Harley-Davidson under fire from US President

By Réhann Coetzee

 

The iconic American brand Harley-Davidson is the American president’s latest target after announcing that it will be moving some of its manufacturing out of the US.

The company will be moving the manufacturing of motorcycles aimed at the European market to another country, because the EU is now taxing imports from the US because of the Trump administration’s decision to levy import tax of 25% on steel and 10% on aluminium.

“The European Union has enacted tariffs on various US-manufactured products, including Harley-Davidson motorcycles. These tariffs, which became effective June 22, 2018, were imposed in response to the tariffs the US imposed on steel and aluminum exported from the EU to the US,” Harley-Davidson’s statement to the US Securities and Exchange Commission reads.

But the American president is not happy with this. In one of his famous tweets he said: “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse - be patient!”

But Harley-Davidson says that the EU tariffs on Harley-Davidson motorcycles exported from the US have increased from 6% to 31% and that they expect the tariffs will result in an increased cost of an average of $2 200 per motorcycle exported from the US to the EU.

“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.

“Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs. In the near-term, the company will bear the significant impact resulting from these tariffs, and the company estimates the incremental cost for the remainder of 2018 to be approximately $30 to $45 million. On a full-year basis, the company estimates the aggregate annual impact due to the EU tariffs to be approximately $90- to $100-million.

“To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the US to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete.”

Harley-Davidson says it maintains a strong commitment to US-based manufacturing.

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make our motorcycles accessible to customers in the EU and to maintain a viable business in Europe.”

Harley-Davidson sold nearly 40 000 bikes in 2017 in Europe and the revenue generated from the EU countries is second only to the US.