Making the speculation true, the American cult bike manufacturer Harley-Davidson has announced that it will shut down manufacturing operations in India, as the bikemaker’s sales remain week and outlook stands shaky. Harley-Davidson has its sole plant in Haryana’s Bawal, which will shut down and the company will also significantly reduce its sales office.
Harley-Davidson’s exit from the largest global bike market comes as a major blow to Prime Minister Narendra Modi’s campaign for local manufacturing in India.
Harley’s exit comes at a time when the Indian auto industry and the economy at large are passing through a tough time due to the Coronavirus pandemic. Apart from that, the financing crunch, high-duty and tax structure on the automobile industry are other impacting factors as well, as claimed by several auto brands like Maruti Suzuki, Toyota, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, TVS etc.
With this move, Harley-Davidson becomes the latest entrant in the list of automakers that have shut shop in India completely or partially. The list includes names like UM Motorcycles, AMW, Ssangyong Motor Company, Eicher Polaris, Scania, Premier, MAN and General Motors. Ford too has decided to quit solo operations in the Indian market and joined hands with homegrown auto major Mahindra & Mahindra.
Local impact of Harley-Davidson’s exit from India
In its decade-long presence in India, Harley-Davidson has sold over 25,000 units across the country. The company has 33 dealerships across India. With this move, the dealerships would either shut down or scale down operations massively. This would involve around $75 million restructuring cost, while around 70 employees will lose jobs.
Incidentally, Harley-Davidson has been reducing manpower for the last couple of months.
While the bikemaker is closing its manufacturing operations in India, it could strike a partnership with some homegrown two-wheeler brand, most likely with Hero MotoCorp, the number one company in the space, as media reports claim. Speculations are that it is in talks with Mahindra & Mahindra and Bajaj Auto as well.
In that case, the American bikemaker will change the business model in India. However, it is refraining from providing any further details.
Harley’s India exit and Trump connection
US President Donald Trump has voiced his displeasure several times alleging that Harley bikes face high import duty in India, which is unfair. He took this matter up with Prime Minister Narendra Modi as well, which led the Indian government to reduce import duty on the premium motorcycles from 100% to 50%. However, the US government remained unsatisfied with that as well.
Now, with Harley has made it clear that it is cutting short the India journey, the issue may become a dampener for India-US trade discussions, as the latter may blame the import duty structure for the exit.
Why Harley took the exit call?
Harley-Davidson’s exit call from Indian manufacturing is not just about high duty structure, but it goes deeper than that. Despite the evolving scenario in last one decade, the Indian market is still highly price-sensitive, where Harley-Davidson’s entry-level model is Street 750, priced at Rs 4.7 lakh (ex-showroom). The company failed to bring in more affordable motorcycles here, where Royal Enfield grabbed the helm of the game.
Despite Harley-Davidson creating an aura around cruisers, Royal Enfield has garnered a massive growth in demand. Especially, with the introduction of 650 twins, Interceptor and Continental GT, Royal Enfield has been able to grab the attention of the buyers who look for premium riding options.
Despite local manufacturing besides selling imported units, Harley has not been able to price its products affordably for the Indian buyers, which didn’t help in growth for the company. The Indian market contributes around 5% of the total global sales of Harley-Davidson.
Solo playing has been another reason for the low success rate for Harley-Davidson in India.
While Austrian high-performance bikemaker KTM has joined hands with Bajaj Auto to manufacturer bikes locally and sell them at affordable pricing, using the homegrown brand’s widespread retail network. Another premium brand BMW Motorrad too partnered with TVS Motor Company to manufacture and sell the lower-powered models in India, which resulted in bringing in the bikes like BMW G310R and G310 GS.
When Harley-Davidson Chief Executive Officer Jochen Zeitz took the reins at the bikemaker in February this year, he unveiled a major restructuring plan dubbed as ‘Rewire’. Unveiled in July 2020, the ‘Rewire’ strategy aims to boost profits of the company by reducing its product portfolio by 30% and investing in 50 markets with growth potential. These 50 markets included India as well along with other countries from North America, Europe and the Asia Pacific.
Just two months later, the company has announced its decision to quit manufacturing operations from the Indian market.
Interestingly, this comes as a similar move what General Motors took in 2017.
After 21 years of operations in the Indian market, the then 5th largest automaker in the country after Maruti Suzuki, Hyundai, Tata Motors and Mahindra; GM ended its sales operations in India at the end of 2017. The move came after the CEO of the automaker Mary Barra announced in 2015 about the company’s decision to invest $1 billion and to locally make 10 models for the Indian market.