Harley-Davidson exits India as losses mount

After 11 years of operations in India, the cult bike maker told employees on Thursday that it is discontinuing sales and production operations in India as part of a global restructuring plan.

Last month, the company had hinted at exiting some tough markets as part of its strategic plan, which entails pulling out of loss-making markets and focusing on the US, Europe and parts of Asia Pacific.

The company has seen its losses mount and market shares shrink in premium motorcycle segments across continents as it struggles to keep pace with the changing preferences of young riders.

In India, the world’s largest and most price-sensitive two-wheeler market, it struggled with sharply declining production and sales.

Indian production volume fell from 11,753 units in FY16 to 4,533 units in FY20 and sales declined from 4,708 units to 2,470 units during the same period.

Harley’s lacklustre performance in India could be blamed on high prices and the wrong product and marketing strategy, said people close to the company.

“The global leadership at HD targeted 35-50-year-old riders. While doing so, they didn’t only miss out on what younger riders wanted, they became totally dependent on a marketing-led model, and there was no product innovation," said a motorcycle industry veteran who served as a senior executive at Harley-Davidson India in the past, requesting anonymity.

He added that even as Harley-Davidson stuck with selling cruiser bikes, rivals such as BMW, KTM, Yamaha and others came out with bikes that were lighter and more technologically advanced, catering to multiple categories.

“As a result, Harley-Davidson bikes stood no chance in the face of the competition. They were heavy, very expensive and did not suit the road and traffic conditions of India," he said.

Mint reported in June 2019 that Harley was also in talks with key two-wheeler makers, including Hero MotoCorp, to make bikes for India and other emerging markets. Such a partnership would have allowed Harley to make bikes with smaller engines, which would be cheaper and possibly more popular.

On Thursday, announcing additional restructuring actions to its employees, the company said the management has approved actions that involve optimizing its global dealer network, exiting certain international markets and discontinuing its sales and manufacturing operations in India.

“The India action will include an associated workforce reduction of approximately 70 employees," the company said in a regulatory document filed in the US.

In a statement issued locally, the company said it is shutting down its manufacturing plant in Bawal, Haryana, and is significantly reducing the size of its sales office in Gurgaon.

“The Harley-Davidson dealer network will continue to serve customers through the contract term," it said.

The bike maker, which sold 13 models in India with a starting price of ₹4.69 lakh, currently has 33 dealerships in the country. The company said it has more than 25,000 bike owners in India.

“This move is really going to hurt, first the consumers and then other stakeholders like dealers who make considerable investments," said Nikunj Sanghi, director, international affairs at the Federation of Automobile Dealers Associations of India.

“When a brand leaves a country, it results in unavailability of spares and service, makes customers anxious and consumer cases follow," he said, referring to recent exits by General Motors, MAN Trucks and UM Motorcycles.

Harley-Davidson’s spell in India was troubled for another reason: it found itself caught in an India-US tariff war. In June 2019, India slashed the tariff on premium motorcycles imported as completely built units from 100% to 50% after US President Donald Trump telephoned Prime Minister Narendra Modi.

“He (Modi) reduced it by 50% with one phone call. I said it’s still unacceptable because it’s 50% versus nothing. It’s still unacceptable. And they’re working on it," Trump said.