Harley-Davidson banks on Hero Moto partnership to push premium bike sales

With high tariffs hampering sales of its imported big bikes in India, Harley-Davidson is counting on partnering with Hero MotoCorp to bring home-produced premium models to the country, according to company president, president and CEO Jochen Zeitz.

India imposes a 50 percent tariff on all imported bikes, which makes the American bike maker feel like partnering with Hero has become a good decision after it decided to exit its manufacturing operations in India three years ago.

In an interaction with PTI, Zeitz noted that the tie-up with Hero MotoCorp allows the Milwaukee-based bike maker to go for “volume opportunities” by offering a competitive product in the Indian market.

“And (there are) a lot of upsides with a much greater manufacturing capacity that Hero brings and the willingness to invest in the business, to really build us as a brand. So, I would say it’s the right decision,” he said.

Zeitz noted that the company wants to get its big bikes on the market without having to pay huge customs duties. “These (high tariffs) are the downside. But the X440 is made in India. It has no tariffs, which is a positive for those who want to get the Harley brand experience,” he said.

Last week, Harley and Hero introduced their first joint venture product in India – the Harley-Davidson X 440 – with a starting price of Rs 2.29 lakh. The bike is produced by Hero MotoCorp at its Nemrana factory.

Harley-Davidson announced it will stop selling and manufacturing operations in India in September 2020. Prior to that, it had an assembly plant in Bawal, Haryana. In October 2020, Hero MotoCorp and Harley-Davidson announced a partnership for the Indian market.

The deal provided for Hero MotoCorp to develop and sell a range of luxury motorcycles under the Harley-Davidson brand in the country. It is also tasked with taking care of the service and parts requirements for Harley motorcycles.

Asked if the famous brand could return to the Indian market if the tariff issue was resolved in the future, Zeitz said: This is something that politicians are thinking about. I mean, in theory, why would you have to pay such a tariff for a bike that comes to India as opposed to a bike that goes to the US?

When asked if the partners plan to bring more models into the country, Zeitz said the focus is currently on making the X440 a success in the Indian market.

“The more I succeed, the more opportunities we have,” he noted. On Harley’s use of India as a manufacturing base for export markets, Zeitz said, “We’ve been making our 750cc also for the international market, so I wouldn’t rule that out.”

He also said, “But right now, the focus is really on making sure the product is successful in India – an important pillar is getting the X440 to be successful in India, and from there we can build and come up with other ideas.”

When asked if the X440 will be shipped to overseas markets, he said: It’s not something we’re discussing right now.

On the company’s plans to introduce Harley Originals, its range of apparel in India, Zeitz said: “This is an opportunity that I will definitely look into. We’ve invested a lot in our apparel operations in Milwaukee in America.”

He said the company sees a lot of potential in this sector.

Commenting on the development of the high-end bike segment in India, Zeitz said the premium mid-bike segment is definitely a growing segment in the country.

He noted that Harley’s core segment is 975 plus cc bikes.

But in terms of sales opportunities, that’s still a relatively small fraction in India given the price you’re charged, obviously inflated by import duties that make it more expensive than if you were to buy a bike in, say, America, Zeitz said.

Eventually, he noted, the nation’s largest bike segment will grow, but affordability will clearly be an issue if tariffs continue to rise as they currently are.

There is a growing middle class that wants to buy more luxury and fancy products. He noted that we’ve seen that happen in China, and I’m sure we’ll see the same thing happen in India.

In the context of explaining the company’s strategy across global markets, Zeitz said that the company focuses on core sectors that provide a return on investment. He added that the company is phasing out, reducing the complexity of its products by more than a third.

“In contrast, our profitability has gone up dramatically in the last three years as a company. So, I know this industry is obsessed with unit sales and I am obsessed with profitability,” Zeitz said.

So, for the company, the mandate is to make sure that they focus on those sectors where “Harley is really Harley” and those are also the most desirable and profitable sectors, he added.

Zeitz noted that both China and India are growing very fast. “I look at the two most populous markets in the world as an opportunity and you need to think long-term, right. You’re building roots now in order to grow with the economy and that’s really why we’re here,” he said.

Zeitz added that Harley decided to work with local partners in markets where it did not have local expertise.

When asked about Harley-Davidson’s electric vehicle strategy, he said one day, there will definitely be an electric Harley, but not in the near future.

He said, “…Electricity is likely to grow faster in some markets than others. We want to be the leading company in the field of electricity as a holding company.”

Asked if the company was looking to introduce its electric bike range, Livewire, in India, Zeitz said: “I don’t see that in the near future.