President Donald Trump’s trade wars are hitting Harley-Davidson hard with a 22% bite in profits to $US426m after a 8.4% drop in international sales in the last quarter.
The Milwaukee company now expects to ship about 212,000 to 217,000 bikes in 2019, compared with their original estimate of 217,000 to 222,000.
Last year Harley opened a factory in Thailand to make motorcycles specifically for the European and Asian markets to avoid the hefty tariffs on US-made products in the trade wars sparked by Trump.
However, there have been delays in the necessary regulatory approvals to ship Thailand-built motorcycles to the European Union.
They have now been approved, so the results may pick up in the latter half of the year.
In Australia, Harley sales were down 19.4% in the first half of the year, yet the brand has returned to the top of the road bike category, leapfrogging Honda which dropped a massive 28.9%.
Tariff bite
Harley CEO and president Matt Levatich says EU tariffs will bite about $100 million out of their annual profits.
Europe imposed duties on $2.4 billion worth of American-made products after Trump levied tariffs on steel and aluminium imports from Europe in 2018.
“Europe is the big issue for the company, about a $100 million a year run rate that we are covering in order to protect our business in Europe, protect our market share, protect our volume, protect the viability of our distribution channel,” says Levatich.
When Harley announced it would open the Thai factory to avoid EU tariffs, Trump tweeted that customers should boycott the company.
Levatich says Trump’s comments “certainly didn’t help”.
“No company wants comments like that made,” he says.
Levatich has also announced that the company will roll out new products “that play very well into strong and growing segments internationally, in particular in Europe”.
That would include the recently released electric LiveWire motorcycle as Europe is one of the biggest markets for electric vehicles.
The LiveWire arrives in Australia late next year probably costing more than $A40,000.
Future growth
Despite the sales decline, Levatich is positive, saying they are now selling to a more diverse and younger customer which lays “a solid foundation for future growth”.
“The decisions and investments we’re making, within a highly dynamic and competitive global marketplace, demonstrate our intense focus to build the next generation of riders and maximise shareholder value,” he says.
He claims their US rider training participation was up, with the greatest increase among 18-34 year-olds.
Of the total US new retail sales in the last quarter, the mix of 18-34 year-olds increased 2.7%.
Tough quarter
In the past quarter, Harley ironically celebrated the sale of their five-millionth motorcycle out of their York factory while they also closed their Kansas City plant.
The 5 millionth customer was Wisconsin resident Walter Bartlett who bought a Heritage Classic.
5 millionth customer Walter Bartlett who picks up his Heritage ClassicIn Kansas, about 800 jobs were lost when the factory closed. It had been assembling Harleys since 1997.