In 1901, 20-year-old William S. Harley drew up plans for a small engine with a displacement of 7.07 cubic inches (116 cc) and four-inch (102 mm) flywheels. The engine was designed for use in a regular pedal-bicycle frame. Over the next two years, Harley and his childhood friend Arthur Davidson worked on their motor-bicycle using the northside Milwaukee machine shop at the home of their friend, Henry Melk. It was finished in 1903 with the help of Arthur’s brother, Walter Davidson. Upon testing their power-cycle, Harley and the Davidson brothers found it unable to climb the hills around Milwaukee without pedal assistance. They quickly wrote off their first motor-bicycle as a valuable learning experiment. Work immediately began on a new and improved second-generation machine. This first “real” Harley-Davidson motorcycle had a bigger engine of 24.74 cubic inches (405 cc) with 9.75 inches (25 cm) flywheels weighing 28 lb (13 kg). The machine’s advanced loop-frame pattern was similar to the 1903 Milwaukee Merkel motorcycle (designed by Joseph Merkel, later of Flying Merkel fame). The bigger engine and loop-frame design took it out of the motorized bicycle category and marked the path to future motorcycle designs.
The prototype of the new loop-frame Harley-Davidson was assembled in a 10 ft × 15 ft (3.0 m × 4.6 m) shed in the Davidson family backyard. Most of the major parts, however, were made elsewhere, including some probably fabricated at the West Milwaukee railshops where oldest brother William A. Davidson was then toolroom foreman. This prototype machine was functional by September 8, 1904, when it competed in a Milwaukee motorcycle race held at State Fair Park. It was ridden by Edward Hildebrand and placed fourth. This is the first documented appearance of a Harley-Davidson motorcycle in the historical record. In January 1905, small advertisements were placed in the Automobile and Cycle Trade Journal offering bare Harley-Davidson engines to the do-it-yourself trade. By April, complete motorcycles were in production on a very limited basis. That year, the first Harley-Davidson dealer, Carl H. Lang of Chicago, sold three bikes from the five built in the Davidson backyard shed. Years later the original shed was taken to the Juneau Avenue factory where it would stand for many decades as a tribute to the Motor Company’s humble origins until it was accidentally destroyed by contractors cleaning the factory yard in the early 1970s. In 1906, Harley and the Davidson brothers built their first factory on Chestnut Street (later Juneau Avenue), at the current location of Harley-Davidson’s corporate headquarters.
The company was officially incorporated that September. They also began selling their motorcycles to police departments around this time, a market that has been important to them ever since. In February 1907 a prototype model with a 45-degree V-Twin engine was displayed at the Chicago Automobile Show. Although shown and advertised, very few V-Twin models were built between 1907 and 1910.
After 1913 the majority of bikes produced by Harley-Davidson would be V-Twin models. In 1912, Harley-Davidson introduced their patented “Ful-Floteing Seat”, which was suspended by a coil spring inside the seat tube. The spring tension could be adjusted to suit the rider’s weight. More than 3 inches (76 mm) of travel was available. Harley-Davidson would use seats of this type until 1958. By 1913, the yellow brick factory had been demolished and on the site a new 5-story structure had been built. Begun in 1910, the factory with its many additions would take up two blocks along Juneau Avenue and around the corner on 38th Street. Despite the competition, Harley-Davidson was already pulling ahead of Indian and would dominate motorcycle racing after 1914. Production that year swelled to 16,284 machines.