Harley Davidson: India woos the American bike

It is not just a motorcycle. It’s an American icon, all of 115 years old. The Milwaukee based company has withstood recession as well as competition and surprises bikers with improved models every now and then.

They pass faster, stop quicker and see farther at night, described a gushing report of a new model. The motorbikes have an entertainment system, touchscreen for music, GPS and phone. Bluetooth connectivity, support for intercom with other bikers are now becoming standard. Aluminium wheels, hand-controlled switches, wider and deeper seats and arm rests are just some of the features that set a Harley Davidson apart from other motorbikes.

The iconic motorcycle has been popularised by quintessential American films and catchwords like “Don’t fear dying, fear not living. Let’s ride” or “Don’t wait for life, ride to meet it”. Four wheels move the body, two wheels move the soul, stated one of it publicity material. Another audacious take was “How are the brakes? Don’t Know. I never touched ‘em.”

The publicity materials are often as popular as the bikes themselves. “ Put something exciting between your legs” is one of the more popular ones while yet another popular billboard stated, “Meditation doesn’t mean you have to sit still.” “Sometimes, you find yourself in the middle of nowhere; and sometimes in the middle of nowhere, you find yourself…” Therapy is expensive… Wind is cheap…” are a few more marketing gems from the company.

It is what the beautiful man from India had to tell him that was more interesting. Prime Minister Modi, it seemed, had called up the White House to inform the President that India had reduced import duty on US motorcycles, in particular the iconic Harley Davidsons.

India had indeed reduced import duty on high-end motorcycles in February from 75% for the ones with higher than 800 cc capacity and 60% for those with capacity up to 800 cc to a uniform 50%.

The justification was a long-standing demand by the industry and because such high-end motorbikes are still not manufactured in India, reports quoting experts and Indian Customs officials held.

But the US President was far from being impressed. As is now usual for President Trump, he seemed to be economical with the truth and told the gathering that India charged 100 per cent tax on a Harley Davidson motorcycle imported from the United States.

When they (Harley Davidson) send a motorcycle to India, as an example, they have to pay 100 per cent tax—100 per cent,” Trump was quoted as telling the governors.

One of the several reports that appeared in the US media at the time reported, “Referring to his recent conversation with Prime Minister Narendra Modi, he said the “fantastic man” informed him that India has reduced tariffs on imported motorcycles, but the US was “getting nothing”.”

“Now, the prime minister, who I think is a fantastic man, called me the other day and said we are lowering it to 50 per cent. I said okay, but so far, we’re getting nothing. So, we get nothing. He gets 50 (per cent), and they think we’re doing—like they’re doing us a favour. That’s not a favour,” he said.

President Trump in fact said that US got “zero” when it bought an Indian motorcycle.

“So, when they have a motorbike—a big number, by the way—they have a company that does a lot of business. They have a motorcycle or a motorbike that comes into our country -- the number is zero. We get zero. They get 100 per cent, brought down to 75; brought down, now, to 50. Okay,” Trump said,” is what was reported in the Indian media.

Indian industry sources confirm that the US charges no duty on motorcycles exported to the United States. But then the only motorcycle India exports to the US is apparently Royal Enfield. And in the year 2017-18, just about a thousand motorcycles were exported to the US, they maintain.

What is more, in the US the Royal Enfield is more likely to be deemed as the poor man’s bike and its market share in the US is miniscule.

Whereas in India, Harley Davidson leads the high-end section of the market. It is a luxury for most Indians and very few can afford it. Ironically, Harley Davidson sells more motorcycles in India than the combined sale of Indian motorcycles in the United States.

The reaction to lower import duty on Harley Davidson bikes was no wonder mixed. With the models being sold in India costing between half a million INR, which is more than the price of an entry-level four-wheeler in India, and a whopping five million INR, which is more than the price of some models of the BMW and Mercedes cars here, the import duty, feel several experts, hardly mattered.

“People who can afford to pay ₹5 lakhs or ₹50 lakhs for a two-wheeler, can certainly cough up the duty. Reducing the duty would possibly reduce the price of the cheapest HD bike by a few lakhs. It would help the American company to sell more bikes in India and the Government of India will lose some revenue,” felt one of the experts who didn’t want to be named.

Others believe it is really a case of much ado about nothing. “Even if the sale of Harley Davidson motorcycles double in India, it would still have a small share of the market but will probably dominate the high-end segment, which it is doing now in any case. The loss of revenue will be insignificant,” said an analyst, again on condition of anonymity.

More than trade or politics, he suggested, President Trump’s interest in Harley Davidson could be more personal. “The owners of Harley Davidson, in all likelihood, have been old friends and now that he is in the White House, he would like to do them a good turn.”

Indeed, President Trump himself had revealed that the company had neither complained about the tariff nor had asked him to intervene. Ironically, however, in the wake of the US launching a trade war, and the European Union retaliating with higher taxes, Harley Davidson declared this week its plans to shift production facilities out of the United States.

“It’s a great company. When I spoke with your chairman or the president of Harley, they weren’t even asking for it because they’ve been ripped off with trade so long that they were surprised that I brought it up. I’m the one that’s pushing it more than they are, but it’s unfair. And India sells us a lot of motorbikes,” Trump said.

Retaliatory tariff by the European Union would cost the company 100 million US Dollars and it would prefer to cushion itself by removing some of the production facilities. It is not clear, however, if this would also lead to a significant job loss in the US.

India’s compulsion is easily understood. Between India and the US, there is a trade imbalance. While the United States imports precious metals, stones, jewellery and pearls from India, besides pharmaceutical products, Information Technology products, Indian imports from the United States has not kept pace, resulting in a trade deficit of 2,100 crore US Dollars.

In an election year, the Modi Government clearly does not want a confrontation with the US on tariff. In fact, Union minister Suresh Prabhu has gone on record to assure that India would increase its purchase of oil from the US. India also appears to have held out the carrot of purchasing most of the civilian aircraft it needs from US companies. It is estimated that Indian civil aviation sector will require around 1000 new aircraft in the next ten years. The bulk of it is likely to go US companies.

A report in Livemint explains that India is using Harley Davidson to woo the Americans. In return to a promise to renew the country’s eligibility for the generalised system of preferences (GSP) that allows market access to about 3,500 products from India at nil or low duties, India is ready to slash down the import duties even further.