(ATF) Weeks after sending out feelers, iconic US motorcycle manufacturer Harley-Davidson (Harley) finally revealed its quit-India plans on Thursday by announcing that will discontinue sales and manufacturing operations in the country.
The company, though, is expected to keep a skeleton operation to provide after-sales support for the motorcycles already on the road. To support its dealers it is likely sell fully built imported bikes.
With its exit, Harley joins the list of auto manufacturers that have closed shop in India in the past three years, following years of scrambling to grow sales and report profit.
US auto giant Ford last year transferred its Indian assets to a joint venture with local behemoth Mahindra & Mahindra after failing to boost its low market share in the price-sensitive country.
In 2017, US automobile maker General Motors, unable to grow its negligible market share, said it would stop selling cars in India.
The decision, which comes weeks after Toyota Motor said it won’t expand further in India due to the country’s high taxes, also makes Harley one of the first automaker casualties of the virus outbreak fallout.
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The pandemic could not have arrived at a worse moment for Harley, with the Indian auto-sector already reeling from record low sales in 2019.
The withdrawal from India has also come as a blow to Indian Prime Minister Narendra Modi’s “Make in India” strategy, where he has urged foreign businesses to manufacture goods locally. In July, Modi even said he’d offer $23 billion of incentives to attract manufacturing, including production-linked breaks for automakers.
Dismal performance
Harley entered the Indian market a decade ago, but has so far managed to sell only 27,000 bikes, barely half of what the country’s segment leader Royal Enfield sells in a month. In the first quarter of this financial year, it sold only 100 motorcycles and only 2,470 units for the whole of last financial year, down from 4,708 units in 2015-16.
According to industry sources, Harley’s struggle in the world’s largest motorcycle market has been a result of 100% import tariffs on imported bikes during its initial years.
But although India slashed that duty to 50 percent in February 2018, the brand was unable to get traction in the notoriously challenging market dominated by fiercely competitive cheaper local brands like Hero MotoCorp as well as Honda Motorcycle, owned by Japan’s Honda Motor.
In the US too, Harley has been struggling for years to grow sales beyond baby boomers, and has been unable to post retail sales growth in the past 14 quarters. For the three months ended in June, Harley recorded its first quarterly loss in more than a decade.
The following month, Harley unveiled a major ‘Rewire’ to boost profits by reducing Harley’s product portfolio by 30 percent and investing in 50 markets with growth potential in North America, Europe, and parts of Asia Pacific.
According to reports, the India-exit strategy was devised last month with the company sending out feelers to local automakers through consultants for a possible outsourcing arrangement using its leased assembly facility at Bawal in Haryana.
Expensive exit
The India-exit would involve $75m in restructuring costs, some 70 redundancies and the closure of its Bawal plant, and walking away from a market worth about 17 million bike and scooter sales a year.
Harley estimates that its total restructuring costs worldwide in 2020 will now hover somewhere around $169 million.
- With reporting by AFP
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