Case Study

Harley-Davidson:
Market Entry Strategies in India
Anita M*

aking full advantage of the post-liberalization economic boom in the country, the Indian
motorcycle industry is on an expansion mode. Motorcycle manufacturers around the
world are keen to utilize this opportunity to set up operations in India. This is marked
by the proposed entry of the US superbike manufacturer, Harley-Davidson (H-D) into the
country. Its entry into the Indian market was restrained by the stringent emission norms and
high import duties levied by the Indian Government. In April 2007, the emission norms were
relaxed by the counter trade agreement between the US and India. Still, H-D is daunted by the
high import tariffs applicable as on 2007, which have virtually doubled the prices of their
bikes. It faces competition in India from Japanese motorcycle manufacturers, who have queued
up with plans for the premium bikes market. These manufacturers already have a strong hold
in the Indian motorcycle market with their various other brands on road and availability of
inland facilities. Despite the accessibility of various market entry strategies, H-D has announced
that it would confine itself to the import route to enter the Indian market. Time alone can tell
when H-D, the most iconic US motorcycle will traverse the Indian roads.

Indian Motorcycle Industry

Motorcycles are the major contributors to the Indian two-wheeler and auto industry (Figure 1
and Table 1). Due to the increase in income level, Indian consumers shifted to motorcycles
from other two-wheelers like scooters and mopeds. Advanced technology, low maintenance
costs and ability to perform on bad roads fuelled the growth of motorcycles. Further, new
brands, service networks and auto financing became the major industry drivers. The technical
advancement was mainly attributed to the overseas collaborations. Many foreign motorcycle
manufacturers like Honda, Suzuki and Daelim have technical tie-ups and built-in facilities in
India. Some of these tie-ups such as TVS-Suzuki failed due to inconsistency in understanding
the marketing strategies. However, the main driving force of the Indian motorcycle industry is
the economic development of the country.
According to the National Sample Survey Organization (NSSO), which carries out
socioeconomic surveys, the number of people owning motorcycles or scooters in rural India
had recorded a three-fold jump between 1993-94 and 2004-05.1 In the urban households,
motorcycle owners have increased from 11.6% in 1993-94 to 26% in 2004-05.2 Also, National
* Research Associate, The Icfai Business School Research Centre, Chennai, India. E-mail: murugan.anita@gmail.com
1

Even Rural India Shining: Survey, http://www.expressindia.com/fullstory.php?newsid=85866, May 2, 2007.

Ibid.

Case
Study
2008
The Icfai University Press. All Rights Reserved.

49

Figure 1: Domestic Market Share of Automobiles in 2006-07

Three-wheelers
4%

Passenger
Vehicles 14%
Commercial
Vehicles 5%

Two-wheelers 77%
Source: Market Share, http://www.siamindia.com/scripts/market-share.aspx

Table 1: Indian Two-Wheelers Production, Domestic Sales and

Export Trends for 2006-07
Vehicles
Scooters
Motorcycles
Mopeds
Electric Two-Wheelers
Total Two-Wheelers

Number of Vehicles
Production

Domestic Sales

Exports

943,974

940,673

35,685

7,112,225

6,553,664

545,887

379,987

355,870

37,566

7,982

7,341

8,444,168

7,857,548

619,138

Source: Compiled by the author from: (a) Production Trend, http://www.siamindia.com/scripts/productiontrend.aspx, (b) Domestic Sales Trend, http://www.siamindia.com/scripts/domestic-sales-trend.aspx,
(c) Exports Trend, http://www.siamindia.com/scripts/export-trend.aspx

Council of Applied Economic Research (NCAER), Indias premier economic research institution,
has forecasted that motorcycle demand will increase during the period 2002-03 to 2011-12
(Table 2).3 The increase in consumers disposable income favors the sale of motorcycles. These
issues have created a market opportunity for motorcycle manufacturers. But the increase in
fuel prices and the proposed infrastructural development in mass transport system such as,
roadways and railways may decrease the demand for motorcycles. However, the impact of
these factors on the industry may be felt in the long run.
To attract the customers, the industry has reduced prices, introduced freebies and is launching
improved brands throughout the year. The result of this motorcycle wave is the wide choice of
vehicles for the consumers to choose from (Annexure 1).4 The available vehicles are categorized
according to the type of use and engine capacity from 50cc-1200cc and above.5 Tables 3(a)
and 3(b) gives details on the classification based on engine capacity and type of use.
3

Mukhopadhyay Dripto (2004), Indian Two-Wheeler Industry: A Perspective, http://www.fadaweb.com/

itw_ industry.htm

Motorcycles in India, http://auto.indiamart.com/motorcycles/

Cherng Eric and Kosnik Thomas J (2004), The Global Motorcycle Industry 2003, edcorner.stanford.edu/
downloadMaterial.html?mid=472&fileId=907, January 17.

50

The Icfai Journal of International Business, Vol. III, No. 2, 2008

Table 2: Demand Forecast for Motorcycles and Scooters for 2011-12 (in thousands)
Regions

Two- Wheeler
Segment
Motorcycle

South

West

NorthCentral

East and
North-East

All-India

2835

4327

2624

883

10669

(12.9)

(16.8)

(12.5)

(11.1)

(14.0)

Note: Compound Annual Rate of Growth during 2002-03 and 2011-12 is presented in parentheses.
Source: Indian Automobile Industry: Optimism in the Air, Industry Insight, NCAER; Mukhopadhyay Dripto
(2004), "Indian Two-Wheeler Industry: A Perspective", http://www.fadaweb.com/itw_ industry.htm

Table 3(a): Classification Based on Engine Capacity

Motorcycles

Engine Capacity in cc

Light weight

50cc-250cc

Middleweight

251cc-750cc

Heavyweight

751cc-1199cc

Super Heavyweight

1200cc and up

Source: Cherng Eric and Kosnik Thomas J, The Global Motorcycle Industry 2003, edcorner.stanford.edu/
downloadMaterial.html?mid=472&fileId=907, January 17, 2004.

