes, parts and accessories, and general merchandise. We expect our unit volume sales to grow rapidly off a small base, reaching approximately 100,000 units by 2026. The growth is driven by three primary factors, consumer adoption, platform innovation, and distribution growth.
This unit sales growth translates into LiveWire's revenue growing from $35 million today to almost $1.8 billion by 2026. I'm going to take a moment to further contextualize why we have confidence in our unit and revenue projections. To start, LiveWire ONE and STACYC are already in market in the U.S., and our near-term projections are based on sales of these already established models. We are actively working to expand distribution to Europe and APAC. Second, as Ryan talked about, we have a well-thought-out plan on innovation, and LiveWire also has the production capacity and proven manufacturing expertise through our strategic partners required to deliver our 2026 unit estimates. Finally, we believe we have the financial capital to achieve our plan. All of these building blocks will serve as the foundation to achieve our projections.
As our revenue grows and we leverage the manufacturing and distribution capabilities provided by Harley-Davidson and KYMCO, we expect our margins and profitability to also increase. We've provided a P&L in the appendix, which gives financial projections through 2026. Based on our current forecast, we expect to be profitable on both an EBITDA and cash flow basis in 2026. Our long-term targets presented on slide 29 provide our view on the true earnings power of the business. As we drive towards our long-term top-line targets, we expect our gross margins to be in the range of 25%-30%. Our EBITDA margins to be in the range of 15%-20%. We expect our margins to translate into strong free cash flow as we continue to benefit from lower capital intensity due to the investments made to date and the support from our strategic partners.
John touched on the planned use of proceeds up front, but to recap, proceeds will be used to accelerate the go-to-market strategy, fund new product development, build the LiveWire brand, and enhance its manufacturing and global distribution capabilities. The funds provided by the transaction allow LiveWire to execute the business plan and further extend our lead over competitors as the proceeds will go directly towards making and selling new motorcycles rather than investing in the infrastructure to do so. LiveWire is a unique asset that has the growth profile of an EV startup, but with the scale manufacturing and distribution support of two traditional OEMs. The company benefits from the history and manufacturing strength of Harley-Davidson and KYMCO while competing in a faster-growing segment. The transaction values LiveWire at $1.77 billion, which implies an approximately 1x enterprise value to estimated 2026 revenue.
We believe this multiple compares favorably to the valuation multiple of peers in the EV OEM and EV infrastructure space, as well as other high-growth businesses. Before I hand off to Jochen to close, I'd like to briefly touch on governance. LiveWire's board structure will reflect its ownership, with Harley-Davidson comprising a majority of the board, supported by a director from ABIC and other independent directors. We are also putting in place structural protections to address any potential conflicts of interest and commercial issues that may arise between Harley-Davidson and LiveWire. The governance framework details committee makeup, including those which will be fully independent and majority independent. Additionally, we will establish a conflicts committee comprised of fully independent directors to oversee the relationship with Harley-Davidson, including contractual arrangements. With that, I'd like to turn the call back to Jochen before we get to Q&A.
Thank you, Gina. Before we head to Q&A, I'd like to thank the teams for their continued hard work and perseverance to get us to this stage. Today's announcement is a historic milestone with LiveWire set to become the first publicly traded EV motorcycle company in the U.S. By building on Harley-Davidson's 118-year lineage, LiveWire's mission is to be the most desirable electric motorcycle brand in the world, leading the electrification of the sport. This transaction will give LiveWire the freedom to fund new product development and accelerate its go-to-market model. LiveWire will be able to operate independently as an agile and innovative public company while benefiting from the at-scale manufacturing and distribution capability of its strategic partners, Harley-Davidson and KYMCO.
Together with our partners, we believe in the future of LiveWire as a dedicated electric brand with the ability to lead, grow, and revolutionize the electric motorcycle industry and beyond. We hope to see you on the journey. Thank you.
Thank you. In order to ask questions, please press star one on your telephone keypad to be placed into the queue. We ask that to limit yourself to one question. If you have any further question, please press star one again to reenter the queue. Your first question comes from Joseph Spak with RBC Capital Markets. Your line's open.
Thanks. Good morning, everyone. I guess maybe just to start, Jochen, like I think most investors weren't applying this level of value to LiveWire, so in that respect, you're clearly unlocking value here. If EV and LiveWire is the future, like to play devil's advocate, is this just sort of shifting value from, you know, HOG remaining Co to New Co? How does this change the investment and capital allocation priorities for legacy Harley-Davidson?
Thanks, Joe. No, not at all. I'd ask Gina and John to chime in on valuation as well, but we see this as a win-win for both because we are not just shifting EV to LiveWire. Obviously, LiveWire, we expect to lead the electrification of the sport with primarily an urban customer in mind. This is a key strategic pillar of the six elements of our Hardwire strategy. Harley will continue to invest into the electrification, but then also benefit from LiveWire. It's really accretive and a win-win for both companies.
