Harley: Made in India

Harley-Davidson Inc. (HOG) has revealed that it will roll out two new motorcycles assembled at its factory in the north Indian state of Haryana. So far, the company has been importing fully-built motorcycles, which cost more due to higher import duties.

However, local assembling of the motorcycles will help Harley lure Indian buyers by offering lower prices for its premium “hogs”. The Indian plant will assemble the models from kits comprising parts produced by its factories in Wisconsin, Pennsylvania and Missouri, as well as its component suppliers.

The models that will be assembled at the Indian plant include SuperLow, with a price tag of INR 550,000 ($12,168) and Iron 883, priced at INR 650,000 ($14,380). They will be open for booking from January 1, 2011.

Harley started its operations in the world’s largest two wheeler market from August last year. It sells 12 motorcycle models including Fat Boy, Roadster and Road King in India. Although a bulk of its revenue in the Indian motorcycle market is generated from the rural area, Harley mainly targets rich urban bikers.

Harley faces tough competition from domestic bike manufacturers including Hero Honda and Baja Auto. Hero Honda – 26% owned by India’s Munjal business family and 26% by Japan’s Honda Motor Co. (HMC) – accounts for the majority of the market share in the Indian motorcycle market.

Hero Honda manufactures more than half the country’s motorcycles. Rural areas account for about 40% of Hero Honda’s sales. According to an executive in Hero Honda, this share is expected to rise steadily to more than 50% in the future as rural incomes increase.

Bajaj Auto is the second largest motorcycle maker in the country with a market share of about 27%. Tata Motors Ltd. (TTM) has also targeted the motorcycle market by introducing its “ultra low-cost car” Nano.

Harley posted a 66% rise in profit to $93.7 million or 40 cents per share in the third quarter of the year from $56.4 million or 24 cents per share in the same quarter a year earlier. The profit was in line with the Zacks Consensus Estimate for the quarter.

The increase in profit was attributable to the company’s aggressive restructuring actions, and improvement in profit in Harley-Davidson Financial Services.

Revenues from Motorcycles and Related Products declined a tad 2% to $1.09 billion due to poor retail sales of heavyweight motorcycles. The company’s sales outside North America accounted for 27% of total sales in the quarter, up from 24% a year ago.

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