Table 3(b): Classification Based on Type of Use

Motorcycles

Emphasis

Engine Capacity

Standard

Simplicity and cost

50cc-250cc

Performance

Racing and speed

Greater than 251cc

Touring

Comfort and amenities

for long-distance travel

Custom

Middleweight to Super Heavyweight

Style and individual

owner customization

Heavyweight to Super Heavyweight

Source: Cherng Eric and Kosnik Thomas J (2004), The Global Motorcycle Industry 2003,
edcorner.stanford.edu/downloadMaterial.html?mid=472&fileId=907, January 17.

According to the findings of 2006 Motorcycle Total Customer Satisfaction (MTCS) study6
conducted by TNS (a leading global automotive market information company), the consumers
were satisfied with the performance of more than 50 models across India.7 The key factors that
consumers look for in a motorcycle are product quality, performance and design, after-sales
6

The study represents the responses of more than 8,700 new motorcycle buyers towards the performance of
more than 50 models in the key areas of sales satisfaction, product quality, motorcycle performance and design,
after-sales service, brand image, and cost of ownership. The TCS index score provides a measure of satisfaction
and loyalty that a given model or brand enjoys among its customers.

TNS 2006 Motorcycle Total Customer Satisfaction Study, http://www.fadaweb.com/tns_2006_css.htm

Case Study

51

service, brand image and cost. According to the study, the largest market for motorcycles
comprise of the first new motorcycle buyer. The preference for future purchases of motorcycle
with higher engine capacity has also been observed in the West and the South of India.
This study highlighted the fact that existing players have begun to increase the engine capacity
of their bikes. Such cruiser bikes are marked by their striking appearance with a long wheelbase,
stepped seat, backrest and high handlebars designed for long distance travel. Dealers are
optimistic that the trend for cruiser bikes would pick up. This forward trend was also encouraged
by action plans of Indian Government.
The Government of India has commenced a development program called Automotive
Mission Plan 2006-2016 for the auto industry to make India a global production hub by
2016.8 The vision of this development program for India is, to emerge as the destination of
choice in the world for design and manufacture of automobiles and auto components with
output reaching a level of $145 bn, accounting for more than 10% of the GDP and providing
additional employment to 25 million people by 2016.9 There will be government intervention
through policy changes such as reduction in the excise duties. The automobile industry is also
expected to contribute through development initiatives such as improvements in quality
standards. Many foreign firms are keen to participate in and obtain profits from the growth and
development of the Indian market. One of these foreign firms is the world renowned,
Harley-Davidson.

Harley-Davidsons Struggle for Indian Entry Harley-Davidson

Harley-Davidson (H-D), a US-based motorcycle manufacturer was founded in 1903, by William
S Harley and Davidson brothersArthur, Walter and William. The H-D subsidiary companies
include Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company and
Harley-Davidson Financial Services (HDFS). HDMC produces heavyweight motorcycles and
Buell manufactures sports bikes (Annexure 2). Both these subsidiaries also offer motorcycle
parts, accessories, apparel and general merchandise such as sunglasses, head-gear, belts, hats,
shoes, wallets, watches, t-shirts, jewelry, toys and black leather jackets. HDFS provides wholesale
and retail financing and insurance programs to H-D dealers and customers.10 H-D is known for
its brand across the world.
Harley-Davidson is rooted in American culture and values. It has become a symbol of
rugged individualism, freedom and rebellion.11 H-Ds biggest asset is its marque brand which
stands for attitude and lifestyle. Its brand name has recognition status rivalled only by the
multinational brands like Coca-Cola. H-D also merchandises its bar and shield logo. A lot of
such merchandise is worn by the vast majority of people in the United States who do not even
8

Auto Mission Plan Envisages $40 bn Investment, http://www.hindu.com/2007/01/30/stories/

2007013007061700.htm, January 30, 2007.

Automotive Mission Plan 2006-2016, http://www.dhi.nic.in/Final_AMP_Report.pdf

10

Bose Supriyo (2006), Harley-Davidsons Foray in China (Case Study), IBS Research Centre, Ref. No. 306243-1.

11

Rifkin Glenn (1997), How Harley Davidson Revs its Brand, http://www.strategy-business.com/press/
16635507/12878

52

The Icfai Journal of International Business, Vol. III, No. 2, 2008

ride motorcycles. For the year ended 2006, revenue from general merchandise, which consists
of MotorClothes(R) apparel and collectibles, totalled to $277.5 mn.12 According to BRAND
sense study,13 18.9% of respondents in 13 countries declared that H-Ds logo is most favored
and expressed their willingness to be tattooed with the logo.14 According to brand analysts,
If you ride a Harley, you are a member of brotherhood, and if you dont, you are not.15
Though H-D bikes lack the kind of quality that its competitors boast of, the personality built
around the Harley bike makes it sustainable.16 For instance, H-D is the preferred brand of
Hells Angels17 who supposedly used the Harley owners manual as a bible in wedding
ceremonies. All facets of H-D such as product, distribution channels, sales, customer service,
design, communication and brand extension are bound to enhance the companys brand identity.
According to Anmol Dar, Managing Director, Superbrands India, They created strategies and
supporting communications that nudged people towards the view that the offering was
a fashion statement.18
For H-D, consumers are its brand ambassadors. Regarding H-Ds strategy, Philip Kotler
said, It is clear and simple. Get the customers into a passionate affair with you, the rest
will follow through.19 The H-D owners belong to the company-sponsored, Harley Owners
Group (HOG) and pay for the privileges of membership. The mission of HOG is To Ride
and Have Fun. 20 A HOG membership is believed to emphasize the riders passion and
pride. H-D members are entitled to various benefits such as riding in international and
national rallies, and participating in charity events and parades. As on 2006, the HOG
recorded a membership of 1 million. 21 The members wear H-D merchandise to claim their
association with the brand. HOG has a newsletter that brings together both H-D owners
and motorcycle enthusiasts. HOG has helped the company to build a brand community
through the H-D owners.
12

Harley-Davidson Reports Revenue and Earnings Growth for 2006, http://investor.harley-davidson.com/

ReleaseDetail.cfm?ReleaseID=226180, January 18, 2007.

13

BRAND sense study was a survey conducted by Martin Lindstrom and Milward Brown Research Institute through
600 researchers in 13 countries. The survey was a part of the book, BRAND sense written by Martin Lindstrom.

