Harley and its Indian manufacturing partner are expected to have a non-equity arrangement
Harley Davidson has been exploring for partnership opportunities in Asia to venture into cost-effective compact displacement premium motorcycle market. Not long ago, American company found a partner in China-based Zhejiang Qianjiang, the parent company of Benelli, to develop and manufacture a 350 cc twin-cylinder, badge engineered, entry-level product which is dubbed as Harley Davidson 338. Now, the company is reportedly scouting for a manufacturing partner in India to strengthen its future medium displacement portfolio.
Contract manufacturing partner in India
According to ET Auto, Harley Davidson is looking for a contract manufacturing partner in India who has adequate production capacity and well established vendor base. It is being reported that Classic Legends, the makers of Jawa Motorcycles, and Hero Motocorp are the top contenders to be the American cruiser brand’s local partners. However, none of the parties involved responded to the publication’s email query.
Classic Legends which is focusing on medium displacement premium motorcycles has ample production capacity at its disposal. On paper, the brand supported by Mahindra appears to be a viable partner for Harley Davidson but the company has been struggling with delivery timelines and quality issues of its Jawa Motorcycles. Harley Davidson can’t afford to face similar problems with its volume-oriented entry level products that primarily target India and India-like markets in Asia.
Hero Motocorp with its unparalleled scale and interest in establishing a presence in premium segment emerges as an interesting option for Harley Davidson. Hero Motocorp has previously gone on record to state that it is open to partnership with global brands to explore the medium displacement motorcycle segment. The Indian two wheeler giant has a comfortable market leadership in the commuter motorcycle segment but has zero presence in medium displacement space and this would change with Harley Davidson partnership.
With a right partner, Harley Davidson would be able to drive down fixed costs, accelerate sourcing process of its upcoming entry level products. Continuing production on its own will make it challenging for the brand to achieve the scale required to arrive at a competitive price point.
Harley Davidson’s restructuring
With new top management, Harley Davidson has scaled back significantly on its aggressive turnaround plan announced last year. Under the new CEO, the company is planning to withdraw from less profitable markets and reduce its product portfolio by 30%.
This may include axing a few future products even before they could materialize. However, the medium displacement motorcycle project is likely to proceed as per plan considering that this segment is growing globally.