Harley-Davidson dealers demand higher compensation, mulling legal options

Harley-Davidson dealers demand higher compensation, mulling legal options

Harley-Davidson dealers in India are unhappy with the American premium motorcycle manufacturer’s decision to tie up with Hero MotoCorp for its India operations. The Harley-Davidson Dealers Association, that currently represents the company’s 33 outlets across India, is still awaiting clarity from HD or Hero MotoCorp on the future steps.

The Harley-Davidson dealers across India estimate that the retail network of 33 outlets is likely to be scaled down by more than half to 13-15 dealerships due to the current situation.

So far, while the Harley-Davidson and Hero MotoCorp deal is a positive development for the customers and motorcycle enthusiasts who look for premium models, the HD dealers are facing an uncertain future. Despite the dealers facilitated the growth of the American brand in India for 11 years, the reduction of the network would a major setback for them, as many will be asked to shut shop.

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In this situation, Harley-Davidson dealers have appointed law firm AZB & Partners to look at the possible legal options against the company. Also, they are hopeful that things will be resolved in a favourable manner for all the stakeholders. Currently, they are waiting for a formal announcement from either of the two motorcycle companies, to get clarity about the next steps, so that they make the necessary adjustments.

Several Harley dealers are unhappy with allegedly below the expectation compensation they have been offered after the iconic bike maker has stitched up an alliance with Hero MotoCorp.

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The Harley-Davidson dealers have been offered a compensation of Rs 1,500 per square feet with a 10% annual value depreciated rate and a 6-month reimbursement of the margins of sales. According to the Harley’s dealer partners, this compensation package is way below compared to the Rs 300 crore they have invested over the last decade. Also, each Harley-Davidson dealer has been reportedly incurring a loss of Rs 30-40 lakh per months.

According an affected dealer quoted by a report, the support package offered by the company is not equal to the loss suffered by them since August 2020 and till Hero MotoCorp comes onboard, it will be at least another 6 months.

Harley-Davidson announced its exit from India operations on 23rd September 2020. Since then the HD dealers are uncertain about their future. This involves not only huge financial loss for them, but the livelihood of many as well, amidst this Coronavirus-induced crisis period. Later in October 2020, when HD took an 180 degree turn to announce its tie-up with Hero MotoCorp, that didn’t do much to address the concerns of its dealer partners.

The Harley-Davidson Street 750 model is the bestselling motorcycle of the company in India. The mid-size motorcycle accounted for 70%-90% of its total sales in the country. However, the model has been out of production for more than a month, impacting the sales of the brand. Earlier the Harley-Davidson dealers used to sell around 20-25 motorcycles every month, but the numbers have come down to single digits lately.

In this scenario, several Harley-Davidson dealers have expressed concern than continuing business with recently opened showrooms might not be viable anymore, especially in the smaller towns and even in metros like Delhi and Bengaluru.

The Federation of Automobile Dealers Associations (FADA) said the exit of the American cult-bike maker would lead to a loss of up to Rs 130 crore for the Harley-Davidson dealers across India along with job loss of up to 2,000 workers who are working across the Harley dealerships.

Harley-Davidson showroom

What’s Harley-Davidson India saying?

Facing flak from the Harley-Davidson dealers who are fuming after the cult American brand and Hero MotoCorp inked their partnership, Harley has issued a statement saying that it is working with its Indian partner to ensure a smooth transition for the customers, including after-sales service and warranty.

Sajeev Rajasekharan, Managing Director, Harley-Davidson (Asia Emerging Markets and India), said in a statement, “As we change our business model in India, we are pleased to be continuing our journey in the country together with Hero MotoCorp. We are working closely with Hero to ensure a smooth transition for our riders.” He also said that the company is providing its customers with updates as available.

The company has also announced that Harley-Davidson motorcycle, parts and accessories and general merchandise sales, as well as after-sale services, warranty and H.O.G. (Harley Owners Group) activities will continue from January 2021 onwards.

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What’s the deal?

According to the deal between Harley-Davidson and Hero MotoCorp, the latter will take over the sales and service operations of Harley. This will involve the existing Harley-Davidson dealers. Hero will also retail the HD original parts, accessories, riding gears, apparel and general merchandise.

The other part of the deal gives Hero MotoCorp the license to develop and sell premium motorcycles locally with Harley-Davidson brand name. The first of these premium motorcycles could be a model in the 350cc-500cc category that will challenge the Royal Enfield.

Also Read: Harley-Davidson’s India ride with Hero on seat: Tough test ahead

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