Harley-Davidson Ventures Into Chinese Market; Will Sell Small Harley Motorcycles By 2020

The logo of U.S. motorcycle company Harley-Davidson is seen on one of their models at a shop in Paris
Harley-Davidson Inc partners with the Chinese Qianjiang Motorcycle Company Limited for the joint production of small motorcycles in China, which is expected to go on sale by the end of 2020. (Photo: REUTERS/Philippe Wojazer)

The largest American motorcycle manufacturer Harley-Davidson Inc. signed a partnership with the Chinese Qianjiang Motorcycle Company Limited for the joint production of motorcycles in China. In this agreement, Harley_Davidson is expected to build small motorcycles that will go on sale in China by the end of 2020. The company has not released pricing yet, but it's expected to be one of the more expensive two-wheelers in its category.

Just when motorcycle lovers thought that Harley-Davidson is busy working on its first ever electric bike, the LiveWire, which is said to be priced at $30,000 and launch at the before the year ends. The iconic American motorcycle brands seem to have changed its strategy and want to focus on international sales, as they built a partnership with Chinese motorcycle brand to build and manufacture small motorcycles in the Asian country.

According to the Harley report, the size of the motorcycles will be smaller than that of other models of the company. They will be produced in the Qianjiang factory and sold exclusively at Harley dealerships in China. The engine capacity of new motorcycles will be 338 cubic meters, a huge step down on the average engine volume of 601 cubic meters for Harley-Davison motorcycles in the United States.

The agreement between Harley and Qianjiang was concluded as part of the Harley strategy to increase production outside the United States. Harley wants to sell half of its motorcycles in foreign markets by 2027 as in the US. Motorcycle sales have been declining for years, and although there's no looming catastrophe, and Harley still gets a lot of sales, they expect that the sales of smaller bikes in Asia would grow 6% a year between 2017-2022 as opposed to the declining thread in the US.

It makes sense for Harley-Davidson to start in the Asian market with a smaller motorcycle. In the US, motorcycles are ridden more in the pursuit of fun than out of necessity. In Asia, however, motorcycles are daily transportation use mainly to avoid traffic and get to the tight streets.

Despite the smaller size, the new Harley-Davidson motorcycles that will be manufactured in China will belong to premium models and be high quality. This is because Harley plans to get the brand established on the smaller and lower category of motorcycles and for people to be able to distinguish Harley quality from a sea of cheap motorcycles sold in China. This will then set up buyers up to ascend from a small bike to a larger one.

Probably another reason for Harley's global shift is the trade war. Harley-Davidson is one of the first American companies to assess the financial consequences of US trade disputes with its main allies. Last June, the company announced plans to move part of its production outside the United States because of the duties that the EU introduced as a response to the US actions in the steel and aluminum markets outside the US,

Harley-Davidson was affected greatly with Import duties on their motorcycles for the EU market, increasing from 6% to 31%. The manufacturer estimates the adverse financial effect of the increase from 2018-2019 is around $90 million to $100 million. This is why as early as last year, Harley had ventured into the international market and built plants located in India, Brazil, and Thailand.

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