NEW DELHI (Reuters) - Harley-Davidson Inc HOG.N is in advanced talks with India's Hero MotoCorp HROM.NS for a distribution deal which will allow the U.S. company's motorcycles to be sold in India, after it stops local manufacturing there, three sources told Reuters.
The Milwaukee-based company said on Thursday it will stop sales and shut its manufacturing plant in India, effectively abandoning the world’s biggest motorcycle market after a decade of unsuccessful efforts to gain a foothold.
Harley, however, is in talks with Hero over a distribution arrangement that will allow the Indian company to import and sell Harley bikes as its sole distributor, two sources with familiar with the talks said.
“Hero will be the master distributor for Harley bikes in India ... This will be a partnership, a strategic alliance,” said one of the sources, all of whom declined to be named as the discussions were private.
Discussions are also ongoing to let Hero become a contract manufacturer for at least one Harley motorcycle with 300-600 cc engine capacity, which it will launch later, the first source added.
The financial details of the deal were not immediately clear.
Asked about talks with Hero, a Harley spokeswoman said the company would not comment on speculation. On Thursday, it said it was changing its business model in India evaluating options to continue to serve customers.
Hero MotoCorp, India’s largest two-wheeler manufacturer by sales, also declined to comment on market speculation. It produced 6.4 million two-wheeler scooters and motorcycles in the fiscal year ending March 2020, a third of India’s total output.
Harley manufactured 4,500 motorcycles during that period, largely assembled from imported knock-down kits at its plant near New Delhi, which it will shut as part of its restructuring.
Harley's decision to stop direct manufacturing marks another major exit by an automotive player in India and is a setback for Prime Minister Narendra Modi, who has invited foreign firms to ramp up local production. Ford Motor F.N and General Motors GM.N have both cut back their India operations in recent years.
Harley, known for its heavy touring motorcycles, struggled in India mainly because of high import duties - which U.S. President Donald Trump often criticized India for - and also because its locally assembled bikes faced high taxes.
Hero typically sells motorcycles with engine capacity of under 200 cc and a deal with Harley will boost its entry into the mid- and high-engine market favoured by biking enthusiasts and fashion conscious younger riders, the second source said.
Harley’s 33 dealerships will likely come under Hero’s management under the new arrangement, said one of the sources.
In a statement on Friday, the Federation of Automobile Dealers Associations (FADA) in India criticised Harley for not informing dealers about their India plans.
“It goes without saying that dealers who have invested their hard-earned capital in this iconic brand are left like an abandoned baby without any compensation package,” FADA said.
Reporting by Aditya Kalra and Aditi Shah in New Delhi; Additional reporting by Rajesh Kumar Singh in Chicago; Editing by Raju Gopalakrishnan and Louise Heavens
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