Here's why Harley-Davidson is shutting shop in India

US motorcycle maker Harley-Davidson said on Thursday it will discontinue its sales and manufacturing operations in India. The company said it now expects total restructuring costs of about $169 million in 2020. Harley had indicated earlier in the year that it planned to reduce its product portfolio and exit lower volume markets, without specifying which ones. The announcement comes two months after Harley unveiled a strategy to shift focus back to more profitable motorcycles and core markets, such as the United States.

The company's annual sales volumes in India account for less than 5 per cent of the company's total. Harley entered the Indian market a decade ago, but has so far managed to sell only 27,000 bikes, barely half of what the country's segment leader Royal Enfield sells in a month. In the first quarter of this financial year, it sold only 100 motorcycles and for the whole of last financial year, it was 2,470 units — dropping from 4,708 units in 2015-16. Harley has an assembly plant at Bawal in Haryana, where it assembles completely knocked-down (CKD) motorcycles for local sales.

The company imports completely built-up (CBU) motorcycles on which the import duty is as high as 50 per cent. Earlier, Harley had become a rallying point for the US government to push for reduction of import duty on American motorcycles. Trump has on several occasions pointed to what he has described as high import tariff on Harley bikes. In July, the US President once again expressed displeasure, saying that even after India's February 2018 tariff cut from 75 per cent to 50 per cent on CBU units, the rate was still too high and not acceptable. “He (Narendra Modi) gets 50 (per cent), and they (India) think they're doing us a favour. That's not a favour,” said Trump, referring to India's decision of lowering duty to 50 per cent from 75 per cent in February this year.

The move will result in the termination of 70 employees at its India operations. Harley will retain only a scaled-down sales office in Gurugram. It is seen as the latest setback for Prime Minister Narendra Modi's strategy to encourage domestic manufacturing that would keep more of the fruits of a gigantic home consumer market in India.

Harley is also exploring a strategic tie-up with India's largest two-wheeler maker Hero MotoCorp. UK-based Triumph Motorcycles, Harley's rival in the 500-cc and above segment, has a non-equity partnership with Bajaj Auto, under which it produces its products at Bajaj's Chakan factory. Bajaj also handles distribution for Triumph.