14

Lindstrom Martin (2005), Ill Show You Mine, http://www.ameinfo.com/61853.html, June 7.

15

Bapooji Shenaz (2004), Why Lifestyle Branding Works, http://www.thehindubusinessline.com /bline/catalyst/

2004/12/09/stories/2004120900080200.htm, December 9.

16

Brands Can Connect with Consumers in New Ways, http://www.thehindubusinessline.com/2005/02/18/

stories /2005021803210400.htm, February 18, 2005.

17

The Hells Angels Motorcycle Club (HAMC) is a worldwide motorcycle club for Harley-Davidson riders. It is
generally viewed as the epitome of the outlaw biker counterculture of the 1960s.

18

Can India Have Cult Brands?, http://www.business-standard.com/common storypage_c.php?leftnm=10&

autono=285943, May 29, 2007.

19

Behal Suchitra (2004), Kotler Branding, http://www.hindu.com/thehindu/mag/2004/10/24/stories/

2004102400530500.htm, October 24.

20

Our Mission, http://www.harley-davidson.com/wcm/Content/Pages/HOG/mission.jsp?locale=en_US

21

Verma Mridu (2007), Harley-Davidson: Maintaining a Cult Brand (Case Study), ICFAI Business School,
Ref. No. 507-055-1.

Case Study

53

H-D is the market leader in the cruiser bikes segment in the US.22 The majority of its
customers are mostly Baby Boomers in the US.23 The baby boomers are able to afford luxury
bikes and are drawn by the outlaw status and independent image offered by H-D. But, the
baby boomers are ageing. Jim Ziemer, the CEO of H-D said, Two-thirds of our customers are
between 35 and 54 24 (Figure 2). The problem for H-D is to attract the younger customers
without alienating the customers that buy the big motorcycles.
Figure 2 : Median Age of Harley-Davidson Buyers
55

50

45

40
35
02

03

04

05

06

Source: Demographics, http://investor.harley-davidson.com/emographics.cfm?locale=en_

US&bmLocale=en_US

The younger generation in the US are mainly interested in the sports bike segment. It has
been noticed that youth tend to buy motorcycles that are smaller and less expensivein which
H-D has lesser market share.25 To cater to the needs of younger customers, H-D has introduced
various brands such as the new V-Rod.26
H-D is strategically positioned to explore new target customers to increase their foothold
in international market. H-D initiated the attempt to enter India in September 2005, when its
senior officials visited India to assess the scope for its high-end performance bikes in the
Indian motorcycle market. Timothy K Hoelter, the Vice President of H-D said, India is among
the few motorcycle markets in the world thats growing at a fast pace and we are surely looking
22

Bock Wally (2002), Harley-Davidson at One Hundred: An American Story, http://www.mondaymemo.net/

021125feature.htm, November 25.

23

Helyar John (2002), It redefined the motorcycle industry as it roared through 16 years of growth. But as its
customers ageand the stock market slidesthe ride could get uneasy, http://money.cnn.com/magazines/
fortune/fortune_archive/2002/08/12/327029/index.htm, August 12.

24

Russell Pearlman (2006), Getting New Riders High on the Hog, http://www.smartmoney.com/mag/ceo/
index.cfm?story=august2006, July 11.

25
26

54

Ibid.
V-Rod engine, also called revolution engine was jointly developed by Porsche of Germany and HarleyDavidson in 2002. It incorporates fuel injection, overhead cams and liquid cooling systems.

The Icfai Journal of International Business, Vol. III, No. 2, 2008

at a presence here. Whenever we enter the Indian market, it will be through the sourcing route.
Harley-Davidson buyers identify our bikes to be an all-American brand and they want to buy
the bikes that are produced in US.27
In 2005, H-Ds plan for a completely built route was hampered by the high import
duties and stringent emission norms in India. In 2006, the US Administration tried to
persuade the Indian Government to ease up such restrictions. The Indian Government was
willing to agree to a system of tariff quotas 28 on the resolution of two affairs. First was the
fresh issuance of licenses for opening new branches of three Indian banksICICI Bank,
State Bank of India and Bank of Barodain the US. Second was to retain the import of
Indian mangoes banned due to the US Standards on treatment of weevils and fruit fly, and
to minimize the tax levied on it. Apart from such bureaucratic restrictions, there were no
emission guidelines for motorcycles with engine capacity of more than 500cc in India.
H-D bikes conform to the US and the European emission norms. With increasing cooperation
between the US and India in trade-related activities, it was expected that restrictions on
H-D would be relaxed.
Industry watchers in India are of the opinion that as the economy takes bigger strides, a
younger population with expendable income will begin to embrace luxury as never before. As
on April 2007, with over 1.6 million Indian households earning more than $100,000 a year
and 36 listed billionaires, the Indian luxury market is taking off.29 An NCAER Household
Income Survey revealed that India will have some 140,000 crorepatis30 by 2010.31 The immediate
priorities of many consumers for luxury goods fall into the categories of housing, travel, education,
higher-end automobiles, entertainment electronics, and other home lifestyle improvement
products.32 According to Mohamed Rahman, Managing Director, Porsche India Center,
India is at the beginning of the development of a luxury automotive market as there has been
an increased awareness and availability of top-end brands, which we think should drive up our
sales.33 In 2006, Porsche, a German sports car major, sold 160 units of its luxury vehicles and
introduced Cayenne, its sports utility vehicle at a price range of $125,000-$250,000 in India.34
According to a report by McKinsey, a leading management consulting firm, The upcoming
changes in the Indian consumer market offer substantial opportunities and challenges for
27

Anand Byas (2005), Harley-Davidson has Indian Plans, http://timesofindia.indiatimes.com/articleshow/

1216130.cms, September 1.

28

Tariff quota means lower customs duty for certain number of bikes, above which entire duty will be levied

29

Srivastava Siddharth (2007), A Car Worth a Million Dollars in India, http://www.atimes.com/atimes/South_Asia/

ID17Df01.html, April 17.

30

Crorepati is an individual with an annual income of Rs. 10 mn.

