HD responds to EU tariffs

Hi, I just read in the NY Times that HD will be moving production of motorcycles outside the USA for the EU market in response to the EU raising the tariff from 5 to 31%.

Apparently the EU is 1/6 of HD's global market...................Rod.

Buy a new bike before tariffs are enacted

That article also noted that HD was not planning to increase prices in the EU, presumably because they cannot because they are already facing reduced demand sales challenges.

In our case, I am not yet sure if the BMW motorcycles imported to the US would be similarly affected. BMW sales were reportedly down, too. It would add a couple thousand dollars to a new bike's cost. Bottomline: This might be a good time to buy a new bike, before tariffs take effect. At least, that is what you can tell your wife . . .

jkjohnson said:

That article also noted that HD was not planning to increase prices in the EU, presumably because they cannot because they are already facing reduced demand sales challenges.

In our case, I am not yet sure if the BMW motorcycles imported to the US would be similarly affected. BMW sales were reportedly down, too. It would add a couple thousand dollars to a new bike's cost. Bottomline: This might be a good time to buy a new bike, before tariffs take effect. At least, that is what you can tell your wife . . .

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HaHa, my wife would see right through that, she's an expert at detecting my pathetic excuses.

I wonder if we're seeing the reduction in motorcycle sales in non transit applications.

I don't see many new riders where I live...........Rod.

If HD is announcing this move so soon after the tariff announcement, I'll bet they were waiting for an excuse to make an even more off-shore move......and blame it on something or somebody.
So many HD parts are made outside the US nowadays, I chuckle at the "American Iron" monicker.
They are not the only retailer to take this approach. I guess it part of marketed to the weak minded....and the DDoA.
OM

Harley is also moving the Kansas factory to Malaysia. So much for MAGA!

The tariffs on HD are a response to the Donald's tariffs on steel and aluminum. He stated that "trade wars are easy to win".

Just like regular wars, it's always the common people that will get hurt.

I thought it was interesting in the article I read that HD really didn't want to move the production from the U.S. Apparently, from a marketing perspective European buyers want their Harleys to be built in the U.S. as that adds to the "genuineness" of the product. I guess it's sorta like us wanting our BMW's to be built in Germany.

Currently, vehicles shipped from Europe to the US face a low 2.5% tariff. Meanwhile, cars built in America face a 10% tariff when they're shipped to the European Union.


From: http://money.cnn.com/2018/05/24/news/car-auto-tariffs-us-germany-japan-toyota-volkswagen/index.html

If not free trade, how about fair trade?

powwow said:

Apparently, from a marketing perspective European buyers want their Harleys to be built in the U.S. as that adds to the "genuineness" of the product. I guess it's sorta like us wanting our BMW's to be built in Germany.

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Just two quick observations: (1) The biggest selling SUV in Germany is the X5, all of which are assembled in South Carolina; and (2) BMW's newest int'l production factory is in San Luis Potosi, Mexico. When it begins operations in 2019, it will produce BMW's biggest seller - the 3 Series sedan. BMW engineering DNA, whether 2 wheels or 4, may be German, but manufacturing and assembly robots are multi-lingual, culturally agnostic, and can work anywhere technicians are available to maintain them and parts suppliers can manage the logistics transportation challenges. We have come a very long way from 1978 when VW opened the first foreign automobile assembly facility in the United States, to be closed in 1987 because it could not achieve profitability in the face of Japanese competition. Free trade, fair trade and smart trade can all be made to intersect in a Venn diagram. We will move forward when that is understood by those making policy, in all free nations.

powwow said:

I thought it was interesting in the article I read that HD really didn't want to move the production from the U.S. Apparently, from a marketing perspective European buyers want their Harleys to be built in the U.S. as that adds to the "genuineness" of the product. I guess it's sorta like us wanting our BMW's to be built in Germany.

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I'd prefer my BMW made in the location with the highest quality assembly..........Rod.

Rod Sheridan said:

I'd prefer my BMW made in the location with the highest quality assembly..........Rod.

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Agree. Unfortunately, with my 2007 LT, a quality POS, it didn't seem to matter it was built in Germany. Still had problems with leaky slave cylinder, leaky rear seal and improperly shimmed final drive.

When does this become a story about the business of manufacturing motorcycles in a world market and less about efforts of any government to protect and or level the playing field for businesses? H-D has previously planned a European invasion and changed business plans as a result of changing tariffs and markets.

