Harley-Davidson delivers best Q3 results, retains India presence with Hero partnership

29, Oct. 2020

After announcing its exit from the Indian market in September, Harley-Davidson Inc. has decided to grow its presence in India with a partnership with the country’s largest two-wheeler manufacturer Hero MotoCorp. (Photo courtesy of Unsplash)
After announcing its exit from the Indian market in September, Harley-Davidson Inc. has decided to grow its presence in India with a partnership with the country’s largest two-wheeler manufacturer Hero MotoCorp. (Photo courtesy of Unsplash)

NEW DELHI, NNA - Harley-Davidson Inc. has transferred its sales and manufacturing functions in India to formidable Hero MotoCorp Ltd. in a rescue partnership to help boost sales of its iconic luxury motorbikes after failing to secure a stable foothold in the world's biggest motorbike market.

The announcement by both parties on Tuesday (Oct. 27) followed a declaration of Harley's best third-quarter performance in six years.

Harley delivered a net income of $120 million, up 39 percent over prior year and the highest Q3 result since 2015, indicating its global restructuring exercise called 'The Rewire' has begun to pay off.

In its media statement, Harley said, "Q3 results reflect the actions taken in the third quarter under the company's The Rewire effort."

Harley expects to make $250 million cash savings in 2020 and $115 million savings from restructuring actions starting in 2021.

Currently awash in $3.6 billion cash and cash equivalents compared to $862 million in 2019, it has generated $1.1 billion of cash from operating activities compared to $849 million in 2019.

It said, "The Rewire efforts to date have strengthened the company's focus on customers and dealers and reinforced desirability for the company's brand and products, setting the foundation for its 2021-2025 strategic plan."

Harley's withdrawal of independent operations in India and sealing a licensing agreement with Hero MotoCorp are part of its global streamlining and new mission under a renewed leadership to reinforce the desirability of its products.

Under its agreement with Harley, Hero MotoCorp, the world’s largest maker of motorcycles and scooters in terms of unit volume, will sell and service Harley bikes through a network of brand-exclusive Harley dealers and Hero's extensive dealership network in India.

Apart from retailing all other Harley products, from parts and accessories to riding gear and apparel, Hero will also develop and sell a range of premium motorcycles under the legendary American brand.

Hero has over 7,000 customer touch points including dealerships and service centers across India.

In September, Harley announced its decision to discontinue sales and manufacturing in India, a decade after riding into the country. The company said it was closing its Bawal factory in the northern state of Haryana as part of its global restructuring exercise.

Although it is a much coveted brand, the exorbitant price tags of its leading-edge bikes and high import tariffs had made it out of reach to most bike enthusiasts in India.

Announcing how they will "ride together in India" in a joint statement released on Tuesday (Oct. 27), the two companies said, "This arrangement is mutually beneficial for both companies and riders in India, as it brings together the iconic Harley-Davidson brand with the strong distribution network and customer service of Hero MotoCorp."

Although their statement did not give details of the kinds of "premium" bikes Hero would make for Harley, the first roll-outs are more likely to be entry-level and less expensive to help grow the market for Harley, which sold about 27,000 bikes only in its entire 10 years in India.

Recently, Harley collaborated with China-based Qianjiang Group Co. to develop smaller displacement capacity motorcycles. They also agreed to cooperate in component and supply chain optimization as well as expand to other Asian markets together.

Harley's global retail motorcycle sales in the third quarter were down 8 percent compared to the year before, reflecting, among other things, the company's shift in timing the launch of new model year motorcycles from August traditionally to early Q1 to "better align with seasonality," said its Q3 statement.

According to the Federation of Automobile Dealers Associations (FADA) in India, Harley’s complete exit from the country would have caused job losses for up to 2,000 workers employed by 35 brand dealerships.

Vinkesh Gulati, the newly-appointed FADA president, recently told NNA that Harley was the fourth international automobile company to have announced its exit from the Indian market since 2017. General Motors, MAN Truck and UM Lohia had already quit their Indian operations, he noted.

Harley said that it would carry out more restructuring to optimize its global dealer network to focus on high-priority markets like North America, Europe and parts of Asia-Pacific, and that it would exit 39 markets including India.

Harley is now looking to Hero to help grow its brand line-up in India, including parts and accessories, and general merchandise, two areas of Harley's growth strategies under its new plan to reignite the cool biking culture it has created over the decades.

Hero has sold over 95 million motorbikes and scooters since its inception in 1984. It is also the world’s largest manufacturer of motorcycles and scooters, in terms of unit volumes sold by a single company yearly for the past 19 consecutive years, according to the statement.

Hero currently sells its bikes in more than 40 countries across Asia, Africa, Middle East, and South and Central America.

Hero MotoCorp has eight state-of-the-art manufacturing facilities, including six in India, and one each in Colombia and Bangladesh. It has two world-class R&D facilities, in the northern Indian state of Rajasthan, and in Germany.

American golf champion Tiger Woods is Hero’s global corporate partner.