Harley Davidson to Go away India After Poor Gross sales

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Harley Davidson to Leave India After Poor Sales

NEW DELHI – Bhupender Singh crouched over a fuel tank in a Harley-Davidson showroom. A number of motorcycles shimmered in the afternoon sun; one metallic red, another black matt and a slightly larger version in blue.

The motorcycles were not for sale, but for repair. The front door of the dealership was locked. Harley-Davidson, the proudly American company, is giving up India due to poor sales after following a huge but ultimately frustrating place to do business for more than a decade.

"It's all over now," said Mr. Singh, a service agent. "There are no more bicycles for sale."

The closure has dealt a blow to India's ambitions to attract manufacturers, a campaign based on China's success called "Make in India". It has set back Harley-Davidson's efforts to expand its popularity overseas. And it attracts a small but devoted group of Harley devotees wondering how to keep their precious rides busy.

"It's like losing someone in your family," said Sandeep Bharadwaj, the executive director of a bus manufacturer who spent more than $ 40,000 on his Fat Boy motorcycle. "We had the mental certainty that they were physically present and could help us with spare parts."

Companies looking for the next boom have their eyes on India, a country of 1.3 billion people and an emerging middle class. However, it remains difficult to set up a business there. Roads and rails are inadequate in many areas. Land policy Flummox construction. India's bureaucracy is notorious.

With his “Make in India” campaign, Prime Minister Narendra Modi vowed to remove bureaucratic hurdles, invest in infrastructure and take other steps to create high-quality manufacturing and design work.

Even before the pandemic, the campaign had been disappointing. Manufacturing is contributing less to India's economic output than it was a decade ago. The government has worked hard to build an ecosystem for manufacturers, including infrastructure and industrial parks. Small suppliers who could help a large manufacturer build a supply chain are struggling to get credit.

"Harley came to produce for your market," said C.P. Chandrasekhar, economist and former professor at Jawaharlal Nehru University in New Delhi. "If you're not happy, just get up and leave."

A spokesman for the Ministry of Commerce in New Delhi said the government was trying to reduce the bureaucratic burden on businesses.

Despite the difficulties, any foreign manufacturer interested in India must explore setting up a business here. The country has some of the steepest trade barriers among the world's great nations. President Trump has repeatedly cited high tariffs on Harley-Davidson motorcycles in his trade negotiations with New Delhi.

India cut tariffs on Harley motorcycles from 75 to 50 percent in 2018. Still, the government levies an additional 31 percent tax on two-wheelers, one of the highest in the world.

Harley-Davidson decided to assemble bicycles in the country. The Milwaukee-based company shipped knockdown kits – packages of parts to assemble – for low-powered models like the Street 750 to its facility outside of New Delhi. The typical high-end motorcycles were still shipped from the USA.

However, after an initial surge, sales declined and the Indian company suffered from executive sales. Harley-Davidson sold a total of 2,470 motorcycles in India in the twelve months to March, nearly half the number it saw five years ago, according to the Society of Indian Automobile Manufacturers, a nonprofit that represents automakers.

The company's motorcycles also remained inaccessible to many. Harley's flagship model tops $ 88,000 after taxes and royalties in Delhi. According to the World Bank, this is 41 times the average annual income in India.

People in India tend to prefer cheaper, lighter bicycles that are easy to move around on the country's pedestrianized streets. The most expensive bike from Hero MotoCorp, one of the largest manufacturers of motorcycles and scooters in the country, costs around $ 1,500.

Harley-Davidson's moves in India are part of a larger restructuring. Harley's average customer ages quickly. Sales stagnated and profitability fell.

Under Jochen Zeitz, its new president and managing director, the company is downsizing the dealerships, limiting production to a handful of models and scrapping discounts in order to present the motorcycles as exclusive luxury items.

"This is always a tricky business because customers can be turned off," said Stephen Brown, senior director at Fitch Ratings, a rating agency in Chicago. "It's a delicate balance that you are about to walk."

The Harley name is not going to disappear entirely from India. The company announced last month that it had signed a deal to "sell and service" its motorcycles through Hero, the local company that will also "develop and sell" Harley-branded motorcycles. With its own factory closed, the fate of the Street 750, Harley's most popular bike in India, is not clear. Harley is also laying off about 70 workers.

India's Harley enthusiasts wonder what it means to them.

In 2014, Gaurav Gulati, a long-time Harley rider, was persuaded by the company's managing director in India to open a car dealership in New Delhi.

Mr. Gulati wanted to make it big. Scouring the city for an ideal location, he settled in an abandoned warehouse that he would turn into a fancy Harley store with a cafe, workshop, garage, lockers, and even a shower for drivers. When his branch opened two years later, two of the company's bosses in India had come and gone.

Mr Gulati is one of 33 traders who said they invested nearly $ 27 million in their dealers, some of which only expanded in February. He is sitting on an investment of $ 1.2 million, which he made partly from his own savings and partly after borrowing from banks. He's still paying about $ 20,000 a month in rent.

Neither Harley nor its new Indian partner, Hero MotoCorp, has reached out to Mr Gulati to continue the tenure for his dealership, he said. His dealer contract expires at the end of the year.

"I'm devastated," said Gulati-san, looking at the outside wall of his shop, which he was decorating with old-style red bricks and graffiti. "It's mental torture. Where have I put my trust and belief? What should I do?"

With all that said, some of Harley's die-hard fans in India are not giving up.

One recent morning, Preetam Thakoor, a real estate developer, and other riders from his Harley club took their bikes for a weekend ride. They rode in full gear and wore American flag headscarves, dog tags, and tailored jackets with their initials on them.

"It's not about the machine," said Thakoor, who bought the popular Street 750 model in 2014. "It's the entire community, the bond that makes it special."

Four years ago, Mr. Thakoor drove a journey of more than 1,700 miles from India's northernmost corner in Kashmir to its southernmost tip, Kanyakumari.

He ran out of money midway through the trip after Mr. Modi announced a sudden ban on high quality Indian banknotes. This was part of the national effort to stamp out corruption and get more Indians to use digital currencies. Another Harley rider flew from Mumbai to the southern city of Chennai to deliver him cash.

This camaraderie is "a feeling that cannot be described in words," Thakoor said.

It is not clear if he can continue his passion. Indian drivers and dealers need to find sources for essential machinery: batteries, acceleration cables, mufflers.

"In this case there is no Jugaad," said Thakoor, referring to the Indian method of finding inexpensive solutions to big problems.

Harley, he said, "should have been here."

Vindu Goel contributed to the coverage.