New Delhi: What is it about Harley Davidson and India that gets US President Donald Trump’s goat? After all, the American motorcycle maker owns only a tiny fraction of India’s massive two-wheelers market, and even in the US, it employs only about 5,000 people. And yet, it has managed to play a prominent role in the India-US trade war.
Over the last couple of years, Trump has lashed out at India several times for imposing high customs duty on Harley Davidson bikes. As recently as a week ago, on 11 June, Trump publicly chided Indian Prime Minister Narendra Modi again, calling the import duty “unacceptable”.
Harley Davidson’s share in the US market is also shrinking, but the brand remains deeply popular among Trump’s electoral base. This has given the company a lot of influence in Washington, but also made it an easy target for foreign governments, including India’s.
Harley Davidson in India
Harley Davidson entered the Indian market in 2007 through what was referred to as a “mango deal”. India had allowed Harley to invest in 2007, and in return, the US lifted the ban on India’s mango exports to the US.
But last year, while India reduced the custom duty on Completely Built Units (CBUs) to 50 per cent from the earlier 100 per cent, it increased the duty on Completely Knocked Down units (CKDs) to 15 per cent from the earlier 10 per cent.
Currently, Harley sells 17 models in India, with prices ranging from Rs 5.33 lakh to Rs 50.3 lakh. But 13 of these models are CKD units, and are completely assembled in India. These 13 are relatively cheaper models, and account for most of Harley Davidson’s sales in India.
The four CBU models attract the 50 per cent duty, and India has imported just a few hundred of them in recent years.
“There are four models which come in CBU form, so the volumes are very less. That is a niche segment also… The impact of the CBUs is minimal because it is only the 1600 cc-plus models which come in,” said Sanjeev Rajasekharan, Harley Davidson’s managing director in India.
According to Autopunditz, which compiles the most comprehensive data on motorbike sales in India, Harley Davidson sold 2,676 motorbikes in India during 2018-19, which was down 21 per cent from 3,413 in 2017-18.
Even at an aggregate level, Harley controls only a fraction of the Indian two-wheeler market. Out of the 13 players, Harley Davidson ranks 12th in terms of sales volumes. In comparison, market leader Hero Motocorp sold over 75 lakh two-wheelers in 2017-18, and over 78 lakh in 2018-19.
Trump’s fascination with Harley Davidson
This leads to the all-important question: How has a firm selling just over 2,500 motorbikes become such a major irritant for the India-US trade relationship?
Since coming to power in 2017, Trump has hailed Harley Davidson on several occasions, called it the “pride of the United States”, and hosted its executives at the White House.
Paul Krugman, economist and columnist for The New York Times, made an intriguing observation — that for all the influence Harley Davidson enjoys with the Trump administration, it employs only 5,000 people in the US. To put that number in perspective, the US economy on average hires 2,50,000 people every day, Krugman wrote.
Moreover, Harley’s popularity comes predominantly from the older generation. The firm has struggled to retain its demand among millennials, with its sales declining by 32 per cent in the past year in the US.
So what explains Trump’s love for Harley? The brand continues to be popular among Trump’s core voters in the mid-west and southern US, and is considered an iconic symbol of American culture across that region.
The love for bikes and support for Trump is most evident in a group called Bikers for Trump, which has a following of over three lakh on social media. This group is known to mobilise support for Trump, and most of its members ride Harley Davidsons.
Thus, publicly batting for Harley doesn’t necessarily help Trump create a lot of domestic jobs, but it does make him seem to stand for a symbol of American pride.
Moreover, Harley Davidson is headquartered in the key Republican-controlled state of Wisconsin, making it essential for Trump to project his support.
Easy target for foreign governments
Several other foreign governments have also raised tariffs on Harley Davidson bikes.
There is a long-held logic in trade disputes, where governments retaliate against unfair trade practices of another country by targeting an item that would have some political costs as well.
For instance, in the early 2000s, during an EU-US trade dispute, foreign governments raised tariffs on US oranges. The state of Florida accounts for most of US orange exports, and at the time, Jeb Bush, brother of President George W. Bush, was the governor of Florida. So, targeting oranges meant hitting at the Bush family.
There seems to be a similar logic at play in the case of Harley Davidson.
President Trump has started trade disputes with several countries, and they, in turn, have reacted by targeting a company seen to be close to Trump. Moreover, they are targeting a symbol of the American culture, which is held so dear by Trump and his supporters.