Harley-Davidson riding out of India

Harley-Davidson Inc is riding out of India. That’s as much of a problem for the American motorcycle icon as for one of the largest two-wheeler markets looking to make its mark globally.
Harley said in a regulatory filing that it was
discontinuing sales and manufacturing operations in the world’s second most populous country as part of its company-wide restructuring, or the “Rewire” plan, a five-year strategy to reset its business, focus on high-priority markets and tighten up by streamlining models.
That the Milwaukee, Wisconsin-based company is pulling out of a thriving market for motorbikes speaks to a troubled international strategy in need of overhaul. It comes as Prime Minister Narendra Modi is pushing his “Make in India” program, with the autos sector (including two-wheelers) as a key part and potentially $23 billion in production incentives on the way. Nonetheless, Toyota Motor Corp said it won’t expand further there.
India hasn’t been an easy market for Harley, where it’s had an assembly plant for a decade and sells a few thousand bikes.
The company operates
a “complete knock-down”
assembly plant, where components and parts are imported from the US and assembled into motorcycles for the local market. It also produces the Harley-Davidson Street series for sale outside North America.
Finding the price sweet spot and gaining traction in India, even with models made for the market with smaller engines, has been difficult. Discounts sometimes help; at other times, they turn off buyers. Bike manufacturers have struggled with the existential approach — more for less, or vice versa? Indian consumers are aspirational and not that easy to please: A cheaper model of a high-end brand won’t cut it. Taxes on larger powertrains are punitive. Harley’s bikes can cost as much as about $15,000. That’s steep for a market where the average bike with decent mileage starts at 50,000 rupees, and its nearest competitor prices closer to 150,000 rupees.
Harley was never going for the mass market, of course. It’s long since moved beyond the Wild One to the Weekend One, selling the emblazoned-leather-jacket lifestyle of the American biker on the open road to those who can pay a top price for it. Still, in India, there has been opportunity. Volumes of premium-segment motorcycles have been growing for the last six years. Top-end models have drawn first-time buyers from higher-income levels, and are potentially an upgrade choice for the 70-some million riders of smaller bikes, according to analysts from Goldman Sachs. Its main rival in the segment is Eicher Motors-owned Royal Enfield — priced well below a Harley, with a similar brand appeal.
The Harley cult hasn’t grown big enough to convert into substantial sales. The top 10 brands in India have 70% of the market, according to Macquarie Group Ltd analysts. Most of the best-selling models have been around for at least 17 years, on average. Both India and Harley are walking away from what could have been a big opportunity.

—Bloomberg