Harley-Davidson has finally called it quits in India. The iconic American cruiser, which was targeting annual sales of 10,000 units, struggled to sell even a quarter of that in FY20 — even after US President Donald Trump persuaded the Indian government to cut taxes.
So, what went wrong? We look at nine reasons why Harley Davidson had to shut shop in the biggest two-wheeler market in the world.
No full-scale manufacturing
India had good reason to cheer back in 2011, when it played host to the first Harley-Davidson plant outside the US. Set up in Bawal, Haryana, the idea was to make the bikes as affordable as possible for the value-conscious Indian customer.
However, the bikes bear a tax burden of 56 percent (GST 28 percent + Customs duty 25 percent and Cess 3 percent) as they are not manufactured but merely assembled from parts imported into India. Such an assembly operation is no match for the 28 percent GST, which is the only tax levied on two-wheelers manufactured in India (there is an additional 3 percent cess on bigger bikes).
Financial troubles, declining sales and Covid-19
Last year, Harley-Davidson shipped 213,939 motorcycles to its dealerships, which was the lowest in nine years. At $423 million, its 2019 net income was also the worst in nine years.
The June quarter saw Harley post its first quarterly loss in 37 quarters. Retail sales in its home market, the US, which is also its biggest market, saw sales skid to a six-year low due to production cutbacks, the Covid-19 impact and dealership closures. The company now wants to refocus on the US and European markets.
No clear demand outlook
The Covid-19 disruption has pushed back India’s two-wheeler demand by 2-3 years. Society of Indian Automobile Manufacturers (SIAM) data show that two-wheeler sales were slightly more than half at 4.13 million units during the April-August period compared to 8.03 million units sold in the same period last year.
During the same five months this year, sales of high-end bikes (above 800cc) saw a sharper fall to 445 units, a slump of 53 percent from 938 units. During the whole of FY20, such bikes suffered a fall of 12 percent to 2,605 units from 2,945 units in FY19. With India’s GDP contracting by nearly 25 percent in Q1FY21, demand for premium bikes could stay depressed for a while.
The dying cruiser segment
The cruiser bike segment is a dying breed not just in India but overseas too. With the exception of Indian Motorcycle and, more recently, BMW, no other brand competes with Harley in the premium cruiser bike segment in India.
Buyers instead fancy touring, adventure, sports bikes or race replicas made by Honda, Kawasaki, Yamaha, Suzuki, Ducati, Benelli, Aprilia and others. These brands have stayed away from cruisers for India.
Too late to fight Royal Enfield?
In early 2019, Royal Enfield launched two bikes with the biggest engines offered by it yet. The Interceptor and Continental GT came with 650cc engines. These non-cruiser bikes were launched at Rs 2.5 lakh. Harley-Davidson’s entry bike in India was the Street 750, with a price tag of Rs 4.7 lakh.
Royal Enfield has successfully created an affordable but strong brand alternative to Harley-Davidson over the years. The Delhi-based company has products in similar segments as Harley: cruisers, touring, adventure. In fact, Royal Enfield went a step further to launch a Cafe Racer of its own, creating a segment in which Harley does not have a product.
Smaller scale of reach
Just 35 Harley-Davidson dealerships catered to the entire length and breadth of India. In comparison, luxury car heavyweight Mercedes-Benz has nearly 100 operational dealerships in India. With more than half of its sales emerging from the less than 800cc category, there was a pressing need for Harley Davidson to expand beyond the metros and into Tier 2 and Tier 3 cities.
Harley’s average sales per dealer in a year were less than 70 units, making it one of the lowest in the two-wheeler space. A dealer selling Mercedes-Benz cars sells nearly 150 units during the same period.
Poor service back-up
While there are cases of owners clocking 250,000 km on their Harleys without much of a hiccup before seeking an engine change, social media sites are teeming with angry reactions from customers dissatisfied with the service back-up offered by the bike maker.
A faulty fuel pump forced the company to issue a recall of nearly 3,700 bikes in India in 2015. Customers have also complained about engine overheating, worn out brake pads and clutch plates burning out too soon. Moreover, several owners have faced a prolonged wait for the parts, which have to be imported.
No local partner
When, in 2007, Pune-based Bajaj Auto invested for the first time in Austria’s KTM, Harley-Davidson was busy clearing the decks for an India launch the same year. However, the actual launch happened two years later.
Since then Bajaj Auto has turned KTM into a leader in the premium (200cc and above) bike segment in India. Bajaj has also partnered with Britain’s Triumph Motorcycle. BMW has teamed up with TVS Motor Company. Other global brands like Hyosung and Benelli also tied up with local partners. Harley, instead, joined hands with Qianjiang, a Chinese subsidiary of Geely Motors.
Unable to enter the sub-Rs 300,000 price band Harley-Davidson would have found it tough to fight four competitors — Triumph, Royal Enfield, Jawa and Norton are working on a range of bikes that are directly relatable to those offered by Harley-Davidson.
Jawa and Norton have Indian companies — Mahindra & Mahindra and TVS Motor Company, respectively — managing affairs and stand to benefit from low-cost manufacturing.