According to text below, Explain how the behaviour of Indian vs American motorcycle consumers is different. Specifically, for each country, who rides motorcycles, and why do they ride them?

Harley Davidson was among the most well-known motorcycle brands in the world, famous for its large, cruiser style motorbikes. In 2010, the company expanded their operations into India. Ten years later, the Indian motorcycle market had grown to become the largest in the world. Yet, Harley-Davidson had not been able to generate strong sales in the market. After a decade of disappointing performance, the company announced that they were exiting the market. How had one of the most iconic motorcycle companies in the world failed to be successful in the largest motorcycle market in the world? What was next for Harley- Davidson?

HARLEY DAVIDSON COMPANY BACKGROUND

In 1903, William Harley and Arthur Davidson built the first ever Harley Davidson motorcycle in their Milwaukee, Wisconsin 'factory' - a small wooden shed with the words 'Harley-Davidson Motor Company' scrawled on the door. Over the next decade, the brand began to attract more attention by winning races and contests with Harley Davidson motorcycles. By the 1910's the company had attracted enough interest to begin exporting their motorcycles internationally, and by the 1920's, the company was the largest motorcycle manufacturer in the world, with over 2,000 dealers in nearly 70 countries around the world1.

In the period between the end of World War II and the 1970's, the United States saw incredible growth in motorcycles, with the number of registered motorcycles in the country jumping from less than 200,000 to 2.8 million.2 During this period, Harley-Davidson motorcycles gained particular fame by featuring prominently in major Hollywood films, including the 'The Wild One' and 'Easy Rider'3. In the 1970's, Harley-Davidson motorcycles continued to feature in popular media, with the daredevil stunt performer Evel Knievel riding a Harley-Davidson XR-750 during the peak of his career4.

The company continued to grow, and by the 2000's it was the most recognized American motorcycle brand and had an extensive and loyal community of consumers around the world. Harley-Davidson formed the Harley Owners Group (HOG) in 1983 to foster a community among Harley owners. A 1995 HOG member survey provided a glimpse of a typical Harley-Davidson owner, revealing that most HOG members were men (87%), with a high school education or less (62%), a median income of about $56,000, a median age of 41, and that many (45%) were employed in sales or technical professions.5 Through HOG, members found opportunities to meet and ride with other Harley owners, including through Harley-Davidson rallies, in which hundreds of riders would gather together. These riders were known to be highly loyal to the brand, and connected with each other over their love of motorcycling as a hobby or lifestyle.

The Harley-Davidson stock price peaked in 2006, and the company generated over $1 billion in profits that year.6 However, the years since 2006 were less favorable for the company. Some notable challenges that the company faced included changing customer demographics and behaviours - although the Harley-Davidson brand remained very popular in the United States and motorcycling as a hobby or lifestyle remained popular among Baby Boomers, younger generations had not shown an interest in motorcycling to the extent that older generations had.7 In addition, the company faced financial difficulties following the recession in 2007.

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The Harley-Davidson stock price reached a 13-year low in 20098, with the company reporting a loss of $55 million that year. The company was able to return to profits the following year, although its revenues and net income began to decline again in the mid 2010's (Exhibit 1).

Harley-Davidson Motorcycles

Motorcycles could be classified based on the cubic capacity (cc) of their engines. In general, modern motorcycles tended to have a cc somewhere in the range of 500cc-1500cc, with higher cc motorcycles having higher power output and lower gas mileage9.

Although Harley-Davidson sold a variety of different motorcycles, the company was best known for its iconic heavyweight cruisers, known as 'hogs'. These motorcycles - which started at about $19,000 but could cost up to $44,000 - were the biggest, longest, and heaviest that the company sold10. They were designed for comfort, carrying capacity, and long-distance cruising, and generally had a cc in the range of 1,700 to 1,90011.

In addition to these heavyweight motorcycles, Harley-Davidson had a large assortment of middleweight motorcycles (750 cc - 1250 cc) as well as one electric motorcycle. 'Street' motorcycles were the smallest motorcycles offered by the brand, and were designed to be 'sleek and nimble, with an authentic urban attitude'.12 Street motorcycles ranged in price from roughly $7,600 to $11,500, and the engine capacity of these was considerably lower than other Harley-Davidson bikes, with some having a capacity as low as 500 cc13. The Harley-Davidson LiveWire, released in 2019, was the company's first foray into electric motorcycles. Priced just under $30,000, this motorcycle had a range of about 150 miles14.

