Prepare or Ship: Harley’s Dilemma in India – Blog Entry


For once, Donald Trump has nothing to say about his pet peeve: India’s high tariff structure on Harley-Davidson motorcycles. Perhaps this is because the US president already has his hands full with the impending election as well as the devastation that Covid-19 has wrought on the US economy. Harley, meanwhile, has made it clear that he will only stay in relevant markets as part of his new “Rewire” initiative.

Speculation is rife that this will mean leaving India where the company has a factory in Bawal, Haryana. It came in full force over a decade ago, bolstered India’s global relevance as a manufacturing hub with the Street 500 and 750, but just lost its way thereafter.

Sales have averaged 3,000 units per year at best, which is hardly good news from a profitability standpoint. Things just haven’t gone well for Harley in India, and the renewed priorities at HQ in Milwaukee could mean the curtains here could fall at any time.

Imperfect past, future?

Yet it is in contradiction with what the iconic American bicycle brand had stated barely two years ago. At the time, the management team reiterated that it made little sense to ignore growth prospects in Asia. The way forward was to create a new range of mid-size motorcycles (250-500cc) that would be competitively priced and sold in markets like India, China and ASEAN.

In an elaborate investor presentation (More Roads to Harley-Davidson: Accelerated Strategy) from July 2018, Harley referred to consumer spending on premium discretionary products “reaching critical mass in China, India and South Asia. -East “. While motorcycle volumes in China are expected to “grow rapidly”, India’s 250-500cc motorcycle segment is expected to grow by around 25% per year through 2021.

So the next step was to forge a strategic alliance in Asia to launch a 250-500cc motorcycle within two years in India (hence 2020) and other emerging markets in Asia over time. The idea was to “accelerate market entry and increase brand access and volume” while leveraging the manufacturing scale and business footprint of its “class-leading partner.” world ”.

Clearly, Harley was keen to find an ally for India to make her vision a reality. After all, big brands like Triumph and BMW Motorrad had forged ties with Indian two-wheeler manufacturers like Bajaj Auto and TVS Motor Co. It was the only way to strike a balance between cost and quality while targeting a larger buyer base in India. and other emerging markets.

Bajaj Auto had already shown the way in its partnership with Austrian bicycle maker KTM, where the Chakan plant became the new manufacturing hub. It is from there that KTM motorcycles in the 125-400cc range are manufactured and shipped to various parts of the world.

This is the type of business model that Harley was looking for and the first big step in Asia was forging an alliance with the Chinese company Zhejiang Qianjiang Motorcycle Co, a subsidiary of Geely, to manufacture motorcycles under 350cc. It looked like it would spread to India as well, but Benelli, who belongs to Qianjiang, is already present here.

Harley clearly wanted to partner with a local player, but options were limited given that Bajaj and TVS (which recently acquired Norton) were already engaged in their own partnerships, leaving only Hero MotoCorp as a potential ally. There has been no official confirmation if the two are likely to join hands although it might make perfect sense from a perspective of the economies of scale Hero brings to the table.

Still, given the new focus on ‘Rewire’ and the urgency to restart operations across the globe, time may be running out for Harley in India. If the management team presents a new business plan here that takes into account a strong partner, the American brand will hang on here and fight. On the contrary, if the lackluster story continues, she may be forced to retire.

Global headwinds

The bigger problem is that Harley is facing headwinds in a multitude of markets, including the United States, where the number of loyal former racers is now rapidly disappearing. GenNext has a wide choice of mobility options, which eliminates the costly problem of owning a vehicle. Worse, Covid-19 was the last straw on the camel’s back.

“In ASEAN, Harley has strong markets in Thailand and Korea. It can choose to use the CBU route from Thailand to serve India instead of continuing to lose money here, ”said a senior industry executive. In his opinion, this is the best option since the HOG community in India (see panel opposite) will be more than happy to have a Harley connection still in place, even if that means buying imported bikes.

Still, there are no two ways that a Harley release from India will result in poor optics. The automotive space has already seen Daewoo, Peugeot (which is now back in a Citroën avatar) and General Motors, call it out. Eicher Polaris then put the brakes on the Multix while local auto brands like Hindustan Motors and Premier Automobiles also went out of business earlier.

Such exits cause a lot of problems in terms of lost jobs as well as the extended supply chain that depends on the OEM for business. More importantly, a loss of goodwill will hurt the most and that’s something Harley-Davidson management will need to consider when making one final appeal to India.

Originally featured on: Professional Coach

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