Harley seeks alliance for lightweight bikes to grow India business

[August 07, 2018]   By Rajesh Kumar Singh

CHICAGO (Reuters) - Harley-Davidson Inc <HOG.N> is scouting for a partner with a manufacturing and distribution footprint to make lightweight motorcycles for use in India and other Asian markets, a top company executive said.

The Milwaukee-based company, known for its heavy touring motorcycles, said last week it would launch a 250cc to 500cc motorcycle in India to boost sales in the world's largest two-wheeler market as it grapples with an aging customer base and falling sales in the United States.

Industry sales are projected to grow 25 percent a year in Asia's third-largest economy in the 250cc to 500cc segment through 2021.

"We realize that we as a company have been very focused on large heavyweight motorcycles and our expertise in the 250-500cc space needs to grow," Marc McAllister, vice president of product portfolio at Harley-Davidson, told Reuters in an telephone interview on Friday.

"We are looking for a strategic alliance that can help us grow through understanding the product, understanding the consumer, understanding the assembly," he said.

That could mean Harley will not necessarily make the new motorcycles at its own facility in India, and may instead use a local partner, McAllister said. He declined to discuss names or details of potential partners.

Helped by rising discretionary spending, motorcycles sales in India are experiencing double-digit percentage growth, compared with tepid recent consumer demand in the United States.

Lured by the enticing growth prospects, British motorcycle maker Triumph and Germany's BMW <BMWG.DE> have partnered with Indian companies Bajaj Auto <BAJA.NS> and TVS Motor <TVSM.NS>, respectively.

A biker rides his Harley-Davidson during a parade at the "Hamburg Harley Days" in Hamburg, Germany, June 24, 2018. REUTERS/Fabian Bimmer/File Photo

Harley expects the lightweight segment to act as a "bridge" to its brand, said McAllister, giving it a chance to make deeper inroads into a market where over 20 million two-wheelers are sold annually.

The company had been criticized by U.S. President Donald Trump over a plan move production for European customers overseas to avoid retaliatory tariffs in a trade dispute between the United States and European Union.

Harley is hoping a foray into the lightweight segment, along with other new product launches, will expand its operating margins and add up to $250 million in operating profit in 2022.

Analysts are skeptical of the profit targets as India is a highly cost-competitive market and lightweight bikes are historically lower-margin products.

McAllister said the new bike will a premium product, but declined to reveal a price range.

As part of its drive to increase market share in India, Harley said it will increase its number of dealers there from the current 30, McAllister said.

(Reporting by Rajesh Kumar Singh; Editing by Bill Berkrot)

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