MOTORCYCLE MARKETS

In 2006, international sales of Harley-Davidson bikes accounted for only 25% of total sales - but by 2010 this number had risen to 35%.15 Throughout the remainder of the 2010's, international retail sales of Harley- Davidson bikes remained fairly constant, with international sales reaching 40% of total sales by 2017 and 42% by 2019.16 The company hoped to grow their international sales to 50% of their annual revenue in the near future.17 In addition,

One of the main predictors of motorcycle use in a country was quality of living, as people who do not have enough purchasing power to afford cars often purchase more affordable vehicles, such as motorcycles, instead.19 Not only were motorcycles more affordable, but they also came with lower maintenance costs. In many emerging markets, cars were considered a luxury product. Another factor that was potentially important was climate, as motorcycles did not offer riders protection from cold climates or low temperatures.

The United States

Overall sales of new motorcycles in the United States had been stagnant from 2010 to 2020, with roughly 440,000 units sold in 2010 and 470,000 units sold in 2019.20 The value of the United States motorcycle market was $4.1 million in 2018, and was forecast to reach $4.3 million by 2023 (Exhibit 2), representing only 5.5% of the global motorcycle market value.21

in 2017 to 4 million by 2027.18

the company planned to increase its ridership in the United States from 3 million

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Harley-Davidson had long been the leading player in the United States motorcycle market, although Honda, and KTM AG also captured significant market shares (Exhibit 3). Based in Japan, Honda had a well-known, global reputation for high quality vehicles, including motorcycles, cars, small trucks, lawnmowers, and tillers, among others22. Within its motorcycle category, Honda had a wide range of offerings, with engine capacities ranging from 50 cc to 1,800 cc23. Although Honda motorcycles were manufactured primarily in Japan, the company also had a number of international subsidiaries which produced their motorcycles, including some in India24. KTM AG was based in Austria, and sold a range of motorcycles and sports cars under the KTM, WP, and Husqvarna brand names25.

Although US consumers showed small increases in interest for cheap, small motorcycles, demand for heavyweight motorcycles was in the decline.26 In addition, consumer demographics were changing. In 2019, 21 to 34 year-olds reported that they would consider buying a motorcycle for ease of transportation, compared to older buyers whose primary considerations in buying a motorcycle related to their perception that motorcycles were cool, or the fact that riding motorcycles was a hobby to them.27

The India Opportunity

India was considered an emerging market, meaning that its economy was in a state of development leading towards higher incomes and higher standards of living (Exhibit 4). By 2025, it was expected that an additional 60 million households in India would have an income of over $8,000, thus allowing them to enter the consuming class.28 As incomes rose throughout the country, many predicted growth in luxury goods purchases - including luxury vehicles.29

Until the late 2000's, political and regulatory barriers stood in the way of Harley-Davidson operating in India. One issue related to emissions: motorcycles over 500 cc were so rare in India that existing regulations did not specify the required emissions standards for these motorcycles, which essentially ruled out motorcycles from Harley-Davidson. However, in 2007, in what was dubbed 'mango diplomacy', the Bush administration negotiated a deal which would bring Indian mangoes to the United States market in exchange for India adopting emissions standards that would allow Harley-Davidson to operate in India.30 Even with this deal, another significant barrier remained: India had import duties of 60% and taxes of 30% which would effectively require the company to double the price of their motorcycles, making all their models prohibitively expensive for Indian consumers.31

In 2009, conditions in India were favorable enough to allow Harley-Davidson to announce that they would enter the Indian market. Harley-Davidson officially entered the Indian motorcycle market in 2010, offering 12 of their motorcycles spanning across their product mix. The smallest, most basic model available in the Indian market was priced at $15,000.32 Although some of the models available in India were manufactured in the United States and imported, the company also opened a factory in northern India. Motorcycles made in the Bawal facility were sold throughout India, and also exported to other Asian markets as well as Europe.33 Harley-Davidson also opened a sales office near Delhi and developed partnerships with dealers, eventually having 33 Harley-Davidson dealers throughout the country.34

