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The iconic American brand is now entangled in the recent US-EU trade war. The US government recently levied additional tariffs on steel and aluminium imports from the European Union (EU) region, and to retaliate, the EU hiked tariffs on multiple American-made goods, which saw the tax HD was paying go up from 6 percent to 31 percent.
This hike has hit Harley hard, it sees a rise of around $2,200 (Rs 1.49 lakh) per motorcycle for every unit imported from the USA. The EU is Harley’s second-biggest market, with the company exporting nearly 40,000 units in 2017. The company will face an incremental cost of around $30 to $45 million (around Rs 170 crore to Rs 306 crore) for the remainder of 2018.
The company has said it will absorb the cost and estimates in the short-term and won’t pass it on yet. But with an annual impact expected to be around $100 million (Rs 680 crore), it will have no option to raise prices. An easier solution is to move most of its production from the USA to overseas markets; it currently has manufacturing units in India, Thailand, Brazil, and Australia.
President Trump expressed his disapproval on Twitter: “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately, they will not pay tariffs selling into the EU, which has hurt us badly on trade, down $151 billion. Taxes just a Harley excuse – be patient!”
This shift in production will take place over the next 18 month and Thailand appears to be the logical direction for Harley to head in. Thailand is also already a manufacturing hub for big brands like Ducati and Triumph.
In India, Harley-Davidson’s India plant at Bawal, Haryana currently has a manufacturing capacity of 12,000 units per annum.