Harley-Davidson to shift motorcycle production out of US due to EU tariffs

Bike manufacturer says costs associated with new levies would lead to price hikes for consumers

Harley-Davidson said on Monday that it will move production of EU-bound motorcycles out of the US in a bid to combat costs linked to tariffs on various American products.

The EU is Harley-Davidson’s second biggest market in terms of revenues outside of the US.

The motorcycle maker said the tariffs, which came into effect on 22 June in response to levies imposed by Donald Trump on steel and aluminium imports, had risen from 6 per cent to 31 per cent.

This translates into a cost of around $2,200 (£1,700) per motorcycle exported from the US to the EU.

“The tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” the manufacturer said.

Therefore, Harley-Davidson added, the company will not raise its suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs.

Instead, the company said it would bear the near-term “significant impact” of the tariffs, with the cost for the remainder of 2018 estimated at between $30m and $45m. On a full-year basis, Harley-Davidson estimates the aggregate impact arising from the EU tariffs to be between $90m and $100m.

The firm said it will shift production of motorcycles for EU destinations from the US to its international facilities to avoid the tariff burden.

The group noted that such a move will require incremental investment and “could take at least nine to 18 months to be fully complete”.

In a statement to the SEC on Monday, the company said: “Harley-Davidson maintains a strong commitment to US-based manufacturing which is valued by riders globally.

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson."

The group added: "Harley-Davidson’s purpose is to fulfill dreams of personal freedom for customers who live in the European Union and across the world, and the company remains fully engaged with government officials in both the US and the EU helping to find sustainable solutions to trade issues and rescind all tariffs that restrict free and fair trade."

Over the weekend, the US president further stoked fears of an imminent trade war between the US and many of its allies when he threatened to put a 20 per cent tariff on European cars.

“Based on the tariffs and trade barriers long placed on the US and it great companies and workers by the European Union, if these tariffs and barriers are not soon broken down and removed, we will be placing a 20 per cent tariff on all of their cars coming into the US. Build them here!” Mr Trump said in a statement posted on social media.

Shares in Harley-Davidson were down more than 2.6 per cent in early trading.