After launching Fat Bob in India a month back, Harley-Davidson (NYSE:HOG) is gearing up to introduce a new motorcycle made exclusively for the country within the next two years to take on its Japanese and Korean rivals. The motorcycle will be built locally in the country and will target entry-level, premium motorcycle buyers. Currently, the lowest priced model that Harley offers costs upwards of $10,000. The new motorcycle, however, will start from $6,000 to compete against the likes of Kawasaki Ninja 250R and Hyosung GT250R. 
At the same time, Harley is expanding its network of dealers in the country. Currently, there are nine dealers but there will be four more by the end of 2013. The company has seen rapid growth of its motorcycle business in India since entering the market back in 2009. The iconic motorcycle manufacturer reported sales of over 1,000 units in the country between July 2010 and the end of 2011. It now expects sales in 2012 to clock more than 2,000 units and targets a tenfold increase to 10,000 units by 2016. 
Harley Focused On India
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Harley has already made its intent clear that it views India as a key market in the long run. The company has only two assembling plants outside the U.S., one in Brazil and the other in India. Assembling products locally allows the company to circumvent the high import tariffs. This has enabled it to reduce pricing and consequently target a larger market of buyers.
While the luxury industry is at a nascent stage in India, the country holds great potential. Acquiring the interests of a tiny percentage of India’s huge population could translate to a significant amount of top-line for the company. Another thing that could work in favor of India is that its growth comes on top of a very low base (per capita of $1,500), so there is a good probability that the development might be sustainable for a number of years which could burgeon the number of millionaires. India currently has more than 125,000 millionaires, according to one study. 
Harley-Davidson is increasingly looking towards international markets to drive growth. While the company still derives most of its sales from the U.S. and Europe, the percentage share of Asia and Latin America is growing. In the first nine months of the year, Asia and Latin America combined contributed 12% to its total sales compared to 10.4% in the previous year. 
We have a $57 price estimate for Harley-Davidson, which is about 20% above the current market price.Notes:
- Harley-Davidson to launch a made-for-India machine in 2014, November 27, 2012, zigwheels.com [↩]
- Harley Davidson targets ten-fold jump in India sales by 2016, Economic Times, May 2012 [↩]
- Number of Indian millionaires fell by over 25,000 in 2011: report, June 20, livemint.com [↩]
- HOG 10-Q [↩]