31

Vedpuriswar V A (2005), The Marketing of Luxury Brands, http://www.blonnet.com/catalyst/2005/03/03/

stories/2005030300170200.htm, March 3.

32

Indian Luxury Goods Buyers set to Treble by 2010, http://www.blonnet.com/2006/02/25/stories/

2006022501691200.htm, February 25, 2006.

33

Srivastava Siddharth (2007), op. cit.

34

Ibid.

Case Study

55

Indian and multinational businesses alike.35 This boom in the Indian consumer market had
triggered H-D to enter India despite restrictions faced by it.
In April 2007, a deal was struck between the US and India in the India-US Trade Policy
Forum (TPF) based on a fair trade agreement.36 According to the agreement, India will allow
the import of H-D bikes and the US will allow the import of Indian mangoes. Under the
proposal, India will apply the Euro-3 norms for large bikes. It restricts the emission of pollutants
to 1 gm of carbon monoxide and a gram of the combination of hydrocarbons and nitrous oxide
per kilometer of vehicular run. Further, ceiling will not be placed on the number of bikes to be
imported. The idea of granting emissions standard exemption was a significant issue as India
adopted Euro-4 standards37 for large bikes to avoid over pollution in urban areas. In the light of
these breakthroughs, H-Ds market entry strategies in India play a crucial role.

H-Ds Viable Market Entry Strategies in India

H-D has adopted different market entry strategies (Annexure 3) in various foreign countries
based on local feasibility. For instance, H-D entered Japan through a licensing agreement with
Sankyo Company in 1935. In 1999, H-D built an assembly unit in Brazil. However, its key
market entry strategy is through appointment of dealers.38 Harley-Davidson has dealers across
North America, Europe, Asia, Australia and New Zealand. The recent inclusion is the
appointment of Feng Huo Lun of Beijing as a dealer in China. The major requirements to
become a dealer are a strong financial and management foundation and experience. The minimum
requirements begin with a net worth of $1,000,000 and $600,000 in unencumbered funds
such as cash, stocks and bonds.39 However, the investment costs vary based on factors such as
market size and facility costs. Apart from motorcycles, the dealers have to sell H-Ds accessories.
The company also offers various support programs for dealers such as public events, training
programs and service support. Considering the market entry legislations of India, H-D has
various options to choose from.
The Indian Government initiated the liberalization policy and economic reforms in July
1991. Foreign investors can enter Indian business as a foreign company in the form of liaison
office/representative office, a project office and a branch office, and also as an Indian company
in the form of a joint venture, and a wholly-owned subsidiary (Annexure 4). Various foreign
motorcycle manufacturers have utilized different strategies to enter India (Table 4).
35

Continued Policy Reforms Sine Qua Non for Sustained Economic Growth in India Global Trade will be at
Risk unless Development Dimension of Doha Round is Met. Indias Statement at WTO Trade Policy Review,
http://commerce.nic.in/May07_release.htm, May 23, 2007.

36

Mangoes for Harley Hogs Agreed on in India-US Trade Talks.

37

The Euro-4 regulations are stringent norms with highly reduced weights of carbon monoxide, hydrocarbons
and nitrous oxides in a kilometre of vehicular run. These emission limits are yet to be developed and implemented
in India.

38

Where to Meet the Perfect Machine, http://www.harley-davidson.com/wcm/Content/Pages/Dealers/

dealers.jsp?locale=en_US

39

I nqui r y , ht t p: / / www. ha r l ey- davi dson. co m/ wcm/ Cont ent / P ages/ Becomi ng_a _Deal er /
us_inquiry.jsp?locale=en_US

56

The Icfai Journal of International Business, Vol. III, No. 2, 2008

Table 4: Modes of Entry into India by Foreign Motorcycle Companies

Country of
Origin

Type of
Entry

Jawa

Czechoslovakia

Technical
collaboration

Suzuki

Japan

Licensing and TVS

Joint Venture

Honda

Japan

Joint venture

Honda

Japan

Yamaha

Company

Indian
Company
Ideal Jawa
India Ltd.

Year

Present Status

1961

Operates in a niche
segment

1982

Breakup in 2001

Hero

1984

Worlds largest
motorcycle manufacturer

Collaboration

Kinetic

1984

Kinetic acquired a
stake of Honda in
1998

Japan

Technical
Assistance

Escorts group

1985

Yamaha acquired
100% share in 2001

Kawasaki

Japan

Technical
Tie-up

Bajaj

1986

Planned to launch
motorcycles with
increased engine
capacity

BMW

Germany

Joint Venture

Hero

1997

Sales declined due to

high price of bikes and
the joint venture broke
up in 1998

Daelim

South Korea

Collaboration LML

1999

Sells scooters, mopeds

and motorcycles with
high engine capacity

Honda

Japan

Whollyowned
subsidiary

Honda Motors
2001
and Scooters
India Limited

Manufactures and
operates in all
motorcycle segments

For instance, Enfield India Limited began its Indian operations in 1955, through assembly
of Completely Knocked-Down (CKD) units imported from England. The CKD units attract
lesser import tariffs when compared to completely built units. As on June 2007, the import
duties for CKD are 12.5%.40 Apart from the import of CKD, Indian and foreign companies
have technical tie-ups and collaborations as in the case of Kawasaki-Bajaj and Daelim-LML.
A joint venture, as between Hero Group of India and Honda of Japan, has helped both the
companies involved, to stabilize their businesses. The success or failure of the joint venture
depends on the understanding between the companies involved. H-Ds alternative, i.e., to
build a wholly-owned subsidiary such as that of Honda Motors and Scooters India Limited,
will attract a major initial investment for infrastructural development. The company would
40