For a variety of reasons, H-D developed the water-cooled V-Rod engine in conjunction with Porsche. In the context of this thread, the V-Rod engine was the engine planned to ride into Europe. It was modern by comparison to the then current engine line while readily complying with EU emission standards.

Along with the focus on V-Rod engined cruisers for that market, Buell was expected to finally come into its own in Europe as a significant part of the product line. H-D’s plans for Buell included shifting the power plant from the Sportster based engine to something that would not drain the U.S. demand for those engines. The development of the 1125R engine with EU partners BRP-Rotax gave H-D a modern power plant and expanded production parts sourcing in the EU.

In August 2008 H-D purchased MV Agusta. Pundits were confused by the purchase and now view it through the recession-driven crash of motorcycle sales. In any deal with the Castiglione family I would have held my wallet and checkbook very close; however, H-D had a decade's old history with them and felt more comfortable. On the purchase side of this deal it expanded the H-D owned product line to sell in Europe, quickly added dealer and supply networks, and gave them manufacturing facilities on the continent that were not producing at peak demand to use for future expansion.

H-D’s India adventure has tariff stories changing production plans for the motorcycles the company hopes to sell in that market. One hundred and ten percent tariffs on imported motorcycles led to CKD assembly plants as the workaround. In turn the India government responded as part of its goal to build jobs in India. As import tariffs for full units dropped to the fifty percent level and duties of CKD components increased the math continues to change. The questions for H-D in India seem to be more about when will it make sense to build in that country rather than if.

H-D’s plans for an electric motorcycle are another factor in its international market plan. The current electrified two-wheeled world is a realm of two scooters, of various sizes, and smallish bikes. If H-D can be early to market with a proper sized electric motorcycle, it could be a leader in that segment. I don’t think the US market is pushing the 2020 target. Instead, a plan to take it across the pond and beyond is driving the projects.


A combination of the product line, viable potential customer base, resulting in the ability to make money. Motorcycle sales in North America are at best flat. If any company is to grow then expanding to other markets in the world is part of what will result in that growth.

BMW is no different. Some get their undies in a bundle over BMW’s expansion of production in Mexico. Their plans to expand sales in Central and South America and strategies for sustainable production facilities much more than being green. It is about developing and placing plants in a manner that can expand and sustain over the long haul worldwide growth in sales.

Everybody drop all tariffs. Sell/buy stuff on its merits of what any market demands. Just dreaming.

Used bikes likely will rise in value if they have a good service record, a supply of parts and go down the road with comfortable reliability. Watch prices at the parts counter skyrocket. "So, you want an air filter, that'll be $75."

Lions, Tigers and Bears - Oh My! (Duties, Tariffs and Quotas....)

"When does this become a story about the business of manufacturing motorcycles in a world market and less about efforts of any government to protect and or level the playing field for businesses?" - Mika


Once upon a time there was a newly hatched Republic that chose to be and call itself, the United States of America. And it was broke. Actually, worse - in debt. To finance itself, it collected duties upon imported merchandise. The U.S. Customs Service, created by the 5th act of Congress in 1789, and the Revenue Service (of late, the U.S. Coast Guard) were together charged with preventing smuggling and illegal fishing, inspecting and classifying imported merchandise, and assessing and collecting duties which became the new nation's sole source of federal revenue. These folks (all of whom were appointed through patronage but that's a story for another time), also interdicted contraband, e.g. imported slaves (after 1807). The federal gov't continued to finance itself entirely by Customs duties until a little dust up began in 1861. Upon the separation of the Southern states in the War of Northern Aggression, Washington, DC lost the revenue previously provided by Customs ports of entry in the South. To offset this, and to further augment the war purse required to prosecute the conflict with the States in rebellion, Lincoln proposed and on August 5, 1861, Congress enacted the Revenue Act - the first federal income tax; a 3% tax upon all personal income exceeding $800/yr - maybe $25-30K today adjusted for inflation. The Revenue Act was modified during the War but there's no reason to go into the weeds. After the North and South made nice, in 1871, the Congress repealed the Revenue Act and we would not see another meaningful federal income tax until after the 16th Amendment was ratified February 3, 1913. Where the entire federal gov't once operated entirely upon collected customs duties - tariffs by another name - today that income is not consequential to the budget. So then why do we still levy duties, or for that matter, impose quotas, upon some imported merchandise? Because, readers of the tribe BMW, rightly or wrongly, some still deem them useful for protecting domestic manufacturing interests perceived at risk from foreign competition. Case in point:

