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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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