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Harley-Davidson is trying to find its way into a new world.
The legendary American motorcycle manufacturer is battling an increasingly small customer base in the United States and is looking for new markets abroad where some of the world's largest markets are found in Asia, including India, China, Vietnam and Indonesia.
Harley-Davidson has a lot of leverage to expand its customer base abroad and protect against declining demand at home, but the market is full of strong competitors with strong brands selling motorcycles at much lower prices. than those that Harley could reach up to here.
The largest motorcycle market in the world, for example, is not the United States, but India.
Its more than 1.3 billion people, more than four times the US population, and its recent growth have contributed to the success of Royal Enfield, an Indian company.
The motorcycle company has a long and illustrious British heritage. Like Harley, Royal Enfield has been producing bikes for over a century. It is now the largest manufacturer of heavyweight motorcycles in India and the world, far surpbading Harley-Davidson.
Harley-Davidson enjoys great prestige among Indian buyers, said Jinesh Gandhi, an badyst at Motilal Oswal in Mumbai, India. The problem is that bikes are just too expensive for 95% of customers.
"Harley-Davidson must launch affordable products for India and other emerging markets, as do many of their peers (BMW, Triumph, etc.)," said Gandhi. "They can reduce costs by lowering content and making India a manufacturing hub for the global market."
Harley-Davidson is in a difficult position. Developing its business in robust emerging economies seems to be a natural step towards securing a future for the iconic brand. But there are also disadvantages.
"Harley has some of the highest motorcycle margins in the world," said Joe Altobello, an badyst at Raymond James. "It's the good news – and it's also the bad news – there's only one way to go."
As the company expands into these low-cost markets, it may be able to increase its volume but may also earn less money on each bike sold.
"The question is how much degradation are they willing to bear?" he said.
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