Harley-Davidson's Operations in Europe Threatened by Retaliatory Tariffs from the EU - Freedonia Analysis
Harley-Davidson is by far the largest manufacturer of motorcycles in the US
CLEVELAND, June 25, 2018 /PRNewswire/ -- In June 2018, the EU imposed retaliatory tariffs on the US in response to the Trump Administration levying a 25% tariff on steel and a 10% tariff on aluminum made in the EU. The new tariffs target motorcycles and a number of other strategically important products to US manufacturers.
The new measures raise tariffs on US motorcycles sold in the EU from 6% to 31%, which for Harley-Davidson adds approximately $2200 to the final cost. In response to the new tariffs, Harley-Davidson announced that it would not raise prices in Europe but would instead shift a portion of its production operations outside the US in order to mitigate the impact of these new measures. Europe represents the largest market for Harley-Davidson motorcycles outside the US, and the relocation of manufacturing is seen as a better long-term solution to sustaining the company's business ventures in the area. In 2017, Harley-Davidson sold approximately 40,000 motorcycles in the EU, representing 16% of its total sales.
Harley-Davidson is by far the largest manufacturer of motorcycles in the US, responsible for around 80% of the country's total motorcycle production in 2017. However, falling motorcycle sales in the US, due in part to rising competition with companies like Honda and Yamaha and an aging population and changing consumer trends among younger generations has led Harley-Davidson to focus more outside of the US. As a result, the company has been active in expanding its geographic reach, which has led to the opening of assembly facilities in Brazil and India, as well as plans to build a factory in Thailand. The EU's retaliatory tariffs on US produced motorcycles represent another reason to move production out of the US, and this shift has the potential to have a profound impact on the viability of the US motorcycle industry in both the near- and long-term.
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