By the Staff of Clutch and Chrome

Harley Davidson has finally been allowed to export the American Legend to India. We take a look at how Harley achieved this, India's motorcycle appetite, other future hurdles and the surprising history it already shares with the American motorcycle manufacturer.

Having a solid 62% of the American motorcycle market and establishing a worldwide presence as far reaching as China should be enough, but now it seems it's India's turn to get seduced by Harley Davidson's charm.

According to the company, India is among the quickest growing motorcycle markets in the world and certainly large enough for the legendary manufacturer to set its sights on the Indian consumer.

India's economy is flourishing as the country transitions it's national product from agriculture to technology.

"As India's economy takes bigger strides, a younger population with expendable income is embracing luxury as never before," says a trade analyst. "With the demand for high-end bikes like Kawasaki Ninja and Suzuki Hayabusa growing by the day, it comes as no surprise that Harley-Davidson is also finding this market very attractive."

Enough it seems, to have it's eye caught by the Jewel of the East.

Old is new again
But the love affair between India and Harley Davidson isn't new. There were many old Harleys on the roads of New Delhi in the shape of motorized rickshaws called phat-phatis, named after the sound they used to make. In fact, during World War II Harley-Davidsons came into India by the thousands, intended to transport men and deliver mail in the eastern Assam state of India. Few saw action and the abundance of motorcycles were sold off as war-surplus, most still in their original crates.

No matter what part of the world, when young enthusiasm is mixed with the passion of riding, creativity isn't far behind. There are famous stories in India about an enterprising young man, Wazir Chand Kohli, who brought the famous war surplus American motorcycle to New Delhi, converting them into three-wheelers, so the bikes could transport four to six people with ease.

These machines were hybrids: half were made with the Springer at the front end and half as a three-wheel motorcycle. The side-valve engines were removed and replaced with diesel. First appearing on the streets as long ago as the late 1940s, these machines could be seen on the New Delhi roads as recently as three years ago.

It took the state government of India to outlaw them in the name of controlling pollution to remove the motorcycles from the streets.

However, safety was seen as another major concern, with flimsy chassis making them dangerous for passengers, as well as exposing passengers to rain, pollution and extreme temperatures.

Need more than a passport
As Harley Davidson learned with their move into China, it takes more than a desire or financial ability to open shop in another country. It took years of discussions with the Chinese government and the helpful persuasion of some American diplomacy to open the first dealership in that country.

Harley-Davidson's vice-president of government affairs, Timothy K. Hoelter and the company's legal team were in talks with officials in the Indian government for some time, trying to find the government's flexibility over the emission standards for high-end motorcycles and discuss a reduction in customs duty on the bikes.

Although its bikes meet air emission standards for both the United States as well as Europe, there were none in place for high-end motorcycles in India. This left Harley Davidson in the position of having to convince the Indian government to specify emission standards before making a financial commitment to creating a dealer network, and all the support it would require in India.

Opening the Indian market has always been a high priority for Harley-Davidson. Owning 62 percent of the American market of motorcycles in the 850cc or more category is certainly impressive enough. But the company experienced slow or declining sales in the United States at the end of 2007 which continued into 2008.

Robert W. Baird & Co analyst Craig Kennison surveyed 86 Harley dealers across North America for their assessment of business trends in the first seven weeks of 2008.

Sales were slightly below dealer expectations, Kennison said, although 35% of the dealers said new motorcycle sales were better than expected.

"Many dealers (32%) think that new bike inventory is too high," Kennison said. Some dealers were frustrated by the late delivery of models such as the Rocker, new for 2008.

Forty-eight percent of the dealers said they were selling new Harleys for below the manufacturer's suggested retail price - a nagging problem that recent production cuts haven't fully addressed.

"That's partly a sign of the economy we are in, and it's partly due to the inventory levels at some dealerships," Kennison said.

Twenty-eight percent of the dealers said it had become more difficult for customers to obtain motorcycle financing. Half of the dealers said that Harley should offer more sales incentives, and they complained that interest rates were too high.

One reason to look abroad to sell it's wares, those opportunities are wide open, unlike the American marketplace that's not only saturated by Harley's product but also from the growing competition in the cruiser niche.

Other reasons to look to foreign markets would be the reported global revenues of $5.34 billion in 2005 with a net income of $960 million. Aside from traditional sources such as motorcycle, parts and apparel sales, it also licenses its logo which was worth $41 million of revenue in 2004, or almost 5 percent of net income.

Meeting of the economic minds
With political lobbying and negotiations behind it, the famous Milwaukee motorcycle manufacturer finally received official permission to sell it's world-famous Hogs to the riders of India in February 2008.

After years of negotiations between Harley-Davidson's vice-president of government affairs, Timothy K. Hoelter, the company's legal team and officials in the Indian government, the motorcycle manufacturer is finally able to sell motorcycles in India.

