Harley Davidson dealers in India have hired a law firm and are looking at legal options
While the Harley Davidson & Hero MotoCorp deal is a positive development for customers and motorcycle enthusiasts, many Harley dealerships are facing an uncertain future.
Harley dealers are even more worried now because there’s a growing possibility that the total number of dealerships may be reduced to just 13-15 dealerships. This will be a major setback to Harley dealers who may be asked to shut shop.
Demand for higher compensation
One of the primary complaints of Harley dealers is that the compensation package is not enough to cover their losses. The compensation offered by Harley-Davidson management includes two components, one of which is Rs 1,500 per sq. ft., after adjusting for 10% annual value depreciation. The second component is reimbursement of sales margins for a period of 6 months.
Harley dealers claim that this compensation is significantly lower than their collective investments over the last decade, which amounts to around Rs 300 crore. Moreover, since the lockdown was lifted in August, the dealers have been incurring huge losses of around Rs 30-40 lakh every month.
In the domestic market, Harley’s bestselling product was Street 750 mid-sized motorcycle. It contributed around 70-80% of the company’s sales in the country.
Earlier, dealers used to sell around 20-25 Harleys every month, but the numbers are down to single digits. As new Harley products may take some time to be launched via Hero MotoCorp partnership, dealers are demanding higher compensation for their investment and losses.
Law firm appointed
With the possibility that on-going talks may not lead to favourable developments, the Harley-Davidson Dealers Association has appointed a law firm AZB & Partners. The plan is to explore legal options to safeguard their investment and probably get higher compensation to recover their losses. However, this is a preliminary move to assess potential options. The dealers have not filed any case against either Harley or Hero MotoCorp.
Harley Davidson dealers are hopeful that things will be resolved in a favourable manner for all stakeholders. They are currently waiting for a formal announcement to be made by either Harley or Hero MotoCorp. The dealers say that they need to be clearly told about the next steps, so that they can make adjustments accordingly.
As per the deal between the two companies, Hero MotoCorp will be taking over the sales and service operations of Harley. This will be done via the existing Harley outlets.
Hero will also be retailing original parts, accessories, riding gear, apparel and general merchandise. Hero also gets the license to develop and sell premium motorcycles with Harley Davidson brand name. The first of these products could be a 350cc – 500cc motorcycle that will challenge the supremacy of Royal Enfield.