By the time Harley-Davidson entered the market, India had the second-fastest growing market for motorcycles in the world, behind China.35 Demand was primarily for small bikes with engine capacities of about 500 cc or less - demand for larger motorcycles with engine capacities ranging from 800 cc to 1500 cc was less than one thousand vehicles per year.36 However, this did not dissuade Harley-Davidson executives. At the time, company executives stated that they weren't targeting cost-conscious consumers37, and that even though demand may initially be small, there was 'tremendous potential' in the market.38

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The Indian Vehicle Market

Two-wheeled vehicles - including scooters, motorcycles, and mopeds - were an exceptionally popular method of transportation in India. Across all types of vehicles between 2016 and 2017, for example, two- wheelers represented 80% of all sales, with passenger vehicles (i.e., 4-wheeled vehicles) coming second at 14%.39 The sale of two-wheelers was also growing quickly, with an increase of nearly 7% between 2016 and 2017, including growth in sales of motorcycles at 4%.40 Of these, most were sold at a price of $1,500 or less.41 Within passenger vehicles, smaller cars tended to be popular, with about half of the market share of passenger vehicles being captured by mini-cars or hatchbacks.42 By 2020, roughly 17 million motorcycles were sold each year in India, making it the largest market for motorcycles in the world.43

Scooters and mopeds were potential substitutes for motorcycles, although these vehicles had a number of limitations. First, motorcycles were much better suited to carrying additional weight than mopeds or scooters were. This made motorcycles a better option for carrying multiple passengers, or for carrying luggage. In addition, motorcycles tended to be higher quality and have better performance than other two- wheeled alternatives. This was important, as roads in India were often in poor condition, making maneuverability around obstacles such as pot-holes important. In addition, traffic rules were seldom enforced and often violated by drivers, making maneuverability in uncertain traffic conditions even more important.44

The four main players in the Indian motorcycle market were Hero MotorCorp, Honda, TVS, and Bajaj; however, of these main players Hero MotorCorp and Honda were the most dominant (Exhibit 5). For example, in 2017 and 2018, Hero MotorCorp sold 7,023,363 and 7,824,067 units, respectively; Honda sold 5,456,364 and 5,884,911, respectively. In comparison, those same years Harley Davidson sold only 3,339 and 3,148 units, respectively.45

Of the four main players in the Indian market, Honda was the only foreign company and was also the most diversified in terms of its product offerings46. Hero MotorCorp, TVS, and Bajaj were locally based. Hero manufactured and sold only two-wheeled vehicles, including motorcycles, scooters, and mopeds, and provided a range of associated services47. Hero's motorcycles were small, with engine capacities ranging from 100 cc to 225 cc48. TVs sold two- and three-wheeled vehicles, although motorcycle sales accounted for about 40% of company revenue49. Bajaj also manufactured and sold two- and three-wheeled vehicles, although they sold commercial vehicles in addition to these50.

HARLEY-DAVIDSON'S INDIA DEPARTURE

In 2018, Harley-Davidson announced its new global strategy, which involved, among other things, expanding its business in Asia, developing electric bikes, and developing smaller motorcycles - specifically, 250cc - 500cc bikes.51 At the time, the company said of their plan to develop smaller motorcycles: "

This new product and broader distribution is intended to fuel Harley-Davidson's customer

access and growth in India, one of the largest, fastest-growing markets in the world, and other Asia markets..... The bold actions we are announcing today leverage Harley-Davidson's vast capabilities and competitive firepower our excellence in product development and manufacturing, the global appeal of

the brand and of course, our great dealer network".52

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Yet, only two years later, Harley-Davidson announced their departure from the India market. This entailed closure of their India factory and significant reduction of the size of their sales office. Local dealers would serve existing customers to the end of their contracts, however the brand would no longer pursue new sales in the area. Over ten years of operations in India, Harley-Davidson had sold a total of roughly 25,000 motorcycles in the country.53 At the same time, demand for motorcycles had grown dramatically among Indian consumers. Why had Harley-Davidson failed to succeed in the market?