India's commerce ministry agreed to recognize European engine emission standards for motorcycle engines exceeding 800 cubic centimeters. Although Harley-Davidson managed to get it's invitation to the party, the company didn't exactly get the preferred seating arrangement they wanted. Apparently India didn't budge on the customs duty, leaving India's buyers to pay nearly double the retail price because of tariffs and taxes.

India hasn't set a limit on the number of Harleys allowed in the country. But there is a 60% tariff on the imported bikes, plus another 30% or so in various taxes.

"The net effect is, the cost of a Harley in India is about double what it is here," Harley spokesman Bob Klein said.

The heavyweight motorcycle culture is barely established in countries such as India and China, and Harley has just begun to tap the sales potential, said analyst Craig Kennison with Robert W. Baird & Co.

"But the markets are huge. If Harley makes an investment in them now, then in 10 or 20 years it should pay off in spades," he said.

Speaking of markets, was it the savvy negotiation skills of Harley-Davidson executives or the opportunity for the Indian public to own their very own slice of America that finally brought government officials to the approving decision?

Or were there other parties with their own political interests involved?

Worldpress.org, a website which carries news from around the world using articles reprinted from international press sources reported in May 2007 of a swap deal between India and the United States. The arrangement lifted a twenty year ban allowing India to export mangoes to the United States. A ban originally put in place because of American concerns over pest-risk.

According to K.S. Maney, chairman of Agriculture and Processed food products Export Development Authority, India produces about 14 million tons of mangoes of which nearly 65-70,000 tons are exported annually.

"At present, we can export almost 8,000-10,000 tons of fruit to the U.S. annually," said Maney

But what did the United States get in return for lifting a decades old ban on mangoes?

No surprise for those paying attention that the Indian government would allow the importation of Harley Davidson bikes with an engine capacity of 800 cc or above if they complied with Euro-III emission norms.

It's not unusual that Harley-Davidson looked to American political influence for help with difficult or tightly-controlled foreign markets such as China or in this case, India. Its a common practice among large corporations with international ambitions.

However, an interesting coincidence crosses international lines to the highest office of American politics.

The announcement of the swap deal and resulting reopening of the American market for India's mangoes was made by President George Bush on a visit to the country. Interestingly, over the last two years Mr. Bush has been a frequent visitor to different Harley-Davidson factories, signing and sitting on motorcycles to a full court of press.

When the swap deal was first announced last year, it was rumored Harley-Davidson was economically discouraged by the high tariff and import taxes, electing at the time not to pursue the Indian market.

Perhaps the recent news release regarding emission standards indicates the motorcycle manufacturers growing concern over sales in the United States and has made India's market much more appealing.
 

An American in India
Harley Davidson plans to tap into the huge Indian market by importing their product instead of building factories in the country. Other major motorcycle manufacturers such as Suzuki, Yamaha and Honda are not only looking to sell more bikes to India's consumers but have invested considerably into existing factories within the country.

Interestingly enough, other high-end motorcycles have failed to gain a foothold with the Indian consumer and not from the lack of enthusiasm. When BMW announced they were entering the India market the press and motorcycle reviewers were excited and local riders looked forward to the opportunity of buying one. But with a higher price tag than it's competition, BMW only managed to sell the initial delivery of 100 motorcycles.
 

The Royal Enfield's Bullet 500 Click to enlarge

Although not blamed for the motorcycles nearly non-existent sales numbers, BMW imported their motorcycles to the Indian market, just as Harley Davidson plans to. Not only would Harley Davidson compete with smaller 125cc - 500cc motorcycles built for India's rugged roads, the American legend would face a British icon, The Royal Enfield. The first Royal Enfield was built in England during the early 1900's with the most popular model, the Bullet appearing in 1931.

Consistently large orders from the Indian government led to setting up of a factory in India in 1955 to build the motorcycle. Even after production stopped in England, the motorcycle continued its popularity and production in India. The Bullet today is faithful to that classic design of the 50's albeit with several design and quality improvements.

As with most things in life as well as with business, timing can be everything. When Harley-Davidson first pursued selling its Hogs in India, the motorcycle market was growing at double-digit rates. Recently, even that market has slowed leaving many other manufacturers who had invested heavily in factories and dealership networks across India scrambling to retain market share.

However, the Milwaukee motorcycle company has a marketing advantage over other manufacturers that can't be bought or created. They have the Harley-Davidson mystique and brand recognition that has managed to carry quite a premium in every foreign market the company has entered.

Harley-Davidson has the financial fall-back of merchandising and selling it's brand, giving it resources beyond any competitors.

It seems Harley-Davidson is facing the same uncertainty every rider faces when going on any road trip of any length, never really knowing what's coming around the next corner.