Customs, http://www.siamindia.com/scripts/custom-duty.aspx

Case Study

57

attract the excise duty of 16%41 which is much less when compared to the import duties
prevailing in India. However, H-D has a strong inclination towards the import route to enter
India. Government of India has allowed the import of motorcycles with more than 800cc
engine, subject to government clearances.42
H-D is expected to import 2000 bikes in three years from its entry into India. According to
analysts, the high price of the bike will deter mass imports.43 India imposes 60% customs duty
and 30% taxes on larger motorcycles, increasing the cost of the iconic vehicle for Indians.44
The entire price of the imported bike is calculated by adding the price of the bike in the
country from where it has to be bought or the country the dealer has contacts in, freight
charges, import duty and other miscellaneous charges. For instance, the smallest of the H-D,
the 883cc Sportster is priced at $6,600 (Rs. 2.9 lakhs) in the US.45 In India the price of the bike
will be nearly twice its original price. Royal Enfield, the makers of Bullet bikes in India,
makes motorcycles with engine capacities of 350cc and 500cc. Its six models are priced at Rs.
70000 and the company sells around 32,000 motorcycles every year.46 The price of the bike
may hinder H-Ds business as it happened with the German large bike manufacturer, BMW in
India. The German auto maker entered India through a joint venture with the Hero Group in
1997. The arrangement was to assemble BMW high-end motorcycle parts and to sell in India.
But the BMW failed because of the bike was priced at approximately Rs. 450,000.47 Due to
low sales it reduced the price up to Rs. 180,000. Despite price reduction, sales failed to
initiate and BMW terminated its venture in the Indian motorcycle industry.48

Will H-D Outgrow the Definition of Motorcycle in India?

Motorcycles are used as a means of transport in India. Indias six million a year motorcycle
market is dominated by fuel-efficient motorcycles with engine capacity of 100cc.49 These are
the main mode of transport and eight out of every ten motorcycles sold in the country is a
commuter bike.50 According to Jim Ziemer, President and CEO of H-D, It is indeed a challenge
to introduce the concept of recreation riding in emerging markets.51 Kartik Krishnan, Biker
and Founder Member of the Delhi-based riding outfit Royal Beasts said, To sell, the
41

Excise, http://www.siamindia.com/scripts/excise-duty.aspx

42

The clearances include homologation or the submission of Type Approval Certificate / Conformity of Production
(COP) of an international accredited agency from the country of origin along with notarized English translation
of the certificate.

43

Harley-Davidson Comes to India, http://www.siliconindia.com/shownews/35347, March 19, 2007.

44

Ibid.

45

Ibid.

46

Ibid.

47

Anand Byas (2005), Finally BMW to set up Shop in India, http://timesofindia.indiatimes.com/articleshow/

1178324.cms,July 20.

48

Ibid.

49

Harley Davidson Comes to India, op. cit.

50

Ibid.

51

Harley-Davidson Says It Still Eyes India, http://news.moneycentral.msn.com/provider/

providerarticle.aspx?feed=AP&Date=20070501&ID=6820414, May 1, 2007.

58

The Icfai Journal of International Business, Vol. III, No. 2, 2008

Harley has to outgrow the definition of a motorcycle. 52 He added, It has to position

itself as a status symbol, an expensive fashion accessory that one rides to a social do. But
for all practical purposes, itll probably be limited to just a weekend indulgence. 53
According to Adil Jal Darukhanawala, Auto Expert and Editor of Bike India, a famous auto
magazine, H-D would face mechanical problems which would require careful
maintenance. 54 It will be difficult to handle H-D on curved roads. For instance, H-D has
never done well in Europe where the roads are curved unlike that of the US. H-D has a
problem with fuel efficiency. It expects to give about 20 km per liter. The Indian motorcycle
buyer is so mileage conscious that he may complain even if a H-D delivers less than 50
km per liter. 55 Apart from the structural complications, major constraint that will be
encountered by H-D, will be competition.
Japanese bike makers, Yamaha, Honda, and Suzuki have lined up plans to offer a stiff
competition to H-D bikes. Suzuki, the Japanese auto major is likely to export two of its
sports bikesa 4-cylinder, liquid cooled 16 valve GSX-R1000 (Rs. 0.9 mn) with a 999cc
engine and 749cc GSX-R750 (Rs. 0.7 mn). 56 Yamaha Motors, is expected to import its
completely built units of 998cc YZF-R1 (Rs. 1 mn), MT01 (Rs. 0.8 mn) and the 600cc
YZF-R6, from Japan. 57 Honda Motorcycles & Scooters India (HMSI) is also expected to
import its 800cc bikes. 58 NK Rattan, Head of sales, HMSI said, We plan to get into the
big bike segment. These would be bikes with engine capacity above 500cc and would be
Completely-Built Units (CBUs). 59 Honda is already the biggest seller of motorcycles in
India in collaboration with Hero Group. It may even assemble these bikes within the
country to avoid high import duty of over 100%. Y Aoshima, President and CEO, HMSI
said, We aim to be present in every segment of the domestic two-wheeler market and
hence, plan to launch higher displacement bikes above 500cc. 60 Certain popular sports
bikes such as Suzuki GSX1300R Hayabusa, Yamaha YZF R1, Kawasaki ZX12R Ninja and
Honda CBR1100XX Blackbird are already being imported into India. The Indian twowheeler manufacturer, Bajaj Auto, is also planning to launch higher capacity bikes in
technical collaboration with Kawasaki.
52

Mahapatra Anirban Das (2007), Going the Whole Hog, http://www.telegraphindia.com/1070429/asp/7days/

story_7702345.asp, April 29.

53

Ibid.

54

Ibid.

55

Xavier Francis S (2001), The Great Indian Motorcycles Rush, http://www.hinduonnet.com/businessline/

catalyst/2001/01/04/stories/1904m101.htm, January 4.

56

Kumar Nirbhay (2007), Superbikes to Hit Indian Roads, http://www.financialexpress.com/

fe_full_story.php?content_id=161780, April 21.

57

Ibid.

58

Ibid.

59

Verma Meenakshi (2007), Heavyweight Bikes Queuing up as Indian Roads get Wider, http://
economictimes.indiatimes.com/News/News_By_Industry/Auto/Two-wheelers/
Heavyweight_bikes_queuing_up_as_Indian_roads_get_wider/articleshow/1912866.cms, April 16.

60

Kumar Nirbhay (2007), op. cit.

