25.9.20

Harley to Ride Out of India

US motorcycle manufacturer Harley-Davidson announced it will stop making and selling its bikes in India as part of a global restructuring plan. The company had been cited several times by US President Donald Trump in his complaints about India’s high tariffs, which succeeded in persuading the government to change its tax policy in favour of the bike maker.

Harley-Davidson is said to be evaluating several scenarios for India, which could include a partnership with Hero MotoCorp, according to people with knowledge of the matter.

Harley-Davidson didn’t comment on this. Hero MotoCorp said, “We do not comment on market speculation.”

“Between August 6, 2020 and September 23, 2020, the company approved commitments to additional restructuring actions under The Rewire related to optimising its global dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India,” the company said in a Securities and Exchange Commission filing in the US. “The India action will include an associated workforce reduction of approximately 70 employees.”

In a separate press statement in India, Harley-Davidson said it’s overhauling its operating model and market structure.

“Harley-Davidson plans to close its manufacturing facility in Bawal (Haryana) and significantly reduce the size of its sales office in Gurgaon,” it said in the press release. “The Harley-Davidson (India) dealer network will continue to serve customers through the contract term.”

The company expects to incur restructuring expenses of $75 million in 2020, of which about 80% is expected to be cash expenditure, “including one-time termination benefits of approximately $3 million, non-current asset adjustments of approximately $5 million, and contract termination and other costs of approximately $67 million,” it said without elaborating.

India had slashed tariffs on the import of completely built units of motorcycles ahead of Trump’s visit to India earlier this year. Motorcycles with engine capacity of more than 1,600 cc now attract a single-digit import tariff. The government had previously slashed it to 50% from 100% following Trump’s statements but even this he had termed “unacceptable.”

People close to Harley-Davidson said India may figure in its so-called Hardwire strategy. However, this will depend on the nature of any alliance that it enters into. “The current structure will be folded up and the new structure, if they decide to continue, may be for an alliance, it may be for contract manufacturing or distribution agreement of imported models,” said a person close to the development.

If the alliance talks fail, Harley will be the fourth US automaker to exit independent operations in India in the past decade.

Truck maker Navistar exited its joint venture with Mahindra & Mahindra in 2012, General Motors left India in 2017, while Ford India sold its majority stake to Mahindra last year. Polaris, an all-terrain vehicle maker, called off its multi-utility vehicle venture with Eicher Motors in 2019.

Harley-Davidson has over 60% market share in the 750 cc and above space. The US motorcycle maker was bullish on India, but has been disappointed by its failure to notch up substantial sales. It sold 2,470 units in the domestic market in FY20, almost half of what it sold five years ago. About 2,142 units were exported from India. At the end of FY19, the company had registered a loss of ₹12.14 crore on revenue of ₹382.36 crore, based on financial data sourced from Veratech Intelligence.

Since its India entry in 2010, Harley-Davidson has sold over 25,000 motorcycles across categories. It was the first premium motorcycle brand above 600-750 cc to enter India and there are about 6,500 Harley Owners Group members in the country. It has the largest network of 33 dealers for premium motorcycles in India.

No comments: