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Monday, November 23, 2020

Explained: What does Harley Davidson’s tie-up with Hero entail?

In September, Harley Davidson had announced the closure of India operations after 11 years of poor performance, which saw the company sell only 25,000 units – far short of its annual target of selling 10,000 units annually.

By: ENS Economic Bureau | New Delhi | Updated: October 29, 2020 12:49:29 pm
Hero Harley tie up, Harley Davidson, Hero MotoCorp, Harley Davidon in India, Harley exits India, Indian ExpressA Harley-Davidson Inc. badge is seen on the gas tank of a motorcycle. (Bloomberg Photo: David Paul Morris)

The tie-up announced by Harley-Davidson with Hero MotoCorp is part of the corporate makeover by the American cruiser bike brand, which involves exits from nearly 40 global markets.

On Tuesday, Harley-Davidson said it has decided to hand over sales, service and distribution of its products to Delhi-based Hero MotoCorp. Hero will also take care of sales of parts, accessories, general merchandise, riding gear and apparels of Harley-Davidson.

This arrangement is similar to revamped distribution models being piloted by Harley in 16 other markets outside the United States, apart from India. While Harley-Davidson announced the shutting down of Bawal, the Haryana-based assembly factory a month ago, Hero MotoCorp clarified that it won’t be taking over the plant.

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Hero Harley tie up, Harley Davidson, Hero MotoCorp, Harley Davidon in India, Harley exits India, Indian Express A motorist rides past a Harley-Davidson Inc. store in Chennai, Tamil Nadu. (Bloomberg Photo: Sanjit Das)

Speaking to analysts, Jochen Zeitz, chairman, president and CEO, Harley-Davidson, said: “Under our focussed participation model, we are exiting about 40 markets where low volumes and little profit do not warrant investments. We are establishing dealer-direct or distributor model in about 17 markets, and our 36 highest potential markets will have the leadership, resources and clearly defined operating framework that we believe will derive desirable growth and profitability in the future.”

Does the deal involve equity transfer?

This is being defined as a non-equity tie-up — a distribution-based partnership that does not involve transfer of technology from Harley. A licensing agreement allows Hero to develop and sell a range of premium motorcycles under the Harley-Davidson brand name.

“With a complete reset of our regional structure, we now have a less cumbersome and much more efficient set-up and have defined a clearer regional strategy in North America, India, Asia Pacific and Latin America,” Zeitz said.

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In September, Harley had announced the closure of India operations after 11 years of poor performance, which saw the company sell only 25,000 units – far short of its annual target of selling 10,000 units annually. Harley did not offer any clarity about the future of the Haryana factory in its statement.

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