Case Study

59

The price of high capacity bikes impedes the manufacturers. The cheapest H-D, for instance,
costs Rs. 0.4 mn in India, as much as the cost of two Maruti 800 cars.61 In India, the cheapest
car costs Rs. 0.2 mn.62 Currently, Royal Enfield is the only domestic player producing high
capacity bikes in the range of 350cc-500cc. Its costliest product, the 350cc Thunderbird, sells
at Rs. 93,200.63 All the motorcycle players hope that consumers will begin to separate luxury
from utility. The industry appears set to lap up the relaxed norms, though the industry remains
anxious about the exact demand which is projected to be in the range of 6,000-12,000 bikes
per annum. Yet, with each bike costing between Rs. 0.7 mn-Rs. 1 mn, it could create a new
motorcycle market between Rs. 4.20 bn-Rs. 12 bn.64 But with disposable income on the rise
and the growth rate of the economy close to 8.5%, it is expected that the demand would be
better than what bike makers expect.65
Pradeep Saxena, Senior Vice President, TNS Automotive India said, The landed price
range of these motorcycles would start at around Rs. 0.5 mn and hence, the customers for that
are very limited. The super bike market would not be more than 1,000 units per annum. There
are brands like Ducati and Harley which would find customers easily but not all.66 He added
that a company such as Honda which already has a wide network of dealers and an ongoing
business would also sell a good number of high-end bikes. BMW who quit the Indian big
bikes segment are not very confident about re-entering the market. Peter Kronschnabel, the
President of BMW India said, Our luxury and high-end bikes are too costly to be launched in
the Indian market and that is why we have not yet decided to bring our bikes here. But if there
is demand, we may take a call.67
As on May 2007, international markets accounted for 21.8% of the total shipments of H-D.68
Gregory Badishkanian, Leisure Vehicle Analyst with Citigroup said that India would probably prove
more favorable to H-D than Vietnam, just because of the countrys population.69 He added that It
will most likely be a long time before the motorcycles enter the market.70 S Sen, the Director of
Society of Indian Automobile Manufacturers, pointed that the final price of an H-D, when it does
market in India, may vary from the indicative prices that they sell at, in the US markets.71 He added,
As a company, it can choose to increase or decrease the price of its bikes in a new market.72
61

Ibid.

62

Harley Davidson comes to India, op.cit.

63

Kumar Nirbhay (2007), op. cit.

64

Ibid.

65

Ibid.

66

Ibid.

67

Ibid.

68

Rovito Rich (2007), Keeping Sales Revving Overseas, http://milwaukee.bizjournals.com/milwaukee/stories/

2007/05/07/story2.html, May 4.

69

Harley-Davidson Seeks to Expand Overseas, http://in.ibtimes.com/articles/20060609/harely-davidsonmotorcycle-vietnam.htm, June 9, 2006.

70

Ibid.

71

Mahapatra Anirban Das (2007), op. cit.

72

Ibid.

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H-D gained permission to sell in India in April 2007, but later was quoted as saying it
might shelve its plans.73 According to Timothy K Hoelter, H-Ds Vice President of Government
Affairs, daunting trade barriers erected by the Indian Government were discouraging companies
like H-D from entering the market.74 Further he told Mint, the financial newspaper, However,
with tariffs still at over 90%, the bike would be too expensive for the Indian consumer to
participate in the H-D experience. We know we could help build a leisure market for
motorcycling within India, where none exists presently. We are looking for some concessions
from the government. We look forward to the day when we can enter India, but now does not
seem like the right time.75

Annexure 1
Different Motorcycle Brands in India
Bajaj Auto
Bajaj Avenger
180cc
Bajaj CT 100
9.27cc
Bajaj Discover
Bajaj Discover
111.63cc
Bajaj Discover DTSi
124.52cc
Bajaj Kawasaki Caliber
111.6cc
Bajaj Kawasaki Boxer
111.6cc
Bajaj KB 125
123cc
Bajaj Platina
99.27cc
Bajaj Pulsar DTSi
Pulsar 180 DTS-i UG
180cc
Pulsar 150 DTS-i UG
150cc
Bajaj Wind125
124.6cc

Hero Honda
Hero Honda Achiever

Kinetic Motor
149.1cc

Hero Honda CBZ

156cc

Hero Honda CD Dawn

97.2cc

Hero Honda CD Deluxe 97.2cc

Hero Honda CD 100

97.2cc

Hero Honda CD 100 SS 97.2cc

Hero Honda Glamor

Glamor
124.7cc

Glamor FI
124.8cc

Hero Honda Karizma

223cc

Hero Honda Passion Plus 97.2cc

Hero Honda Sleek
Hero Honda Splendor

Splendor +
97.2cc

Super Splendor
124.7cc

97.2cc

Kinetic Aquila
249cc
Kinetic Boss
Boss
97.2cc
Boss115
Kinetic Challenger
97.2cc
Kinetic Comet
250cc
Kinetic GF
GF Laser
166cc
GF 170
166cc
GF125
125cc
Kinetic Stryker
97.2cc
Kinetic Velocity
115cc

(Contd...)
73

US Harley Davidson Motor Seeks Tax Breaks in India Market Entry, http://www.finanznachrichten.de/
nachrichten-2007-05/artikel-8201090.asp, May 8, 2007.

74

Ibid.

75

Harley-Davidson Says It Still Eyes India, op. cit.

Case Study

61

Annexure 1

(...contd)

Different Motorcycle Brands in India

LML
LML Adreno FX
110cc
LML Beamer
150cc
LML Energy FX
110cc
LML Freedom
Freedom DX
110cc
Freedom Prima110
110cc
Freedom Prima125
125cc
Freedom Topper
110cc
LML Graptor
150c
Yamaha
Rajdoot Excel-T
173cc
Yamaha Crux
106cc
Rajdoot Deluxe
173cc
Rajdoot Standard
173cc
Yamaha Enticer
123.7cc
Yamaha Escorts Ace
173cc
Yamaha Gladiator
123.7cc
Gladiator Std.
Gladiator DX
Yamaha Libero G5
106cc
Yamaha RXZ
132cc
Yamaha RX 135
132cc
Yamaha YBX 125
125cc

Royal Enfield
Bullet 350
346cc
Bullet500
499cc
Enfield Diesel
325cc
Bullet deluxe
346cc
Bullet Electra

