Home >Auto News >Harley-Davidson, Hero gear up for India ride

Mumbai: US-based Harley-Davidson Motor Co. is in talks with India’s largest two-wheeler maker, Hero MotoCorp Ltd, to outsource the production of 250-500cc motorcycles that the iconic motorbike maker plans to develop for emerging markets, four people aware of the matter said. The talks are still at a preliminary stage and both sides are keen to explore a potential alliance that would make Harley-Davidson motorbikes more affordable in India, these people said on condition of anonymity. Fully-built imported Harley-Davidson motorbikes attract customs duty of 50%. Building them in India will help bring down the price.

For Hero MotoCorp, which plans to build a full portfolio of premium products over the next three to five years, a potential tie-up will help it enter the premium segment.

“Harley-Davidson had approached Hero MotoCorp and has had preliminary talks with the Indian company for a possible partnership. Hero’s proven capability in sustainable and frugal manufacturing would make them an appropriate partner for Harley, which is looking for developing products in the lower engine capacity segments," said the first of the four people cited above.

In July 2018, Harley-Davidson had announced that it plans to develop more affordable, small-displacement motorcycles for emerging markets in Asia, and is scouting for a strategic partner in the region.

The strategy, called “More roads to Harley-Davidson", is part of its attempt to penetrate high-growth emerging markets.

A Harley-Davidson spokesperson from Milwaukee, replying to a Mint query, said, “When we are ready to announce something, we will certainly do that."

A Hero MotoCorp spokesperson said: “We do not comment on market speculation."

In the past year, Harley-Davidson has become a rallying point for the US government to push for reduction of import duty on American motorcycles. US President Donald Trump has on several occasions pointed to what he has described as high import tariff on Harley-Davidson bikes. In July, Trump once again expressed his displeasure on the matter, saying that even after India’s February 2018 tariff cut from 75% to 50% on completely built units (CBUs), the rate was still too high and not acceptable.

Meanwhile, a completely-knocked down (CKD) unit attracts 15% duty. Harley Davidson builds two models in India, imports 11 as CKDs, and four as CBUs.

Harley-Davidson’s growing focus on India and similar markets comes amid tough conditions in its home market where sales dropped from 173,994 units in 2014 to 132,868 units in 2018. Meanwhile, international sales fell from 96,920 units in 2014 to 95,183 units in 2018. Harley’s India sales dropped from 4,708 units in FY 2015-16 to 2,676 units in FY19.

“Harley’s lookout for a partner has led it to Hero MotoCorp, which, besides being the dominant player in India, is also looking at tapping into the growing trend of premium products and aims to build a full portfolio over next three to five years. The Pawan Munjal-led company sits on a well-established production capacity of 10 million units per year across six plants and also brings to the table a wide network of suppliers who are willing to climb up the value chain," the second person added.

As part of a heavy operational restructuring process, Harley recently shut one production unit each in the US and Australia, and opened a new assembly unit in Thailand. In India, it has a production facility at Bawal in Haryana, where it builds 750cc bikes and assembles models up to 1750cc engines.

A potential deal will benefit Hero MotoCorp, the first person said. “Having maintained its market leadership after separating from erstwhile partner Honda, and after rapidly expanding its global footprint and R&D capabilities, Hero MotoCorp has emerged as a prized target for global manufacturers to partner with in having a foothold in the highly competitive Indian market. In return, the partnership with the global player gives Hero access to regions where it is looking to expand its presence. This includes mature and evolved markets. It is, therefore, a win-win situation for both the companies. However, the talks are currently at a very preliminary stage."

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