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Economics of Harley-Davidson’s exit from India

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Fahid Fayaz Darangay
Harley-Davidson, Inc., H-D, or Harley, is an American motorcycle manufacturer founded in 1903 in Milwaukee, Wisconsin. It was one of two major American motorcycle manufacturers that survived the Great Depression in 1930s.The company survived numerous ownership arrangements, subsidiary arrangements, periods of poor economic health and product quality and intense global competition to become one of the world’s largest motorcycle manufacturers and an iconic brand widely known for its loyal following. There are owner clubs and events worldwide, as well as a company-sponsored, brand-focused museum.
Harley-Davidson is noted for a style of customization that gave rise to the chopper motorcycle style. The company traditionally marketed heavyweight, air-cooled cruiser motorcycles with engine displacements greater than 700 cc, but it has broadened its offerings to include more contemporary VRSC (2002) and middle-weight Street (2015) platforms.
Harley-Davidson manufactures its motorcycles at factories in York, Pennsylvania; Wisconsin; Manaus, Brazil; and Bawal, India(closing). Construction of a new plant in Thailand began in late 2018. The company markets its products worldwide, and also licenses and markets merchandise under the Harley-Davidson brand, among them apparel, home decor and ornaments, accessories, toys, scale models of its motorcycles, and video games based on its motorcycle line and the community.

In India Harley-Davidson India had started operations in August 2009 and appointed its first dealership in July 2010. The company had 29 dealership facilities across India: New Delhi, Gurgaon, Coimbatore, Chandigarh, Mumbai, Hyderabad, Bangalore, Chennai, Kochi, Kolkata, Ahmedabad, Indore, Pune, Goa, Guwahati and Jaipur etc.
After 11 years of operations in India, Harley Davidson told employees that it is discontinuing sales and production operations in India as part of a global restructuring plan. Indian production volume fell from 11,753 units in FY16 to 4,533 units in FY20 and sales declined from 4,708 units to 2,470 units during the same period.
Harley’s lacklustre performance in India could be blamed on high prices and the wrong product and marketing strategy, said people close to the company.
“The global leadership at HD targeted 35-50-year-old riders. While doing so, they didn’t only miss out on what younger riders wanted, they became totally dependent on a marketing-led model, and there was no product innovation,” said a motorcycle industry veteran who served as a senior executive at Harley-Davidson India in the past, requesting anonymity. This was reported by mint.
He added that even as Harley-Davidson stuck with selling cruiser bikes, rivals such as BMW, KTM, Yamaha and others came out with bikes that were lighter and more technologically advanced, catering to multiple categories.
“As a result, Harley-Davidson bikes stood no chance in the face of the competition. They were heavy, very expensive and did not suit the road and traffic conditions of India,” he said.
“This move is really going to hurt, first the consumers and then other stakeholders like dealers who make considerable investments,” said Nikunj Sanghi, director, international affairs at the Federation of Automobile Dealers Associations of India.
“When a brand leaves a country, it results in unavailability of spares and service, makes customers anxious and consumer cases follow,” he said, referring to recent exits by General Motors, MAN Trucks and UM Motorcycles.
Harley-Davidson’s spell in India was troubled for another reason: it found itself caught in an India-US tariff war. In June 2019, India slashed the tariff on premium motorcycles imported as completely built units from 100% to 50% after US President Donald Trump telephoned Prime Minister Narendra Modi.
“He (Modi) reduced it by 50% with one phone call. I said it’s still unacceptable because it’s 50% versus nothing. It’s still unacceptable. And they’re working on it,” Trump said.
Chief Executive Officer Jochen Zeitz, who took the reins at the company in February, had unveiled a major shift in strategy to boost profits by reducing Harley’s product portfolio by 30% and investing in 50 markets with growth potential in North America, Europe and parts of Asia Pacific.

This statistic provides information about the market share of Harley-Davidson motorcycles in Italy from 2013 to 2018. The market share of Harley-Davidson peaked in 2014 at 3.01 percent. In the following years, the motorbike company lost market share, which amounted to 2.33 percent in 2018. This is depicted by the following graph.
Note: The source of the graph is Statista.
(The author is currently pursuing Masters in Financial Economics from Madras School of Economics, Chennai)

 

 


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