Harley-Davidson Inc. is in advanced talks with India’s Hero MotoCorp for a distribution deal that will allow the American firm’s iconic motorcycles to be sold in India, after it stops local manufacturing there, three sources told Reuters.
The Milwaukee-based company said Thursday it will halt sales and close its manufacturing plant in India, effectively exiting the world’s largest motorcycle market after a decade of unsuccessful efforts to gain a foothold.
However, Harley is in talks with Hero MotoCorp to enter into a distribution agreement that will allow the Indian company to import and sell Harley motorcycles as its sole distributor, two sources familiar with the talks said.
“Hero will be the main Harley motorcycle dealer in India … It will be a partnership, a strategic alliance,” said one of the sources, who declined to be named because the discussions were private.
(Also read: Harley’s exit in India could cost 2,000 jobs at all dealerships – FADA)
Discussions are also ongoing to allow the Hero to become a contract manufacturer of at least one Harley motorcycle with an engine capacity of 300-600cc, which it will launch later, the first source added.
The financial details of the deal were not immediately clear.
When asked about the conversations with Hero, a Harley spokeswoman said the company cannot comment on “rumors or speculation.” On Thursday, it said it was “changing its business model in India and evaluating options to continue serving customers.”
Hero MotoCorp, which is India’s largest two-wheeler manufacturer by sales, said it does not comment on market speculation. It produced 6.4 million scooters and two-wheelers in the fiscal year ending March 2020, a third of India’s total production.
Harley made just 4,500 motorcycles during that period, largely assembled from imported detachable kits at its plant near New Delhi, which it will close as part of its announced restructuring.
Harley’s decision to stop direct manufacturing marks another major departure from an automotive player in India and is a setback for Prime Minister Narendra Modi, who has been inviting foreign companies to increase local production. Ford Motor and General Motors have reduced their operations in India in recent years.
Harley, known for its heavy touring motorcycles, ran into trouble in India mainly due to high import tariffs, for which US President Donald Trump often criticized India, and also because its locally assembled bikes faced high taxes.
Hero typically sells motorcycles with engine capacities of less than 200cc and a deal with Harley will help accelerate its entry into the medium and high-engine segments favored by bike enthusiasts and young riders, the second source said.
“In that segment, cycling is moving towards leisure fashion shopping, weekend rides and Harley bikes will perform well with more local content,” the source said, adding that Harley is likely to provide insight. technology and supplies on quality standards to Hero.
All 33 Harley dealers will likely be under Hero management under the new deal, one of the sources said.
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