Bullet Electra
346cc

Bullet Electra 5S
346cc

Bullet Machismo
346cc
Bullet Std 12V
346cc
Lightning 500
499cc
Taurus
325cc
Thunderbird
346cc

Honda
Honda Shine
125cc
Honda Unicorn
149.1cc
Suzuki
Suzuki Heat
125cc
Suzuki Zeus
125cc
TVS
TVS Apache
147.5cc
TVS Centra
99.8cc
TVS Fiero
147cc
TVS Fiero F2
TVS Fiero FX
Suzuki Max 100
98.2cc
Suzuki Max 100R
98.2cc
Suzuki
Samurai
98.2cc
Suzuki
Shogun
108.2cc
Suzuki Shaolin
138.2cc
TVS Star
99.7cc
TVS Star
TVS Star City
TVS Victor
GLX
124.8cc
GX
109.3cc
Edge
125cc

Source: Compiled by the author from, Motorcycles in India, http://auto.indiamart.com/motorcycles/

62

The Icfai Journal of International Business, Vol. III, No. 2, 2008

Annexure 2
2007 Models of Harley-Davidson Motorcycles and Buell Motorcycles
Harley-Davidson Motorcycles
Bikes

Manufacturers
Suggested
Retail
Price (in $)

Bikes

Sportster

Manufacturers
Suggested
Retail
Price (in $)

Softail

Sportster 883 XL 883

6,595

Softail Standard FXST

14,995

Sportster 883 Low XL 883L

6,995

Night Train FXSTB

15,895

Sportster 883 Custom XL 883C

7,795

Softail Custom FXSTC

16,895

Sportster 883R XL 883R

7,795

Softail Deuce FXSTD

17,345

Sportster 1200 Nightster XL 1200N

9,595

Fat Boy FLSTF

17,095

Sportster 1200 Custom XL 1200C

9,695

Softail Deluxe FLSTN

17,345

Sportster 1200 Roadster XL 1200R

8,695

Softail Springer Classic FLSTSC

17,545

Sportster 1200 Low XL 1200L

9,495

Heritage Softail Classic FLSTC

17,820

50th Anniversary Sportster

9,795

Dyna

VRSC Motorcycles

Dyna Super Glide FXD

12,395

V-Rod VRSCAW

16,495

Dyna Super Glide Custom FXDC

14,645

Night Rod VRSCD

14,995

Dyna Street Bob FXDB

13,595

Night Rod Special VRSCDX

16,495

Dyna Low Rider FXDL

15,795

VRSCX

19,995

Dyna Wide Glide FXDWG

16,795

Street Rod VRSCR

15,495

Buell Motorcycles
Bikes

Manufacturers
Suggested
Retail
Price (in $)

FireBolt

Bikes

Manufacturers
Suggested
Retail
Price (in $)

Lightning

XB12R

10,495

XB12S

10,495

XB9R

8,895

XB12Ss

10,495

Ulysses

11,495

XB12STT

10,295

XB12X
Blast

4,695

XB9SX

8,895

XB12Scg

10,495

Source: Compiled by the author from: (a) 2007 Harley-Davidson Motorcycles, http://www.harleydavidson.com/wcm/Content/Pages/2007_Motorcycles/2007_Motorcycles.isp?locale=enUS& cwpws/dwp/
cont-without-lash=true&swfdwp=&dwp_dealerid=&dwp_pg=&cwpws/dwp/dwp-dealer-id=
(b) Buell Motorcycles, http://www.buell.com/en_us/bikes/

Case Study

63

Annexure 3
H-Ds Market Entry Strategies
Japan: In 1935, Harley-Davidson licensed blueprints, tools and machinery to Japans Sankyo
Company. From 1935 to 1960, when it went bankrupt, Sankyo made H-D bikes in the
name RikuoKing of the Road. In the late 1980s, H-D bought a Japanese distribution
company. By 1989, a Japanese subsidiary, Harley-Davidson Japan was founded. Regulations
in Japan required bikers with 401cc and above to pass a stringent test administered by the
countrys National Police Agency. After 1999 further regulations such as prohibitions on
tandem riding and speed limits on highways were enforced. As in 1999, the US Administration
took effort to convince the Japanese authorities to modify the rule. By the end of 2000, it
had sold 75,000 bikes in Japan. Further, H-D customized its bikes to suit Japanese tastes
and also offered tool kits. Retail sales in Japan were up, from 11,420 motorcycles in 2005,
to 13,284 motorcycles in 2006.
Brazil: Brazil imposed a tariff of more than 70% on imported motorcycles in 1995.
High tariffs doubled the cost of bikes compared to the cost in the US. The US
Administration addressed this issue in the 1996 Hemispheric Summit, and, as a result,
Brazil decided to reduce these tariffs by half, and gradually lower the tariff to 20%. In
1999, H-D commenced assembly of its motorcycles in Brazil along with its Brazilian
distributor, Paulo Izzo. The assembly of imported parts was expected to reduce the cost
as this would increase the profit margin. The motorcycles have to undergo exhaustive
tests of quality in order to assist the international pattern of the group. The line of products
of the Harley-Davidson of Brazil Ltd. constitutes of the following models: Fat Boy, Heritage
Classic, Standard Custom and Night Train. The assembly unit is to cater to the need of
Brazilian market. It operates with 10 dealers across the country. Brazil is H-Ds largest
market in Latin America.
China: In mid-2004, H-D made an agreement with Zongshen Motorcycle Company, one of
the largest motorcycle manufacturers in China. The Chinese counterpart has to act as a
distributor for H-D. The two companies sought to develop a mutually beneficial relationship.
H-D would gain the country-specific sales expertise and gain a better understanding of the
business practices, markets and distribution channels. The Zongshen Group will get the
technical know-how and gain practical insights into the marketing strategies. On March
2006, in Beijing Feng Huo Lun (FHL) was appointed as the authorized dealer. The dealership
would offer H-D motorcycles, related products including clothes and collectibles and aftersales service. But with the addition of import duties, the cost of the bikes would be more
than its cost in the US. The Chinese Government has restricted the usage of large bikes in
urban areas due to high traffic. The FHL is located in strategic places between business
places and outer city limits and hence, it is outside the purview of motorcycle regulations.
Source: Compiled by the author from (a) Zacharias Christoph and Rajshekar N, Harley-Davidson in China
(Case Study), ICFAI Business School Case Development Centre, 2004 (ECCH Ref. No. 304-013-1);
(b) Harley-Davidson to Assemble Motorcycles in Brazil, http://www.bizjournals.com/milwaukee/stories/
1998/07/06/daily6.html, July 7, 1998; (c) Harley-Davidson Reports Revenue And Earnings Growth For 2006,
http://investor.harleydavidson.com/ ReleaseDetail.cfm?ReleaseID=226180, January 18, 2007.

