Harley-Davidson Strikes Deal for Chinese-Made Motorcycle

By Kali Kotoski

June 19, 2019—In an effort to penetrate China’s massive motorcycle market, Harley-Davidson announced on Wednesday that the company has partnered with a Chinese firm to manufacture a small 338cc bike projected to hit showroom floors in 2020.

The bike will exclusively be sold in Harley-Davidson dealerships in China, with expectations for future growth in other Asian markets. The collaboration sees the Motor Company co-developing the bike with Qianjiang Motorcycle Company Limited, which is a subsidiary of Geely. Geely owns Volvo and has a joint venture to assemble cars in China with Mercedes Benz parent company Daimler.

The announcement appears to make good on Harley’s promise to move some production outside of America to avoid tariffs and increase profits, while staying in line with its plan to cut costs domestically and source half of its sales outside of the United States by 2027.

In some ways the deal makes sense as Harley’s boomer-centric sales model has a limited lifespan and to generate new riders, affordability remains paramount, according to recent dealer surveys.

“Harley-Davidson has always been about inspiring riders around the world. Our More Roads plan is all about bringing our brand of freedom to more people, in more places, in more ways,” said President and Chief Executive Officer Matt Levatich in a news release.

While Harley declined to give a price tag for the new bike according to Reuters, the company said that it will still embody Harley’s distinctive look, sound and feel.

“The new Harley-Davidson motorcycle and engine will be produced in a Qianjiang facility in China and adhere to the rigorous quality standards and testing processes followed for all Harley-Davidson products,” Harley said.

And the Chinese motorcycle market is nothing to scoff at with Harley noting that retail sales in China grew 27 percent in 2018 compared to 2017.  Last year, Harley moved some of its manufacturing to Thailand to avoid retaliatory tariffs imposed by the European Union following the Trump administration’s tax on imported steel and aluminum. The Thailand facility is already expected to begin shipping motorcycles to China by the end of the year.

The major shift towards smaller displacement motorcycles for Asian markets, which are dominated primarily by a sea of cheaper Japanese bikes, is essential as riders ride out of daily necessity, unlike America’s leisure-oriented customers.

However, it is somewhat surprising that Harley chose China, given that major global manufacturers have been vying for a footprint in India.

Harley’s logic appears to be first gaining entrance into untapped markets, with the hope that as these markets mature and disposable income increases, riders will graduate to larger bikes. Whether that is a sound strategy will remain up for debate as anyone who has ever been on the roads of China, India or Southeast Asia can attest that there isn’t much room for large bikes. That, and whether the price of the 338cc bike will be low enough to actually grab a slice of the market. To do so while remaining a “premium” motorcycle brand could prove challenging.

While this bike will be one of the smallest in Harley’s 116-year old history, the good news is there is presently no talk of bringing such a bike to the United States. But that clearly is not out of the question.     

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