Donald Trump has recently been vocal about his displeasure regarding the high import duty levied on Harley-Davidson motorcycles in India. Trump has said that while Harley-Davidson bikes are taxed heavily, Indian motorcycles selling are not subjected to any import duty, making it an unfavourable trade scenario between the two countries. Taking note of the situation, Modi Government recently announced duty revisions during the Budget and naturally the import duties on motorcycles displacing more than 800 cc were reduced from 75 % to 50 %. The shocker here was that CKD (Completely Knocked-Down) bikes were exposed to higher duty of 15 % from 10% in case of a disassembled engine and up to 25 % from 20 % in case of a fully-imported engine. As a result, selling and buying imported motorcycles just got cheaper while those that are being Made in India are set to get more expensive! What happened to the Make in India push?
All said and done, the reduction in duty seemed to be a positive move as prices of such motorcycles would come down, making them more accessible and hence increase sales. This, however, is not the actual reality. Why? You might ask and the answer to that is the percentage of sales that imported motorcycles in the Indian premium motorcycle space are quite small. Vimal Sumbly, Managing Director, Triumph Motorcycles India, told us that imported motorcycles only account for about 15 % of the premium segment in India. It should be noted though that this figure excludes Ducati India, which only imports and doesn't manufacture in India.
Harley-Davidson too, the company in Trump's discussions only sells four imported motorcycles in India, all of which are priced above Rs 20 lakh. Peter MacKenzie, Managing Director, Harley-Davidson India & China, told us that the imported motorcycles account for a small part of overall sales in India. Hence, despite Harley-Davidson reducing prices on its imported motorcycles by more than Rs 3.7 lakh, the effect on most premium motorcycle buyers is negative. MacKenzie added that with the increase in duty on locally-assembled models, the company will increase prices of such models from April 2018.
If one looks at it from a macro perspective, Indians will end up paying more for motorcycles that are being made in India in plants that are creating employment for Indians. The logic behind such a move is hard to understand as all this time the government has been pushing the Make in India programme but is now taxing such companies higher.
Yes, most of these locally-assembled motorcycles aren't fully manufactured in India but they are assembled in plants set up in the country. For Harley-Davidson, specifically, parts such as shockers, brakes, lights, bulbs, tyres, fasteners and other few non-critical parts come from Indian suppliers who are building these parts out of scratch in India. In the end, as I see it at least in the space of premium motorcycles, the idea of Make in India seems to have been defeated as Import in India seems to have more benefits.
Coming back to Trump, he was quick to respond by terming PM Modi as a sweet person but immediately made it clear that he's still not happy. His argument was that India sells a 'lot' of motorcycles in the US, which are subject to zero percent import duty and hence US motorcycles being subjected to 50 % import duty is still not fair.
Hence, at the end of the day, changes made to the import duties to make Trump happy (if they were since Trump said Modi called him to inform) failed to do that. Worse, it leaves Indian premium motorcycle buyers unhappy as they'll need to pay more for bikes made in India. Worst is the fact that companies importing in India seem to have come out as winners in this whole scenario with no encouragement to look at local production.
What exactly were these changes intending to do then is a question that we'll need some more time to have an answer to?
Prices Reduced on imported Harley-Davidson motorcycles
|Touring & CVO Line Up||Price before||Price Post Revision|
|Road Glide Special||35,61,00||32,99,000|