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It’s Official: Harley’s Going to India

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There’s been lot’s of buzz about this, but Harley-Davidson has made it official:  The Motor Compnay will expand into india in 2010.  Clearly, they’re hoping to recoup some of their losses from the disastrous decline of sales in the the US Motorcycle market.  According to HD’s press release:

“India is important to our long-term vision of being a truly global company,” said Harley-Davidson Inc. President and Chief Executive Officer Keith Wandell. “We are committed to India for the long term, and we are focused right now on establishing a strong foundation.”

India is the second-largest motorcycle market in the world, with sales dominated by small, inexpensive bikes used as basic transportation. However, India’s rapidly growing economy, rising middle class and significant investment in construction of new highways have opened the door to leisure motorcycle riding.

Whether it will have opened the door wide enough for Harley to make some sales there is still an open question, since the move is not without risk.

First, despite its recent economic growth, India is a desperately poor country.  To the extent that more people can afford to ride motorcycles there, they are riding inexpensive, sub 650cc bikes, not large, expensive Harley-Davidsons.  As I’ve mentioned before, Harley simply doesn’t have a motorcycle that can fit the bill for a developing country, namely a small, inexpensive motorcycle.

On top of that, India is a severely protectionist country, with a 105% import duty on motorcycles.  That means a $10,000 Sportster becomes a $20,000 Sportster in India.  I’m not sure how many units they’re going to sell in a country where the annual average income is $1,100.

Third, India, being a desperately poor country, has an infrastructure to match, i.e., roads in horrifically bad repair, which are not the best placed to be ploughing along on a 600-pound+ motorcycle.

Harley’s main competitor there will also be homegrown firms like India’s Royal Enfield motorcycles, who make little 125cc and 250cc thumpers.  Royal Enfield has, in fact, done very well, and has seen huge sales growth in India.

But, then again, they aren’t asking people to give them 20 years worth of income for a motorcycle.

One also notes that Suzuki and honda are already in India.  The difference being that they are both manufacturing motorcycles there, and thus avoiding import duties.  They are also concentrating on entry level (sub 125cc) motorcycles, and standard 125cc-250cc motorcycles.  Suzuki recently announced that their entry-level motorcycle operations are expected to break even this year.

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6 Responses to It’s Official: Harley’s Going to India

  • Dear Friend,

    I think you have written this article without proper research.

    If you read the press release of Harley Davidson Co. carefully, you will realise the ptential findings of the company. Business is looking beyond the present and India is definitely an economic super power waiting to be unleashed. It is not a desperately poor country, however due to its population it is an ill managed country as of now, and therefore you see more poverty than there actually is.

    Just to get the facts right, BMW, Mercedes, Bentley, RR, Suzuki, Honda, Yamaha etc. are all selling their premium products much more than any other developed economies of the world.

    Fact about Royal Enfield is that it does not make anything below 350 cc and has presence and distributors in more than 149 countries of the world.

    The Golden Quadrilateral Super Highway of India is comparable to any of the best highways of the world.

    And at last, most Harley’s are sold on Financed money all over the world, so what is the big deal if per capita income of and Indian is US$ 1100.

    Thanks
    h. Bansal

  • Business is looking beyond the present and India is definitely an economic super power waiting to be unleashed.

    No, it isn’t.  Sorry, but until your government embraces free markets, India will never be an economic superpower.

    It is not a desperately poor country, however due to its population it is an ill managed country as of now, and therefore you see more poverty than there actually is.

    What percentage of Indians own automobiles?  Microwave ovens? Color television sets?  Let’s not pretend that government mismanagement makes India look poorer than it is.  That mismanagement is a cause of India’s poverty, but it is not a proxy for it.  Per capita income in India is 1/36 of the United States.  India’s GDP is 1/13 of the US, with triple the population. Let’s not try to just elide past that.

    Just to get the facts right, BMW, Mercedes, Bentley, RR, Suzuki, Honda, Yamaha etc. are all selling their premium products much more than any other developed economies of the world.

    Well, the facts as recited by The Economic Times say:

    India’s seven-million strong motorcycle market does not have a big share of super bikes or high-powered bikes that Harley Davidson makes, but the US firm is banking on the growing popularity of such products. Bike makers who are present in the segment include Suzuki with its Hayabusa and Intruder models, besides other companies such as Yamaha, Ducati and Honda. These firms together sell over 400 units a year in the domestic market.

    400 motorcycles per year?  Per year?  A single US dealership in the United States can sell 400 motorcycles per year.

    It goes on to say that Harley is hoping to sell 100 bikes there in the next year.  None of those numbers are particularly impressive.  The Financial Times further notes:

    Analysts are sceptical about whether Harley’s premium bikes, which have starting prices ranging from $6,999 for a 883 model to $25,299 for a Fat Bob in the US, will be able attract Indian bikers, given that the US group will have to add a 105 per cent duty on all its motorcycles.

    Your comment continues:

    Fact about Royal Enfield is that it does not make anything below 350 cc…

    Actually, with the exception of the Bullet 500, 346cc bikes are ALL they make.  And the vast majority of bike sales in India are sub 350cc motorcycles, or scooters.

    The Golden Quadrilateral Super Highway of India is comparable to any of the best highways of the world.

    Yes, I’m sure India has a nice highway or two.  And how many first-class roadways would you say India has compared to, say California?

    And at last, most Harley’s are sold on Financed money all over the world, so what is the big deal if per capita income of and Indian is US$ 1100.

    Because it implies the Indian will have to mortgage 20 year’s of his life’s work to own one motorcycle.  For an American, the same motorcycle represents 6 months work.  Do the math.  Instead of spending 20 years of income on a motorcycle, I suspect the Indian would prefer to spend that 20 years buying, you know, food and housing.

    None of this means that India is a bad place, populated by bad people.  But, by the standards of the developed world, India is desperately poor, and it’s difficult to see how Harley is going to sell $20,000-$50,000 motorcycles in any significant number to people for whom that represents a third to two-thirds of their lifetime working income.  Not even Harley expect that.  They are projecting initial sales of 100 motorcycles.

    If your government decides to embrace free markets, and unleash the entrepreneurial spirit of your people, then all that will change.  Until then…it won’t.

  • Think the Indian upper middle class earning about $12,000 + is 20 million or so. So the market potential is like Australia, but with bigger growth potential and more bike riders.

  • Sorry to say again, your research is poor.
    India’s luxury car market (cars for US$ 55000 and above) is a good 8000 units per year, growing at about 20% per annum.

    I suggest you visit India and travel extensively to change your pereception. Simplicity does not mean poverty !

    Thanks.
    H Bansal

  • Wow !

    In that case I don’t understand why all these automotive giants are looking towards a poverty stricken country like India. May be you should write a personal mail to Harley and others not open shops here, because we are soooooo poor.

    Cheers mate.
    HB

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