In 1969, Harley Davidson, having just gone public in 1965, was acquired by AMF which did its dead level best to destroy the marque until Willie G., et. al. rescued it and bought it back in 1981. At the time, the Japanese were flooding the market with mid-size motorcycles and HD was having a tough go. So in 1982, HD petitioned St. Ronald to impose tariffs upon Japanese motorcycle imports. The U.S. International Trade Commission having found the Japanese were indeed adversely affecting the U.S. motorcycle manufacturing sector, i.e. Harley Davidson, in 1983, the administration levied tariffs of between 4.4% and 49.4% upon Japanese motorcycles, such tariffs to expire in five years. In 1987, having recovered its footing and become hugely profitable, Harley Davidson made a big show of requesting the tariffs be lifted, a year early. In reality, since the tariffs only applied to motorcycles having motors larger than 700 cc, Yamaha had already evaded them by shrinking its engine to 699 cc; Honda and Kawasaki, by opening production facilities in the United States.

So to respond to Mika's question, motorcycle manufacturing (or aircraft, or washing machines, etc.), trade and government intervention, are all of a piece. It has ever been thus. Globalization and its effect(s) upon markets both domestic and international is not new, but its power and dynamic flexibility are unprecedented in reach and effect; both more powerful than any individual(s) may hope to corral. The End.

Flooding the market?
From my memory, in the 70's the Japanese companies had well engineered (race proven) reliable motorcycles manufactured in modern factories that sold at an affordable price.
They were selling what most people wanted.
Bultaco, Triumph, BSA, OSSA etc. did not.

The Japanese did sell what we wanted, but in the early '80s they were shipping bikes to the the U.S in numbers that far exceeded demand. Which is why I had my choice of several different new 1982 models at my Yamaha, Kawasaki and Honda dealers in 1984.

lkraus said:

The Japanese did sell what we wanted, but in the early '80s they were shipping bikes to the the U.S in numbers that far exceeded demand. Which is why I had my choice of several different new 1982 models at my Yamaha, Kawasaki and Honda dealers in 1984.

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And, there was a class-action suit with Honda for selling year old (manufacturer date/vin) bikes the next year as “new”.
OM

If you are looking to buy a "new" 1 to 3 year old bike, now is the time. Just checked Cycle Trader and there are thousands available.

Yes there were lots of unsold Japanese bikes available in the early 80's.
My guess is the surplus was a result of competition between the brands, poor planning, and a downturn in demand, not a nefarious diabolical plan.

My first new bike was a '72 Bultaco purchased in '73.
Second new bike was a '77 Yamaha purchased in '78.
Third new bike was a '77 Triumph purchased in '78. (wanted a Duc or BMW but they were twice the price)
From memory there have been 1, 2, & 3 year old bikes available from most manufacturers many of the years in the last 4 decades. (they are not always on display in the showroom)

The word "dumping", and term "flooding the market" were used at the time to justify the tariffs.
Triumph, Norton, BSA & many others were trying to sell 10 to 20 year old technology.
Most went out of business.

I'm going shopping for an 8 track tape now.
Sayonara!

The Revenue Marine was created by recommendation of the Secretary of the Treasury Alexander Hamilton in 1790, a year after the Customs Service because the 10 Customs Houses at the ports of entry were not being "visited" by all the merchant ships.

Rod Sheridan said:

I'd prefer my BMW made in the location with the highest quality assembly..........Rod.

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Assembly quality is a product of the assembly design engineering and quality implementation and has little to nothing to do with location.

Probably hidden in all the fake/not fake news is the fact HD may find lower labor costs at their new location.

This is more the reason BMW and Mercedes have USA plants, benefitting from lower wages in SE USA and also from NAFTA with lots of made in Mexico parts. That, and more Americans buy SUVs than Europeans and SUVs are big and heavy to ship so why not build them here? Audi, VW, and FCA (Dodge) have Mexican production facilities as well and VW, once in Pennsylvania, is now in Kentucky for some models, including the big Atlas SUV.

lkchris said:

Assembly quality is a product of the assembly design engineering and quality implementation and has little to nothing to do with location.

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Right, and in the case of BMW staff training for Motorrad assembly when opening a new plant has been done at the Berlin plant. Staff spent a minimum of six months in Berlin for orientation and training before going back to set up their plant when the South American assembly of was subcontracted, and when the BMW owned Manaus plant was built and opened. Quality then becomes a function of the willingness to maintain training, equipment, standards for materials and processes, rather than location.