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The Icfai Journal of International Business, Vol. III, No. 2, 2008

Annexure 4
Modes of Market Entry in India
Appointment of Agents or Distributors: Agent or Distributor is a legal entity formally
appointed by a foreign company as agents or distributors to market its products or services
in India. This is the less expensive means through which a foreign company is able to access
the market potential. This is highly open and flexible. The formation and termination are
made easy. There are no restrictions in the number of agents or distributors appointed by the
company. This arrangement can be a franchise where the franchisee is entitled to the practices
and procedures of the company. Any Indian business entity such as company, partnership
or proprietor can obtain license under the EXIM policy to import and export the goods.
The foreign companies can make the appointments through a formal contract or the letter of
appointment. The business activity can be carried out using wholesale cash and carry or
retail. Credit arrangements can also be made but it makes the arrangement expensive.
The payment is guaranteed by the Letter of Credit issued by an Indian bank. Dilemmas arise
during the return of unsold goods as the task is difficult. Lack of control over the agent and
incompetence of agents will create problem to the foreign companies.
Third-Party Arrangement for Maintenance and Servicing of Products: The foreign companies
can appoint Indian technical firms to render local services for high value goods through
Service Center. These service centers are Indian firms with trained staff and technical resources
of the foreign company to offer support. There is no restriction on setting up service center
contracts with the Indian entities. The arrangement involves the mutual agreement of the
Indian company, formal appointment letter or service agreements, training agreements and
confidence agreement. The foreign company remits the money in India and the Indian company
charges maintenance fee from the customers. The foreign company do not have a direct
control. Any incompetence of the Indian workforce increases the training cost and impairs
service quality. Administrative issues such as improper documentation and financial issues in
case of maintaining large quantity of spares and components may occur.
Liaison Office: A foreign company sets up a liaison office to study the Indian markets or as
an intermediate step before a joint venture or wholly-owned subsidiary. The liaison office is
a communicative channel and it does not carry out any business activities. It promotes
import/export and financial or technical collaboration with Indian companies. The
establishment of liaison offices is governed by the Reserve Bank of India (RBI). In order to
set up a liaison office the foreign company has to submit their application in Form FNC 1
to the Central office of RBI, Mumbai (Foreign Investment Division). The permission is
granted for three years and can be renewed further. Application for renewal should be made
to the concerned regional office of the RBI under whose jurisdiction the office is situated.
The parent company has to look after the remuneration of the liaison office. The liaison
office is not taxable as it does not carry out any business. A liaison office in India is
permitted to maintain and operate bank accounts in India. The bank obtains an undertaking
in prescribed form QA22 duly signed by all the persons who are authorized to operate on
the accounts.
Branch Office: If the foreign company observes a significant market potential, it can open
a branch office. Branch office performs all the business activities of the parent company.
The activities include: i) Export/Import of goods, ii) Rendering professional or consultancy
services, iii) Carrying out research work, in which the parent company is engaged,
iv) Promoting technical or financial collaborations between Indian companies and parent
(Contd...)
Case Study

65

Annexure 4

(...contd)

Modes of Market Entry in India

or overseas group company, v) Representing the parent company in India and acting as
buying/selling agent in India, vi) Rendering services in information technology and
development of software in India, vii) Rendering technical support to the products supplied
by parent/group companies, and viii) Foreign airline/shipping company.
Project Office: The project office is for specific projects such as turnkey projects or
large-scale projects. A foreign company can set up a project office only if it has secured a
contract from an Indian company. Project office cannot perform any other function or
undertake any other activity. All expenses of project offices must be met through inward
foreign currency remittances. Project office cannot perform any other function or undertake
any other activity. A formal application should be made to RBI for approval. The application
should include the details of name and address of foreign company, reference number of
contract, total amount of contract, address and tenure of project office and nature of the project.
Site Office: Site Office means a sub-office of the project office established at the site of a
project but does not include a liaison office.
Joint Venture: The joint venture could be either:
a. Technical collaboration with or without royalty payment.
b. Technical and financial collaboration where royalty is paid for technical input and
dividends are paid for financial input.
c. Financial collaboration with rights to use IPR in marketing and distribution activities.
Only dividends are paid for financial inputs.
Primary advantage of a joint venture lies in legal immunity to foreign company.
The joint venture company can repatriate profits in form of dividends to foreign shareholder.
It is not subject to limitations of branch, liaison office or others form of presence. The joint
venture company can perform almost all activities, so far they do not contravene the FDI
norms. Foreign company needs to pay attention to issues such as stringent labor legislation,
cross-border language and cultural issues, and lack of organized classified information more
particularly lack of credit verification system.
Wholly-Owned Subsidiary: Foreign companies can explore certain sectors where 100% FDI
is allowed via wholly-owned subsidiary. This would be an Indian company with 100%
shares issued to foreign company. Wholly-owned subsidiary can be created in two modes:
a. A foreign company can incorporate Indian company and subscribe or acquire its
entire shareholding.
b. Entire shareholding of existing Indian company can be acquired. This becomes a
wholly-owned subsidiary of foreign company.
The subsidiary is an Indian company and as such is subject to all Indian legislation.
In the event Indian company is acquired via merger or acquisition, the foreign company
needs to carry out due diligence to take care of legal, financial and technical issues.
Source: How a Foreign Company can enter into India, www.singhania.com/publications/
Form%20of%20entry.doc

Reference # 48J-2008-05-04-02
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The Icfai Journal of International Business, Vol. III, No. 2, 2008