Executive Summary / Key Takeaways

• LiveWire (LVWR) is executing a critical strategic pivot, aggressively cutting costs and refocusing its product portfolio to achieve sustainable profitability in a challenging electric vehicle (EV) market.
• The company demonstrated significant fiscal discipline in Q2 2025, reducing its consolidated operating loss by 35.2% year-over-year and cutting cash usage by 36%, with a full-year 2025 operating loss target of $59 million to $69 million and cash burn of $60 million or less.
• This financial rigor is paired with a strategic shift in product development towards more accessible "mini models" and a maxi-scooter, leveraging its existing S2 platform and the expertise of its partner KYMCO to expand its addressable market.
• While the Electric Motorcycles segment experienced a sharp decline in unit sales and revenue, the STACYC segment showed robust Q2 2025 revenue growth, highlighting its role in diversifying LiveWire's revenue streams.
• The investment thesis hinges on LiveWire's ability to successfully execute this pivot, achieve market acceptance for its new product strategy, and demonstrate a clear path to profitability, especially given Harley-Davidson's stated intention not to provide additional capital beyond its existing line of credit.

The Electric Frontier and LiveWire's Strategic Imperative

LiveWire Group, Inc. emerged from Harley-Davidson's (HOG) innovative spirit, founded in 2010 with a mission to pioneer the two-wheel electric vehicle space. Its journey took a significant turn on September 26, 2022, when it became a separate, publicly traded entity, securing approximately $293.70 million in net proceeds. This move established LiveWire as a distinct player, yet it maintains a crucial strategic relationship with its parent company, Harley-Davidson. LiveWire operates through two segments: Electric Motorcycles, focusing on premium electric bikes, and STACYC, offering electric balance bikes for kids and, more recently, adult pedal-assist electric bikes.

The broader EV market, however, presents substantial headwinds. Industry trends indicate a slower-than-anticipated adoption of electric vehicles, a challenge exacerbated by a lack of consumer incentives, a less favorable regulatory environment, and a sluggish expansion of charging infrastructure. This macroeconomic uncertainty, coupled with consumers' reduced discretionary spending, has weighed heavily on the appetite for early-stage EV products. In response, LiveWire has initiated a profound strategic pivot, emphasizing aggressive cost efficiency and a diversification of its product portfolio to navigate these market realities and forge a path to sustainable profitability.

Technological Edge and Product Evolution

LiveWire's technological foundation is centered on its S2 platform, utilizing the Arrow Architecture model. This core technology is not merely a base for its current LiveWire One electric motorcycles but serves as a versatile foundation for future product evolution. The S2 platform enables cost-effective innovation and rapid line extensions, a critical advantage in the current market. For instance, S2 electric motorcycles offer Firmware Over The Air (FOTA) software updates, a feature recognized ratably over an estimated five-year period, ensuring continuous improvement and enhanced user experience. A recent software update further introduced "Reverse" and "Roll-Forward Regenerative Braking" features for S2 models, demonstrating ongoing commitment to rider-centric innovation.

The strategic intent behind leveraging the existing S2 platform is clear: LiveWire is not investing in entirely new, larger platforms, which would entail significant capital expenditure and extend development timelines. Instead, it is focusing on line extensions that can be brought to market more quickly and affordably. This approach is evident in the planned launch of production versions of two new "mini models," showcased at Harley-Davidson Homecoming and slated for a formal launch at EICMA in November 2025. These mini models represent a strategic refocus towards lightweight, off-road, and urban-friendly mobility solutions, aligning with evolving customer expectations and the growing demand for accessible EV options. Similarly, an electric maxi-scooter, announced at EICMA in Q4 2024 and planned for a first-half 2026 launch primarily in the European market, will also leverage the S2 platform and the "knowhow and expertise" of KYMCO, LiveWire's second-largest shareholder. This strategy allows LiveWire to expand its addressable market and increase access to the EV experience without incurring the prohibitive costs associated with developing entirely new platforms, directly contributing to its goal of reducing operating losses and achieving fiscal sustainability.

