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A new line of American motorcycles was the buzz of the 25th annual Cycle World International Motorcycle Show, held in January in New York. But this year, the oohs and aahs belonged not to Harley-Davidson (http://www.businessweek.com/ticker/)—the American motorcycle mainstay with close to a quarter of the U.S. motorcycle market—but to a promising young entrant. Victory Motorcycles, the 10-year-old subsidiary of Medina (Minn.)-based snowmobile and ATV maker Polaris Industries (http://www.businessweek.com/ticker/), used the event to unveil two boldly futuristic-looking luxury touring motorcycles dubbed the Vision Street and Vision Tour.

In 2005, the last year for which data exists, sales of new motorcycles were approximately $9.8 billion, according to the Irvine (Calif.)-based Motorcycle Industry Council. Harley-Davidson sales are expected to top $6 billion for 2006, although it doesn’t break out numbers on its motorcycle division. Overseas markets like China and Japan now account for more than $1 billion a year in sales, or 22.5% of all bikes sold—up from 20% last year. Retail sales of Harley bikes outside the U.S. have climbed some 16% since the beginning of 2006 (see BusinessWeek.com, 11/6/06, ).

To Honda (http://www.businessweek.com/ticker/) and BMW, whose Goldwing and K1200LT, respectively, have dominated the luxury-touring category for years, Victory’s announcement may have sent ripples all the way to the design boards. But to Harley, this seeming coming of age for Victory Motorcycles portends the return of something the company hasn’t seen in nearly 50 years: a significant American rival. Indian’s Legacy

In 1901, two years before Harley-Davidson was founded, George Hendee and Carl Oscar Hedstrцm founded Hendee Manufacturing in Springfield, Mass., which would later be called the Indian Motorcycle Manufacturing Co. For the first half of the 20th century, Indian’s bikes went toe to toe with Harley, with such classic models as the Scout and Chief, both introduced in the early 1920s, selling nearly as well as the most popular Harleys of the day.

The two companies created such strong brand loyalties that motorcycle culture became partisan—if you owned an Indian, you rode with other Indian riders, and if you owned a Harley, you rode in a pack of hogs. “Indian and Harley were so different,” says Dale Walksler, who owns and operates Wheels Through Time, a Maggie Valley (N.C.) museum that boasts one of the world’s premier collections of vintage American motorcycles. “Harley had its throttle on the right and shifter on the left. To preserve brand loyalty, Indian had the shifter on the right and the throttle on the left. It kept Indian riders from buying Harleys.”

Both companies survived the Great Depression and contributed vehicles to World War II, but Indian finally succumbed to bankruptcy in 1953. A Gilroy (Calif.)-based company bought and manufactured motorcycles under the Indian name in 1999, but went bankrupt in 2003 after losing an investor. In 2006, London-based private equity group Stellican announced plans to resurrect the Indian Chief bike this year. Victory Revs Up Sales

Since the 1960s, Harley-Davidson has faced new competition in Japanese makers like Honda and Kawasaki, who could make more powerful bikes for cheaper, but has held the distinction of being the only major American manufacturer of motorcycles—a selling point that has helped the company establish a brand cult that extends beyond motorcycles into many lucrative merchandising arenas.

Few people understand Harley-Davidson’s dominant position in the motorcycle market as well as Tom Tiller, CEO of Polaris Industries.

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