Ralph Hermens

What You Need To Know About Harley-Davidson, Indian, And EU Tariffs

How American motorcycle manufacturers are being affected by new tariffs, and how they plan to adapt

  • As a reaction to US tariffs on imported steel and aluminum, the European Union has enacted tariffs on several US-manufactured products, including motorcycles.
  • Tariffs on motorcycles exported to Europe were previously 6 percent and were increased to 31 percent as of June 22.
  • Harley-Davidson has committed to “bear the impact” for the duration of 2018, ensuring that this increase won’t be felt by European customers, at least throughout this year. This will result in a predicted loss for the company of $30–$45 million.
  • Harley-Davidson is only moving manufacturing of motorcycles bound for European destinations. Bikes for American markets will still be manufactured in America.

Below is a statement from Harley-Davidson regarding the recently enacted tariffs:

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 nine to 18 months to be fully complete.

Harley-Davidson maintains a strong commitment to US-based manufacturing which is valued by riders globally. Increasing international production to alleviate the EU tariff burden is not the company’s preference but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson. In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the US.

  • Indian Motorcycle is considering similar moves. We reached out for a statement and heard back from Corporate Communications Manager of Polaris, Jess Rogers:

“The escalating trade war is increasing our costs and has required us to expend time, energy, and resources to evaluate a range of mitigation plans.”