Caught in a diplomatic cross-fire between the Modi and Trump administrations, iconic US bike maker Harley Davidson on Wednesday said every country has the right to decide its policies to protect its domestic industry and the high customs duties for super bikes in India was not unique.
US President Donald Trump had first made a reference to high import duties for bikes exported from US to India during his first address to the US Congress in March 2017. Earlier this month, customs duty on imported motorcycles from high-end brands in India were slashed to 50 percent from 60 percent duty for less than 800cc engine capacity and 75 percent for the rest.
That however, did not satisfy Trump who took another dig at the Indian Prime Minister saying India was not doing a favor to US by this reduction and that the taxes were still high.
“When Harley Davidson sends a motorcycle to India, as an example, they have to pay 100 percent tax,” Trump said, adding, “Now, the Prime Minister, who I think is a fantastic man, called me the other day and he said we are lowering it to 50 percent. I said okay, but so far we’re getting nothing. So we get nothing, he gets 50 [percent], and they think like they’re doing us a favour. That’s not a favour. You know what our tax is? Nothing. So I say we should have reciprocal taxes for a case like that.”
The pointed reference to Harley Davidson in these exchanges has put the company in spotlight. On Wednesday, while unveiling two new motorcycles, the managing director of Harley Davidson in India and China, Peter MacKenzie sought to play it safe.
“There are markets around the world where import duties are higher and there are other where they are lower. That is just the way it is,”he said. “Every government has the right to frame policies that protect the domestic industry. That is not unique.”
Following the cut in duties, the company also revised the prices of the four bikes that it directly imports from US to India by Rs 2.62-3.73 lakh. Road King that was previously priced at INR 2,837,000 will now be available for INR 2,499,000, while Street Glide Special that was priced at INR 3,350,000 will now be available for INR 2,999,000. Likewise, the new price for Road Glide Special is INR 3,299,000 against the old price INR 3,561,000 and CVO TM Limited is now available at INR 4,999,000 against the old price INR 5,372,000.
Besides these, Harley Davidson also assembles 10 products from components that are imported as completely knocked down units and two other bikes are completely manufactured at its facility in Bawal in Haryana.
The company entered the market in 2009 but after achieving robust growth in the first few years it has found the going tough in the Indian market in the last couple of years as competition has intensified. Between April and December 2017, its sales have declined by 11.72 percent over the same period in 2016. Despite the tax cut and the subsequent reduction in price, MacKenzie was not very hopeful of a significant impact of it on demand.
“The impact on demand will be marginal at best,” he said. “For now, we are only trying to mitigate the impact of these taxation changes.”
Besides imported bikes, tax rates were also revised on a range of components that are imported into the country.
The import duty on engine, gearbox, or transmission mechanism as a completely knocked down (CKD) kit in pre-assembled form of motorcycles, not mounted on a body assembly, was reduced to 25 percent from 30 percent while the duty on import of engine, gearbox and transmission mechanism as a CKU kit, which are not pre-assembled was hiked from 10 to 15 percent.
Despite the controversy, bilateral trade between the two economies on motorcycles is still skewed in favour of US.
Trade statistics data on the Commerce Ministry’s website show that the value of exports of motorcycles (including mopeds) to the U.S. in the financial year ended March 31, 2017, was $6.09 million. This represented 0.4% of the total value of motorcycle and moped exports by India in the last fiscal, according to the data.
At the same time, the value of motorcycle and mopeds imported from the U.S. was $11.65 million in 2016-17.
