As Harley-Davidson‘s (NYSE:HOG) sales in Europe slump, the company is increasingly looking towards emerging markets as the next growth drivers. Europe accounted for about 15% of unit sales last quarter but its contribution has been consistently falling due to declining sales in the region. The macro-economic conditions are so weak in Europe that there is very little Harley can do to boost its sales.
Therefore, with an eye on the price-sensitive Indian customers, Harley has cut the prices of its motorcycles FatBoy and SoftTail by as much as 25%.  The price reduction was possible because the company now assembles these motorcycles domestically. Assembling products locally helps the company to circumvent high import tariffs and consequently lower prices. Harley-Davidson has only two assembling plants outside the U.S. – one each in Brazil and India. This indicates where the company expects the future growth to come from.
Made in India
Harley is also developing a new 500 cc motorcycle, made specifically for India whose starting price will be less than $7,000. The iconic brand has a cult following among motorcycle enthusiasts around the world, but its high prices are often a barrier to people’s aspirations of owning one. Harley, which has long been part of America’s popular culture, is even organizing HOG rallies in the country to portray itself as a lifestyle product. At the same time, it is ramping up its dealership network across the country. Currently, it has nine dealers but will add four more before the end of the year. 
However, it will not be an easy ride for the company in India since it faces stiff competition from superbike manufacturers such as Yamaha and Kawasaki, whose base models are available at prices lower than Harley’s. The company only sold about 2,000 units in India last year but that could easily grow multifold as its portfolio of lower-priced products rises. With the help of these initiatives, Harley expects the Indian sales to touch 10,000 units in the next 2-3 years. 
We have a $57 price estimate for Harley-Davidson, which is about 10% ahead of the current market price.Notes: