Harley-Davidson crashes out of India in global restructuring

28, Sep. 2020

Automakers operating in India’s premium lifestyle biking market such as Harley-Davidson are facing challenges ranging from changing consumer habits and rising ownership costs to slow demand due to the declining economy which has been worsened further by the COVID-19 pandemic. (Photo courtesy of Unsplash)
Automakers operating in India’s premium lifestyle biking market such as Harley-Davidson are facing challenges ranging from changing consumer habits and rising ownership costs to slow demand due to the declining economy which has been worsened further by the COVID-19 pandemic. (Photo courtesy of Unsplash)

By Atul Ranjan

NEW DELHI, NNA - American luxury motorcycle manufacturer Harley-Davidson, Inc. will ride out of India after closing its factory there due to poor demand and mounting losses.

Although motorcycles and scooters have been selling very well in the world's largest two-wheeler market, the global leader of lifestyle cruising bikes only sold a dismal 25,000 units in its entire 10-year presence there.

In a statement last Thursday, the company said it will close its Bawal factory in the northern state of Haryana, which it started in 2009.

It will also “significantly” reduce the size of its sales office in the northern Indian city of Gurgram, as it evaluates ways for its 33 dealers to serve existing customers till the end of their contract.

H-D Motor Co. India Pvt. Ltd., Harley-Davidson’s local subsidiary, will let off 70 employees while it finds ways to continue selling its motorbikes in the country.

In a filing on Sept. 23 to the Securities and Exchange Commission in America, the company said it will carry out more restructuring to optimize its global dealer network to focus on high-priority markets like North America, Europe and part of Asia-Pacific. It will exit certain international markets and discontinue sales and manufacturing operations in India.

H-D Motor's filing with India’s Registrar of Companies (RoC), shows that the company incurred a loss of around 120 million rupees or $1.6 million for the fiscal year ended March 31, 2019 as against a profit of around 50 million rupees made in the previous year.

However, its accumulated losses amounted to about 430 million rupees as of March 31, 2019.

The Bawal plant has been assembling select models for the Indian market and producing Street 750 motorcycles for the non-North American market. Harley-Davidson's portfolio of iconic bikes in India includes Street 750, Iron 883, Forty-Eight and Low Rider, with prices ranging from 469,000 rupees and to 1.825 million rupees.

However, the brand, which is far more popular with generations before the millennials, seems to have lost its cool factor globally as well as in India.

According to data from the Society of Indian Automobile Manufacturers, Harley-Davidson sales declined 7.70 percent to 2,470 units in the last fiscal year ended March 2020 when a total of over 17 million two-wheelers were sold in the country.

Industry analysts said almost all automakers selling premium big bikes in categories of 700 cc and above had encountered multiple headwinds such as changing consumer habits, increase in ownership costs due to new emission and safety requirements and slump worsened by the ongoing COVID-19 pandemic.

Data from the Federation of Automobile Dealers Associations (FADA) shows that their total market share hovered around 0.01 percent only in August.

Apart from H-D Motor, automakers dominating the premium lifestyle biking segment include India Kawasaki Motors Pvt. Ltd., a subsidiary of Japan’s Kawasaki Heavy Industries Ltd., Triumph Motorcycles (India) Pvt. Ltd. and Ducati India Pvt. Ltd.

“These are niche products preferred mainly by bike enthusiasts, and have a very limited market in the country,” Shamsher Dewan, a vice president at ICRA Ltd., a rating agency, told NNA.

Speaking on condition of anonymity, a former president of FADA, said Harley-Davidson had entered India a decade ago with the assumption that their appeal would be as hot as in China. But recent regulatory and policy changes in areas such as taxation, emission and safety norms, plus the declining economy have worsened the situation, he said.

Will Harley-Davidson’s exit give an opportunity to incumbents to capture its market?

Analysts such as Dewan said it may be difficult for them to fill the vacuum as Harley-Davidson has a unique fan base. However, the ex-president of FADA disagrees.

He said, “I believe its exit still offers an opportunity for the existing players. Harley-Davidson used to sell around 2,000 bikes annually, so some players will definitely try to capture that market.”

A May 20 report by brokerage firm HDFC Securities noted global sales of Harley-Davidson fell by 5 percent in the calendar year 2019. In fact, sales had been slipping steadily since 2014 as the demand for traditional cruising bikes slowed down in large markets such as the United States.

“As the cruiser segment volumes are shrinking, especially with the millennial generation moving away from these bikes, Harley has decided to expand its product portfolio. It will now be venturing in the adventure touring space as well as launch street fighters, as the brand now seeks the favors of a new generation of riders,” the report said.

It remains to be seen how its diversification will produce models that will appeal to young bike buyers and whether it will have another go at breaking into the Indian market.

Harley-Davidson is reportedly in talks with Hero MotoCorp, India's largest two-wheeler manufacturer, about a distribution deal in the country, according to Reuters. However, Harley-Davidson declined to comment.

The company is looking to complete its restructuring within a year.