Competitive Landscape: Carving a Niche in a Dynamic Market

LiveWire holds a premium position within the electric motorcycle market, particularly in the U.S. 50-plus horsepower on-road EV segment, where it commands a significant market share, reaching 65% in 2024 and 69% year-to-date in Q3 2024. This leadership is largely attributable to its strong brand heritage derived from Harley-Davidson, which fosters customer loyalty and supports premium pricing. LiveWire's strategic partnerships, notably with KYMCO for expertise in the maxi-scooter segment and with Harley-Davidson for fleet and law enforcement applications (as seen with the S2 Patrol models), provide a broader distribution network and enhanced brand appeal.

However, the competitive landscape is diverse and challenging. Direct competitors like Zero Motorcycles excel in performance and battery technology, while Energica Motor Company focuses on high-performance, track-ready models. NIU Technologies (NIU), on the other hand, targets urban commuters with affordable, smart-connected electric vehicles. LiveWire's primary competitive advantages, or moats, include its powerful brand and the extensive ecosystem support from Harley-Davidson, which can translate into superior customer engagement and pricing power. Its established distribution channels also provide a broader reach compared to some niche players.

Despite these strengths, LiveWire faces vulnerabilities. Its smaller scale compared to traditional motorcycle manufacturers or larger EV players can result in higher per-unit costs, making it susceptible to price competition from more cost-efficient rivals like NIU. Furthermore, dependencies on single-sourced or limited-source suppliers for critical components such as batteries and semiconductor chips pose supply chain risks. The strategic pivot towards more accessible "mini models" and maxi-scooters is a direct response to these competitive pressures, aiming to capture growing segments and mitigate the impact of softness in high-ticket discretionary spending. This adaptability, supported by its partnerships, positions LiveWire to defend its market position against rivals, even as it addresses its inherent scale and cost disadvantages.

Financial Performance: A Leaner Path to Sustainability

LiveWire's recent financial performance reflects its aggressive pivot towards cost reduction and operational efficiency. For the three months ended June 30, 2025, the company reported a net loss of $18.83 million, a 24.1% improvement from the $24.81 million loss in the prior-year period. The consolidated operating loss saw an even more significant improvement, decreasing by 35.2% to $18.26 million in Q2 2025, compared to $28.17 million in Q2 2024.

The Electric Motorcycles segment, while showing a sharp decline in revenue and unit sales (Q2 2025 revenue down 65.3% to $0.84 million, with unit sales falling 65.2% to 55 units), demonstrated a substantial improvement in operating loss, which decreased by 32.8% to $18.00 million. This improvement was primarily driven by rigorous cost reduction activities initiated in 2024, including significant headcount reductions, lower fees paid to Harley-Davidson for services, and the strategic relocation of LiveWire Labs from California to Milwaukee. These operational adjustments, alongside accelerated depreciation on leasehold improvements in 2024, contributed to lower selling, administrative, and engineering expenses in 2025.

In contrast, the STACYC segment provided a brighter spot, with revenue increasing by 25.2% to $5.03 million in Q2 2025. This growth was fueled by higher shipment volumes, particularly to independent distributors, and an increase in parts, accessories, and apparel revenue, despite some offsetting pricing reductions. The STACYC segment's operating loss also saw a dramatic 80.9% improvement, shrinking to $0.26 million. This segment's performance underscores its importance in diversifying LiveWire's revenue streams and contributing to overall financial stabilization.

This trend extended to cash usage, with net cash used by operating activities decreasing by 34% to $32.37 million for the six months ended June 30, 2025, compared to the same period in 2024.

LiveWire's liquidity position, however, remains tight. Cash and cash equivalents decreased from $64.44 million at December 31, 2024, to $29.32 million at June 30, 2025. While the company has access to a Convertible Delayed Draw Term Loan of up to $100 million from Harley-Davidson (with no amounts outstanding as of June 30, 2025), management explicitly states it does not expect to rely on the cash exercise of warrants to fund operations, as the current stock price ($4.60 per share) is significantly below the $11.50 exercise price. This highlights the critical need for continued fiscal discipline and successful execution of its strategic pivot.

Outlook and Strategic Execution: The Road Ahead

LiveWire's outlook for 2025 reflects a determined commitment to its strategic pivot. The company has revised its full-year operating loss guidance to a range of $59 million to $69 million, a notable improvement from previous forecasts. Furthermore, it aims to reduce its total cash used by operating and investing activities by approximately 40% compared to 2024, targeting a spend of $60 million or less. A key operational target is to achieve a positive contribution margin by the end of 2025, driven by aggressive Bill of Material (BOM) cost reductions and improved conversion costs.

This forward-looking strategy is underpinned by several key assumptions. LiveWire will continue to leverage its existing S2 platform for new product introductions, such as the "mini models" and the maxi-scooter, avoiding the substantial costs of developing entirely new architectures. This approach is designed to expand its addressable market into more accessible segments, aligning with evolving customer preferences for lightweight, urban, and off-road electric mobility solutions. The company's capital expenditures for 2025 are estimated to be between $5 million and $10 million, reflecting a disciplined investment approach.

Harley-Davidson's stance on its investment in LiveWire is a critical factor in the outlook. Harley-Davidson has stated it does not plan to provide additional investments beyond the $100 million line of credit established in Q1 2024. This places significant pressure on LiveWire to demonstrate tangible performance improvements. As Harley-Davidson's CEO, Jochen Zeitz, noted, "LiveWire needs to perform, and we’ve invested a significant amount of money and that performance needs to happen. Otherwise, we’ll obviously have to look at some optionality here." This underscores the imperative for LiveWire to execute its cost reduction and product diversification strategies effectively to secure its long-term viability.

Risks and Investor Considerations

Investing in LiveWire carries inherent risks, primarily stemming from the nascent and unpredictable nature of the electric vehicle market. The most significant challenge remains the slower-than-anticipated EV adoption, driven by a persistent lack of consumer incentives, an evolving and sometimes unfavorable regulatory environment, and a slower-than-expected expansion of charging infrastructure. These factors directly impact demand for LiveWire's products and could hinder its ability to achieve sales targets.

Macroeconomic uncertainty and reduced consumer discretionary spending further compound these challenges, particularly for high-ticket items like electric motorcycles. LiveWire's ongoing dependency on Harley-Davidson for certain services, as well as potential for strategic decisions by H-D that may not always align perfectly with LiveWire's interests, also presents a risk. Supply chain vulnerabilities, especially for critical components like batteries and semiconductor chips, where LiveWire relies on single-sourced or limited-source suppliers, could lead to production delays and increased costs. Finally, LiveWire's history of losses and the expectation of continued losses for the foreseeable future mean that its path to profitability is not guaranteed and is heavily reliant on the successful execution of its current strategic pivot.

Conclusion

LiveWire is at a pivotal juncture, actively transforming its business model to confront the realities of a challenging yet evolving electric vehicle market. The company's strategic pivot, characterized by aggressive cost reductions, a streamlined organizational structure, and a focused product roadmap leveraging its S2 platform for accessible new models, is a direct and necessary response to slower EV adoption and macroeconomic headwinds. While the Electric Motorcycles segment faces significant demand challenges, the robust performance of the STACYC segment provides a valuable diversified revenue stream.

The core investment thesis for LiveWire rests on its ability to execute this strategic shift effectively, achieving its ambitious targets for reduced operating losses and cash burn, and ultimately reaching contribution margin positive status by year-end. The company's technological approach, emphasizing cost-effective line extensions over new platform investments, combined with its strong brand heritage and strategic partnerships, offers a differentiated competitive position. However, investors must closely monitor market acceptance of its new product offerings, the pace of broader EV adoption, and LiveWire's ability to demonstrate sustained performance to secure its long-term financial independence from Harley-Davidson. The coming quarters will be critical in validating LiveWire's leaner, more diversified path to profitability.