LiveWire will spearhead the electrification, but if you look at the technology at this point, it's not ready to be implemented into the core segments of Harley-Davidson. Having a leader, building leadership, getting into the fast lane for the electrification of the sport, LiveWire will do. It's part of the lineage of Harley-Davidson, at the same time, Harley-Davidson is fully committed as part of our Hardwire and strategic plan to be a leader in electrification long term as well.
All right. Your next question comes from Craig Kennison with Baird. Your line's open.
Hey, good morning. Congratulations. Thanks for taking my question as well. Just to follow up on Joe's question. If I look at your slide 28, you do frame very helpfully, I think, the volume and revenue expectations for LiveWire. Is there a way to think through what you're thinking would happen to Harley-Davidson volume and revenue in this context?
Well, we believe there is great growth potential for Harley-Davidson, the brand and company. In addition to LiveWire revolutionizing the EV market, we see huge opportunities for Harley-Davidson. That is all based on our strategic pillars of our Hardwire plan. Lots of opportunity there. We're not worried the slightest. In fact, if you look at the customer segments that we're appealing to, they are very complementary and not cannibalizing at all, hence why LiveWire is positioned more for the new generation of riders in the urban environment. Harley-Davidson obviously is also going to expand from its traditional core, but the segments are very complementary.
Craig, good morning.
Thank you.
This is Gina. I just wanted to add to Jochen's statement. When we think about this transaction and the value of this transaction, it is absolutely an accelerator. I know you're trying to get at what the Harley-Davidson kind of sales trajectory, what that's gonna look like now with this here. Think of what we did today as an accelerator. As we turn the corner into 2022, we'll get more into details on what this means for Harley specifically, and what this means for our long-term growth potential for Harley.
Great. Thank you.
Your next question comes from the line of Joe Altobello with Raymond James. Your line's open.
Thanks. Good morning, everybody. It sounds like the business is supposed to be EBITDA free cash flow breakeven by 2026. Could you give us what the expected cash needs are to grow this business to call it 101,000 units by that point, you know, over the next five years or so?
Morning, Joe. This is Gina. We would say that the transaction and the proceeds coming in from the transaction fund our business plan until we get to that break-even point. The $500 million-$600 million will fund the plan.
Okay, thank you.
All right, your next question comes from Billy Kovanis with Morgan Stanley. Your line's open.
Hi, team. Thanks for taking the question. Just looking at your slide deck. You're assuming the total units by 2026 for LiveWire is close to 101,000. Harley-Davidson today ships around 180,000-200,000. This is a pretty substantial percentage of Harley-Davidson's total global shipments. Just trying to understand, is this more a function of TAM expansion in terms of EVs? Just curious, in the context of that, what you think sort of EV penetration is by 2026 to sort of triangulate the total units of motorcycles globally. Thanks.
Hey, Billy, this is Gina. I think it's a function of a few pieces. One is absolutely the customer adoption and to your point, the EV penetration and that growing over time. It's also the development and the innovation that we're putting into market. Today, you know, we have the LiveWire ONE that has launched. With this investment we're gonna be increasing the amount of spending that we're putting against product development. That innovation will also help to shape the growth trajectory.
Billy, just in terms of, if you take a look at, where we've mapped out the TAM there, in terms of the unit penetration question that you asked, in 2026, our base case is calling for about 17% in terms of global EV units, as a percentage of that total TAM. That gives you a little bit of a better sense for, where we think the market is headed in that base case.
Which means that the EV segment is continuing to grow over the next five to 10 years. That is also an assumption, and that is also a reflection of the global market overall growing in key markets.
Got it. Thank you. Very helpful.
Your next question comes from, Gerrick Johnson with BMO Capital Markets. Your line's open.
Great. Thank you. One question, two parts. Wondering how this will look to the dealer who might be selling both products if they have to deal with two different regional sales reps or just one. I'm thinking there are probably some shared operational resources still after this, so how would you allocate those costs, such as Jochen, your own salary between the two different entities?
Not sure about the salary, but to answer your first question, our dealers, essentially, those who are interested in LiveWire, will carry LiveWire as a separate line make. We have been signing up dealers with the focus on the U.S. for this year and then going into Europe for next year and Asia beyond, to get those dealers that have the capacity, ability to invest and the interest in electrification to sign up for LiveWire. Separate standalone contracts with the dealers who we pick and that would like to be partner with us on this journey. They will manage them independently. It's a different go-to market approach. There are lots of things that are actually different from Harley, but the great asset that we have is a fantastic dealer network.
Those leaders that in particular attract an urban consumer will be the ones that we will be working with as the focus. I think that's critical. That's why we started with California, Texas, New York as the three core markets and are rolling out across the U.S. and internationally. Gina, do you wanna take the operations just in terms of salary until the closing? All salaries will be covered by Harley-Davidson, and thereafter, it's really the respective committees and boards that will need to make a decision on that.
Sure. The only build that I would have as part of this transaction, right? LiveWire is going to have its own management team, and it will have its own resource structure. We have set up transition services agreements across the two companies, as well as a master services agreement that will govern things like the manufacturing, the broader operation, et cetera. How we're going to govern all of that is detailed in the agreements.
Okay, thank you very much.
Your next question comes from Jaime Katz with Morningstar. Your line's open.
Hi. Good morning. I think I heard you talk a little bit about scooters and side-by-sides in the potential pipeline, and I'm wondering, down the line, what you expect the composition of the mix to be over time. Additionally, as a follow-up, I think it was said in prepared comments that there was going to be a search for a new CFO, but not necessarily, a new CEO over time. Can you just talk about, time allocation, in your day-to-day workflow as far as how the CEO time will be allocated? Thanks.
In terms of the time allocation, as you can imagine, I've been involved in all six strategic elements of the Hardwire. That includes EV, so no change in that regard, only that we will have two separate entities. With Harley-Davidson still being a 74% shareholder, it's imperative for me to continue to drive LiveWire going forward. You might recall that this is a journey that I've been part of for 10 years. I started the sustainability committee and initiated the push into EV when I was still a board member, and I took the decision to set up LiveWire as a separate brand.
This is very, you know, close to me and a personal opportunity that I see for a brand to really lead in the electrification. I believe that, you know, it will be highly beneficial for Harley-Davidson as much as it will be for LiveWire. Overall, I think this is great. It's a one-on-one equals three or even more because we have great partners in this transaction. I'll let Ryan talk about KYMCO and our partner in this, who brings additional expertise in the powersports lineup.
Yeah. Just to take your question on the mix of product that we're expecting, and how we expect that to develop over time. Over the next five years, we're particularly focused on the two-wheel space, so the heavy, the medium, and the light motorcycles. The Arrow architecture that's described in the document does have the benefit of scaling up to applications like side-by-sides, as well as down to applications like scooters. So as we get several years out, with the benefit of having partners like Harley-Davidson, and a couple of categories you mentioned, having a partner like KYMCO, that allows us the opportunity as we get further down the line, to put heavier consideration and potentially focus into categories like scooters, side-by-sides, and potentially a couple others.
In the very near term, we're most focused on that two-wheel space.
Thanks.
Your last question comes from Fred Wightman with Wolfe Research. Your line's open.
Hey, guys. Good morning. Thanks for the question. Just to follow up on the KYMCO relationship, it seems like that should be a big driver of some of the international opportunity. Can you sort of size or frame the domestic versus international opportunity as part of these midterm unit targets that you guys are outlining? Then maybe contrast that with some of the Hardwire strategies to be a bit more domestic-focused for the core internal combustion piece of the business. Thanks.
I'll let Ryan take the KYMCO bit, but Harley-Davidson has tremendous opportunity in the U.S. still today. You know, our business is growing, even our core businesses that we're now focusing on as part of the Hardwire strategy show good growth, contrary to the last years, pre-COVID, let's call it. The opportunity internationally is significant for Harley-Davidson. Think China, where we've barely scratched the surface as a company, Asia, as a whole, but even Europe. You know, if you look at the percent of revenue generated in those regions, that just shows you what the opportunity is for Harley going forward, and that we will be tapping into with bike spend and adjacent businesses, in the coming years. Very excited about that.
Just to pick up on the relationship with KYMCO and the mix of the different markets around the world. You know, North America in particular, you'll see we're expecting to have some fairly strong share there, based on our legacy position, as well as we think the mix of the market sets up very favorably for the kinds of products that we'll be bringing in the near term. Europe, not expecting share quite as strong as North America, but also strong there, given the strong fit with the market conditions. When you get into Asia, as you suggested, we think KYMCO is going to be a real asset there. They're spending a lot of time competing with some of the lighter bikes and scooters.
They've got operations set up to target those segments effectively, in particular some of the places where the cost sensitivity will be a bit higher than some of our legacy markets, and some of what we see in the U.S. and in Europe. We're looking forward to partnering with KYMCO in those markets. Obviously, from a unit basis, a very, very large market, and as a result, a smaller share. Particularly as you think about some of the premium segments within those geographies, we think the combination of LiveWire and KYMCO is going to be well-positioned to pursue those segments.
All right. Thank you. That concludes the Q&A session of today's call. I'll hand the call back to Shawn Collins.
Great. Thanks everyone for joining today's call. We hope you have a great day. Talk to you soon.
Thank you. That concludes LiveWire and Harley-Davidson conference call. You may now disconnect.