Harley-Davidson makes plans for overseas production

Following last week’s announcement of EU import tariffs on American-made motorcycles, Harley-Davidson says it is working on plans to build more motorcycles overseas.

Last week, the European Union announced it was fighting back in President Trump’s trade war, countering his tariffs on European-sourced aluminum and steel. American-built motorcycles over 500 cc were among the products targeted by the EU. This affects Harley-Davidson most of all, as it sells about 40,000 bikes a year in the European Union (Indian does much less business overseas at this point). The European market is Harley-Davidson’s second-biggest source of revenue after the American market.

Previously, Harley-Davidsons had a six per cent tariff applied when sold in the EU; the new rules see an added 25 per cent tariff, bringing the total to 31 per cent.

The tariffs apply to made-in-America motorcycles, but not on motorcycles that carry American branding but are actually built in other countries. This is the loophole that Harley-Davidson seems to be planning to use to sell its machines in Europe, and is already using in India (another country battling Trump with its own tariffs, on top of previous tariffs that already protected the domestic motorcycle manufacturers there). Made-in-Asia bikes can be sold in Europe at the same price as before, maybe even lower, keeping that revenue stream alive.

Currently, Harley-Davidson has three manufacturing facilities in the US as well as plants in Australia, Brazil, India and Thailand.

Whatever Harley-Davidson does, it has to act fast, as its stock value has taken a big hit with the news from Europe, and while the company is still profitable, it’s not making as much money as it wants to or as much money as it used to. Overseas sales were part of the MoCo’s future plans, and the tariffs are expected to cost Harley-Davidson $90-100 million per year, starting with $30-45 million this year.

News of more overseas production will not sit well with the Harley-Davidson factory employees, who are already unhappy and complaining the manufacturer is moving too much work overseas. The closure of the Kansas City plant was a major blow to the company’s staff earlier this year as well.

But then, this is what the EU wants. The officials who drew up these plans were careful to target businesses originating in areas with strong support for Trump—hitting back at the faithful, so to speak.

 

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