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Harley eyes the world even as Trump frets about levies

Murali Gopalan | Updated on: Mar 01, 2018
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US President unhappy about India’s high import duties on Harley bikes

US President, Donald Trump, could be of the view that Harley-Davidson is getting a raw deal in India thanks to the hefty import duty on fully built motorcycles.

Never mind that the company largely focuses on local assembly, which translates into a far lower cost structure. The 50 per cent duty is payable only for a minuscule part of its product portfolio that is directly imported into the country. And even while Trump is visibly upset, there is little he can do considering that Harley-Davidson needs to aggressively push for growth beyond the US if it wants to stay relevant as an iconic American brand in the coming years.

Changing times

After all, the two-wheeler world is changing rapidly with the centre of gravity now being Asia. There is no question that India will be among Harley-Davidson’s key growth engines going forward. After all, the country is the world’s largest producer of two-wheelers with over 19 million units annually.

Harley-Davidson may be a marginal player at this point in time given that commuter motorcycles and scooters rule the roost. However, things could change in the coming years as higher levels of affluence fuel aspiration for top-end, powerful bikes. This is where other top-end bike makers such as Triumph, BMW Motorrad and KTM will hope to woo customers more aggressively with their offerings.

It also explains why Matt Levatich, President & CEO of Harley-Davidson, in his letter to shareholders last April spoke of “embarking on a journey” to build the next generation of riders globally. Terming it “a bold and important” goal, he said everyone within the company was excited about the strategies that were in place to accomplish this goal.

“We believe our ability to drive demand and deepen foundational strengths set us up for long-term success,” said Levatich. “Now we can turn the page and focus on the next chapter of our company’s great history.” This is where the new 10-year strategy of building the next generation of Harley-Davidson riders worldwide becomes so important.

The idea is to build riders, increase access to the company’s products, enhance their impact, grow market share and generate profits to invest back into the business. By 2027, the goals are build two million new Harley-Davidson riders in the US, launch 100 new high impact motorcycles and grow international business to 50 per cent of annual volumes.

“To achieve these objectives, in the US market we will focus on growing ridership,” said Levatich. “In international markets, we will focus on growing reach and impact. And globally, we will focus on growing share and profit.”

Focus on next-gen riders

One of the key aspects of this plan is to focus on the next generation of riders and build their numbers in new and established markets around the globe. “We want to attract experienced and competitive riders, intenders and dreamer,” he added. “We want to attract women, millennials, current customers and generations yet to come. By building these riders, we believe we will grow our sport for the long-term.”

And while the targeted 100 new, high-impact motorcycles is doubtless a big number, the key here is “high impact.” Levatich said that the company endeavours to reinvent the product segments where it has established its strength and now make its presence known in adjacent segments.

“Our new products will be designed to bridge the desires of riders of different ages, genders and cultures, offering unrivalled customisation opportunities – one of our hallmarks,” he said. He added that the strength of the Harley-Davidson brand in international markets rivals its “incredible strength” within the US.

“We believe we have a strong opportunity for growth across developed markets in Europe and Asia, as well as developing markets in these regions,” said Levatich. “By deepening the reach and relevance of our products and experiences, and expanding our international dealer network, we will continue to tap into this growth opportunity.”

Bigger global plans

A beginning was already made some years ago with the decision to produce the Street 500 and 750 at the India plant as part of a larger global play to countries such as Spain, Italy, Australia, Japan and the ASEAN region. The thinking behind the Street was that urbanisation was driving a need in customers’ mind for a different type of access for Harley-Davidson. The answer lay in the Street, which was smaller, more nimble and better designed for such an environment.

The next decade will, likewise, see more mobility solutions emerge, especially in India and ASEAN, which will see far bigger growth than developed markets in Europe and the US. It also puts in context why companies such as Triumph and KTM have joined hands with Bajaj Auto to produce midsize motorcycles that will be competitively priced for a customer base from Europe and Latin America to ASEAN and Australia.

BMW Motorrad has, likewise, teamed up with TVS Motor Company for 310cc motorcycles and it will be interesting to see if Harley-Davidson will follow a similar route of seeking a local ally to go aggressively. For now, its strategic focus over the next three years will see creation of new customers, building brand awareness and driving cost-competitiveness.

The company is only too aware that the world is changing rapidly with traditionally strong markets in the West now giving way to the new kids on the block across Asia. Additionally, urbanisation is also playing a big role in customers’ mobility choices, which means vehicle ownership could also be under some pressure.

Harley-Davidson believes the top seven macro trends that will play a big role in the coming years will include population growth, age-related demographics, Asia’s economic growth and its rising middle class, increased regulation, growth of sustainable technology, rapid digital innovation and accelerated urbanisation. And despite President Trump’s deep concerns, while taxation and duties may doubtless hurt a bit, they are still marginal issues in the overall scheme of long-term global growth.

Published on March 01, 2018

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