Due to new EU tariffs on certain American goods, including motorcycles, American manufacturer Harley-Davidson has been forced to rethink its strategies and shift production out of the US.
American manufacturer Harley-Davidson has sent out a filing to their investors, in which they have announced their plans to shift production of some of their motorcycle models out of the US. This new move is an attempt to avoid the new EU import tariffs. The EU imposed a 31% import tariff on June 22 as a response to the tariffs implemented by the US government on European steel and aluminium. President Trump has been pushing his agenda to impose tariffs on foreign goods to push American made products, but it seems that this is now backfiring.
Harley-Davidson has said that the tariffs will result in approximately $2,200 (₹1.6 lakh) being added to the export cost of each motorcycle in Europe.
‘Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business,’ the company stated. However, the company has also said that in order to prevent this damage in the short term, Harley-Davidson will not raise their prices, and instead the company will bear the financial impact of the tariffs on themselves. This will cost the company around $35 million (₹238 crores) for the remainder of 2018.
The fact that they are willing to do this just goes to show the commitment that the American bike maker has to its customers, and why their brand is considered to be one of the strongest in the biking community across the planet.
Harley-Davidson went further to say, ‘To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least nine to 18 months to be fully complete.’
It is not yet known where exactly the company plans to shift its production, but there is a very high chance that a majority of this production shift may come to India where they already manufacture the Harley Davidson Street 750 and Street Rod. This will allow them to avoid EU tariffs, but this may also be good for India because the cost of their bikes might go down and therefore make them more accessible to Indian customers.
The EU is a critical market for Harley-Davidson, as they sold 40,000 bikes there last year, making it their second largest market after the US. However, Harley is also witnessing a drop in sales in the US. They were even forced to shut down their Kansas manufacturing plant earlier this year.