Harley-Davidson, the iconic US motorcycle brand, is moving production of bikes bound for the EU out of the US, blaming President Trumps controversial tariffs directly.
With EU placing retaliatory tariffs of 31% on the famous bikes and choppers manufactured by Harley Davidson, purchase costs in Europe would rocket by $2,200. Clearly, such a price hike would dampen demand. On a full year basis, the company estimates that keeping production of bikes bound for the EU on US soil would cost it US$100m.
In 2017, President Trump met with executives and union representatives from Harley-Davidson at the White House shortly after his inauguration. Bold claims were made about how a brand, as quintessentially American as it gets, would thrive under the new administration. This move shatters all that façade.
But is this move politically charged or just good business? Plimsoll, the leading business analyst has taken a look at the financial performance of Harley-Davidson Inc to look for the answers. According to 2017 full year financials:
The following is an assessment of Harley-Davidson Inc using the Plimsoll Model. Please click for an enlarged version.
Christopher Evans, Senior Analyst at Plimsoll says, “European sales make up 16% of overall turnover and is the company’s 2nd largest market outside the US. Harley’s sell on that sense of adventure and nostalgia but with faster, more hi-tech alternatives available to cost conscious European consumers, the company can’t afford such savage price increases”.
“Harley-Davidson Inc is already facing declining group sales, falling margins and high debts. They can’t simply sit there and let their product be priced out of such a key market in the name of economic patriotism. Many on both sides of the Atlantic value the “Made in America” badge that comes with a Harley but business is business. If European consumers balk at paying inflated price for US manufactured bikes, sales and profits decline further but the debt remains”.
“A company in that position must find the most economical way to serve such an important market as cost effectively as possible. Although the political fallout of such a move could be seismic, it makes perfect business sense. Moving production of EU bound motorcycles out of the US is the only sensible option left for Harley-Davidson Inc”.