Uh Oh, Harley's Built In India To Be Sold In The US? Yes, And Sooner Than You Think

You'd think this would be a big deal, a really big deal as a matter of fact, but so far it's little more than a third rate story languishing in the backwaters of the web. Given that what's at stake is nothing short of Harley Davidson's standing in America as a "Made in the USA" cultural icon you'd think the press would be taking just a tad more interest. Maybe they're having trouble connecting the dots, or maybe they don't want to snoop, lest an objective review of the facts might jeopardise future ad revenues. Harley Davidson buys a lot of ad space don't you know? Fortunately for you, Chrome Asylum being as it is a defacto NFP, we have zero/zip/nada to lose by bombing you with the facts.

First, some background; Buell and Brazil. Let's start with Brazil. It's been over ten years now that Harley Davidson, in conjunction with its Brazilian partner, have been building motorcycles for local consumption. The operation is call CKD (complete knock down) assembly, a process where components are shipped from the US to be assembled at the local (in this case Brazilian) factory. The most obvious advantage to this arrangement is the avoidance of outrageous tariffs slapped on imports (US built Harley's in this case), and the utilization of extremely cheap domestic labor. Double bonus, the bikes are more affordable for the Brazilian locals, and the company retains greater margin dollars because of the labor savings. It's enough to warm what passes for a heart in any CEO worth his weight in wingtips. Win, win baby!

The late, not so great Blast

Given its decade of CKD success in Brazil, the Motor Company felt the time was right to expand it's foreign assembly strategy, and what better place to put its second CKD facility than India? With it's explosive middle class growth rate, an insatiable demand for all things western, especially Harley-Davidsons, and a stupidly exorbitant tariff on imported motorcycles, India was literally the perfect choice. As you read this the plant in Haryana will be nearing operation, and you can bet that Indian fans of Milwaukee iron are counting the days until the bikes hit the showrooms. Another win, right?

For the most part yes. Harley expands it's customer base, gains much needed unit sales, and the locals finally have an opportunity to purchased relatively affordable Harleys. The fact that the bikes are not actually built in the US appears to matter very little to the Indian (or Brazilian) consumer. It seems that it's enough that the major components and sub-assemblies originate in the US, to them it's still a Harley at the end of the day, its standing as an American icon is not diminished in the slightest. Fair enough.

Enter Buell, or should I say the demise of Buell, and more importantly the Buell Blast. Some of you may remember the Blast, most of you, thankfully will not. But the Blast had a very unique and vital function back here in the good old U.S. of A., it was the foundation of Riders Edge, Harley Davidson's new rider training program. As any businessman can tell you, new customers are vital to the long term survival of any business, and Harley's no exception. HD's Riders Edge program offers a safe, controlled environment for first timers to experience motorcycling, the hope being that that positive introduction will lead to sales. And the Buell Blast, with its nimble handling, small engine and frame was the perfect beginner bike. There's only one small problem, there aren't any more Blasts being built, and their useful service life will be up by the end of this year. And don't think the Motor Company's gonna replace the fading Blast with the 883 Sporty, no way. It's too heavy, and it's handling isn't suited for a newbie. Uh oh.

Starting to see where we're going with all this? Not yet? No worries, let's hop back over to the land of curry and call centers. As we mentioned, sales of small displacement motorcycles is booming in India, great news right? There's only one small problem, seems that there's a ban on the importation of motorcycles into India that are under 800cc in displacement. And even if there wasn't, what does the Motor Company have in its line-up to offer that "small bike" customer? Answer, nothing. Bummer. Or is it? According to sources in both India and Italy, the folks at HD are busy developing "an all new, small displacement v-twin platform that will be manufactured at HD's purpose built, 70,000sq ft factory outside Delhi". Looks like this "mini-twin" is just what the doctor, or should I say bean counter, ordered. It sidesteps India's ban on the importation of small displacement machines, while at the same time giving the Motor Company a viable replacement for the Blast in the US. Riders Edge is saved, but at what cost?

To say that the importation of an Indian built Harley to the US poses some "challenges" to the crew in Milwaukee is an understatement to bitch slap all understatements. But rest assured fellow Chromies, where there's enhanced profit margins, there's a way. Whether the Indian built Harley's will be rebadged as some yet unknown brand, promoted as "designed" by Harley Davidson, or brought in with an entirely new identity, they will be imported. It has to happen, the business dynamic demands it, and once that train has sailed, the brand itself stands in potential peril. It's now a much shorter step to begin importing big twins built in India or Brazil.

Impossible! Harley Davidson's an American icon, a brand that literally epitomizes the very essence of our culture; freedom, individuality, and rebellion. To build them anywhere but the United States would be a blasphemy that would never be forgiven by the American rider. It would literally kill the brand, the company would never even consider such a thing, as it would surely be the beginning of the end for the firm. Golly Wally, that sure would all be great, if only it were true.

You see, the folks that actually Harley Davidson, the "C" level guys, the stiffs on the board of directors, don't think in those emotional terms, they can't. And truth be told, they shouldn't. They are pulling the levers and twisting the knobs for one reason, and one reason only, to raise shareholder value. And to this end, there is no "enough", the quest for profits is relentless and never ending. That's why you're not likely to ever hear an HD board member say, "...hey, the stock is up to record levels, so let's kill that plan to build bikes overseas and add another 20% to the bottom line, we're making enough as it is. And it might make some of our loyal customers pretty pissed off, and we don't want that!". He'd be booted quicker than you can say, "...left to spend more time with his family".

Everything other than the end result of building shareholder wealth; including quaint notions of customer passion and loyalty, the iconic nature of the brand, the machines themselves, and Harley's heritage are merely means to an end. And quantifiable means at that. It's as simple as this, if at some point building Harleys in India and importing them to the states, all things being equal, is more profitable for the company overall (thereby increasing share value), bikes will be built there, and not here. Believe this, the moment that Harley's "Made in the USA" metric is less profitable than a "Made in India" metric, the lines in York and Kansas City would go dark.

But wouldn't a lot of people be furious at the Motor Company and refuse to buy these "imported impostors"? No doubt they would, but one thing the crew in Milwaukee is not, is stupid. Over time countless studies would be conducted, focus groups convened (does anyone actually still use focus groups!?), and surveys analyzed...Bain would have permanent offices on Juneau Ave. Before the first Faux-LH even hit our shores, the HD brain trust would know exactly how many customers they'd be likely to shed verses how many they'd gain (one would have to assume that the company would pass on some of the cost savings of foreign manufacturing in the form of reduced retail pricing). I think you know where this is going by now, more sales on the import side means bye-bye to "American made".

So how close are we to that critical tipping point? Thankfully not that close, at least not from our vantage point. For the moment the consumers desire for an "American made" machine would seem to outweigh the benefit of offering a less expensive bike built overseas. Indeed Harley's been counting on the fact that consumers would be willing to buy what is by any objective measure an average motorcycle (I love 'em too, but you know it's true) at an inflated price mostly because it was built here. But that could easily change over time, and the importation of the Blast replacement is the first tentative step in a potentially new direction. The fact is there are many riders and potential riders that don't necessarily care where a motorcycle is made, and if there are enough of them that want to buy Harley's, and Harley gives them what they want, at a price they demand, then that is what will ultimately determine where your next hog is born. Sleep tight...