Harley-Davidson's global operations have been significantly impacted by tariffs, particularly those imposed by the European Union and the additional tariffs on bikes produced in Thailand. These trade barriers have forced the company to make strategic decisions to navigate the challenging economic landscape.
As you explore the repercussions of these tariffs on Harley-Davidson, consider how these trade disputes are reshaping the company's market presence, production processes, and overall competitiveness in the motorcycle industry.
Key Takeaways
- EU tariffs causing Harley-Davidson a $2,200 increase per motorcycle exported.
- Shift in production planned to overseas factories due to tariff impact.
- Market share decline in Europe leading to profit dent and competitiveness challenges.
- Strategies like production shifts and cost mitigation crucial for sustaining growth.
Impact of Tariffs on Harley Davidson
The imposition of higher tariffs by the EU on Harley-Davidson motorcycles has significantly impacted the company's export operations, leading to substantial increases in costs and necessitating strategic production shifts.
With the EU tariffs on Harley-Davidson motorcycles increasing from 6% to 31%, the additional cost per average motorcycle being exported to the EU amounts to approximately $2,200. Considering that Harley-Davidson sold nearly 40,000 motorcycles in the European Union last year, these tariffs pose a substantial financial challenge for the company, especially since European sales rank second only to the U.S.
To counteract the impact of tariffs, Harley-Davidson is planning to shift some production of EU-bound motorcycles from the U.S. to overseas factories. This move is crucial as the company expects the tariffs to slash its 2018 profits by 5-8%. By investing in international facilities, Harley-Davidson aims to mitigate the financial burden, albeit over a 9-18 month period.
The strategic production shift to overseas factories reflects the company's proactive approach to adapt to the changing trade landscape.
Sales Decline and Market Challenges
Sales for Harley-Davidson have experienced a notable decline in the European market due to the impact of increased tariffs imposed by the EU and China. The European Union tariffs on Harley-Davidson motorcycles surged from 6% to 31%, significantly affecting the company's market performance in the region.
As Europe stands as the second-largest market for the American icon, these tariff hikes have posed substantial challenges for Harley-Davidson in maintaining its sales and profitability. The company's revenue and market share have dwindled as a direct result of these EU tariffs.
To navigate these market challenges, Harley-Davidson is compelled to consider strategies such as potential production overseas to mitigate the adverse effects of the tariffs and boost its competitiveness. The company's ability to adapt and innovate in the face of these hurdles will be crucial in sustaining its presence and growth in the European market amidst the ongoing trade disruptions.
Supply Chain Disruptions and Costs
Facing increased tariffs from the EU, Harley-Davidson is grappling with supply chain disruptions and heightened production costs. The tariffs on European steel imposed by the U.S. have prompted retaliatory measures from the EU, impacting American companies like Harley-Davidson. This has led to an increase in the cost of Harley-Davidson motorcycles exported to the EU by $2,200 per bike.
To counter these tariffs, the company is considering shifting production to international facilities, which is estimated to take 9-18 months. However, in the short term, these supply chain disruptions are expected to dent the company's profits by 5-8% in 2018.
The EU's decision to raise tariffs on U.S.-made motorcycles from 6% to 31% directly affects Harley-Davidson's bottom line, forcing them to reevaluate their production strategies and incur additional costs. As Harley-Davidson navigates these challenges, the company is focused on finding sustainable solutions to mitigate the impact of tariffs on its operations and costs.
International Competition and Market Share
Amid escalating tariffs and increased production costs, Harley-Davidson's competitiveness in international markets has been significantly impacted. The European market, where the company exported nearly 40,000 motorcycles last year, has been particularly affected by the higher tariffs on steel imposed by the Trump administration. These tariffs have placed a significant tariff burden on Harley-Davidson, leading to eroded market share in Europe.
As a result, competitors in the region are capitalizing on pricing advantages, posing challenges for Harley-Davidson to maintain its position in Europe, its second-largest market globally. The company's ability to compete on a global scale is hindered by these tariffs, affecting its overall sales and growth prospects.
In order to address these challenges, Harley-Davidson must strategize effectively to mitigate the impact of tariffs on its production costs and regain market share in the fiercely competitive European market.
Strategies for Mitigating Tariff Effects
To address the challenges posed by escalating tariffs, Harley-Davidson is strategically shifting production overseas to countries like Brazil, India, Australia, and Thailand. This move is crucial for the company to mitigate the adverse effects of tariffs imposed by Trump's administration, which have significantly impacted their profits.
By relocating production facilities abroad, Harley-Davidson aims to cushion the $2,200 incremental cost per motorcycle exported to the EU, thereby safeguarding their bottom line. Investing in international facilities demonstrates a long-term strategy to counter the tariff burden, even though it may take between 9 to 18 months to materialize.
Despite these challenges, the company remains committed to not passing on the additional costs to consumers by increasing retail or wholesale prices. This strategic decision not only protects Harley-Davidson's market share but also ensures that they stay competitive in a global landscape shaped by trade tensions and protectionist measures.
- Shifting production to Brazil, India, Australia, and Thailand
- Mitigating $2,200 incremental cost per motorcycle
- Investing in international facilities
- Protecting market share
- Maintaining retail and wholesale prices
Conclusion
In conclusion, Harley-Davidson's bottom line is suffering due to the detrimental impact of tariffs on its operations. With sales declining, supply chain disruptions, and increased costs, the company faces tough market challenges.
How will Harley-Davidson navigate these obstacles and maintain its competitive edge in the face of ongoing tariff disputes? Only time will tell.
