Tuesday, November 23, 2004
Harley-Davidson set to roar into China
Reuters Shanghai, November 23
Harley-Davidson, which plans to bring its fabled motorcycles to China's roads by 2005, will open its first sales office in Shanghai in the first quarter to try to navigate hefty tariffs and city bans on high-octane bikes.
Harley hopes to cash in on rising personal wealth in the world's seventh-largest economy, its managing director for China David Foley told Reuters.
But it will be no easy ride tackling import barriers in a country where leisure biking is a novel concept.
Still, Foley reckons Harley's Japanese experience bodes well for the company's efforts to sell its chrome-trimmed machines.
Japan is its top export market, accounting for sales of about 10,000 bikes a year and nearly four per cent of revenue in 2003. Harley also moves between 3,000 and 4,000 bikes annually in Australia, its second-largest market in the Asia Pacific.
"Our CEO has said he wants to sell here next year, so those might be my marching orders. We're gearing up to do that," said Foley, who broke in his first motorcycle in Taiwan in 1989.
"It's a huge motorcycle market, and one that we're concentrating on in Asia," said Foley, who clocked his longest ride of roughly 2,000 miles (3,219 km) from the US east coast to Milwaukee -- Harley-Davidson's hometown.
Harley-Davidson, known for its Fat Boy and Road King bikes, was powered to fame by Dennis Hopper and Peter Fonda in the 1969 cult movie "Easy Rider".
A Road King costs roughly $15,000 in the United States, about 15 times the average annual income in China, limiting likely buyers to the minority of the super-rich.
Foley would not be drawn on demand in China.
IMPORT DUTY
Trade barriers -- including a 50 per cent duty on imports -- have limited Harley-Davidson's efforts so far to some 500 bikes on the road. That duty is set to drop to some 30 per cent in January.
Harley, which turned 100 last year, aims to crank out 317,000 motorcycles in 2004. Net income jumped more than 20 per cent to $229 million in the third quarter. Its shares have risen some 20 per cent in the past year.
In China, Harley would stand out in an industry dominated by low-end manufacturers such as Jialing Industrial Co Ltd and Qianjiang Motor and the top motorcycle maker, privately owned LiFan Group.
They churn out some 15 million bikes, ubiquitous on the country's pockmarked, juddering roads.
Foley said the biggest hurdle could be bans on high-powered bikes in many of China's cities, which affect domestic firms as well as foreign competitors such as BMW AG and Honda Motor Co.
About 170 cities enforce riding bans, Foley said. Some cities limit use to 250 cc motorcycles while others ban them altogether. Harley's most common bike is a 1,450 cc model.
"It's the only country in the world that doesn't let motorbikes downtown in major cities. And unfortunately, it's usually in cities that have the people with the most wealth," Foley lamented.
Harley-Davidson has no plans to produce bikes locally. Rather, it wants to stick to its US-made brand and import completely assembled units from Milwaukee.
© HT Media Ltd. 2004.