Harley-Davidson (NYSE:HOG) is a renowned manufacturer and distributor of classic heavyweight motorcycles. By introducing a pair of lightweight motorcycles on a new platform after nearly four decades, the company established its commitment to evolve with shifting market trends. Sales of the lightweight Street motorcycles being assembled at Missouri and in India will be crucial to the automaker’s aim of shipping 279,000-284,000 motorcycles this year, up 7-9% from 2013 levels. The automaker hopes to ship 7,000-10,000 Street 750 models in the U.S., India, Italy, Spain and Portugal this year. The Street 750 was launched in the U.S. this month, and its bookings also started in India in January. Harley is already the market leader in the 800 cc+ motorcycle market in India, with over 4,000 customers in the country.  With the launch of the Street motorcycle, the company will look to grab a significant portion of the sub-800 cc motorcycle market in India.
We have a $62.53 price estimate for Harley-Davidson, which is around 7% below the current market price.
Harley Already Has A Strong Foothold In India
The market for motorcycles with engine displacement above 500 cc nearly doubled in the fiscal year ending April 2013 to 16,000 units from 9,000 units in the previous year.  During this period, Harley-Davidson also saw its market share rise from 5.5% to 8.2%, shipping 1,300 units in fiscal 2013. The single-digit market share percent is because the company only operates in the 800 cc+ category. The automaker further improved its sales in the first nine months of this fiscal year, selling around 1,500 bikes through January, up almost 55% year-on-year. This jump primarily highlights Harley’s dominance in the 800 cc-1,600 cc segment- where the automaker has a massive 88% market share.  In fact, Harley accounted for 229 of the total 242 bikes sold in this segment in January alone. With increasing disposable incomes and rising proportion of high income groups in India, sales for the company could further grow. The population of high net-worth individuals (individuals with investable assets of $1 million or more) in the country was over 200,000 in 2012, and is expected to grow sevenfold by 2020 to 1.5 million. 
Come Street, Harley Will Compete In Sub-800 cc
With the entry of the Street 750 cc and the anticipated launch of the Street 500 later on, Harley-Davidson will now compete in the 500 cc-800 cc segment of the Indian motorcycle market as well. Built on the new ”Revolution X” platform, the Street 750 is the cheapest Harley on sale, priced at INR 4.1 lakh (around $6,700) in India. As the majority of bikes in the 500 cc+ category are constituted by the lower range 500 cc-800 cc segment, the Street might significantly increase unit sales for the company. This is because consumers in India, especially millennial customers, generally prefer lighter and affordable motorcycles. Pre-bookings of the Street 750 at one dealership in Pune have already crossed 100 in just over four weeks after its launch.  Seeing as Harley has 13 showrooms throughout the country, we expect sales of the Street 750 to cross 500 units by the end of this year, adding over $3.35 million in retail sales from this model alone.
Obstacles To Harley’s Growth In India
What could work against Harley-Davidson in India in the next few years is the rising market competition from Triumph, Polaris and other domestic companies, which have foreign partners.
- Indian Motorcycles Could Take Away Share in the 1,600 cc+ Category
Although the market for bikes above 1,600 cc forms a minute part of the Indian motorcycle market at present, high revenue per unit makes it crucial for companies competing in this segment. Harley managed to sell only 7 units in the first nine months ending January, compared to Suzuki’s 19 unit sales.  With the introduction of Polaris’ Indian motorcycles, Harley could lose further market share in this segment. The resurgent Indian motorcycles have already been able to nab some market share from Harley in the U.S. With the launch of the Indian Chief Classic, Chief Vintage and Chieftain in 2014, Polaris aims to grab close to 10% market share in this segment, selling around 28 bikes this year.  The bright spot for Harley is that the Indian bikes are almost twice as expensive as its 1,600 cc+ offerings. Harley assembles its motorcycles in completely knocked down (CKD) units in India, which help the company evade hefty import taxes. As the 1,600 cc+ segment is expected to grow at a CAGR of 40%-50% till 2018, Harley will look to fight off the challenge from Polaris, Suzuki and other companies such as Ducati and Honda in this segment.
- Stiff Competition For The Street Motorcycles
Out of the 16,000 units sold in the 500 cc+ category, the Indian brand Royal Enfield constituted nearly 12,000 unit sales in fiscal 2013. The automaker mainly operates in the 500 cc-800 cc segment and could possibly deter growth of the Street 750. Royal Enfield launched its 535 cc Continental GT late last year, which will now compete with the Street. Apart from Royal Enfield, Harley also faces stiff competition from large domestic automakers such as Hero, Bajaj Auto and TVS Motor. Hero has a 49% stake in Erik Buell Racing LLC, a U.S. company run by a former Harley engineer that makes heavyweight motorcycles. On the other hand, Bajaj Auto already sells Kawasaki bikes in India and has partnered with Austria’s KTM Sports AG to sell two of its motorcycles in the country. Kawasaki launched its Z800 model this year, which will compete with the Street. TVS Motor also looks to develop premium motorcycles with engines up to 500 cc in collaboration with BMW AG for the Indian as well as international markets. The BMW F 800 GS will be introduced mid-2014, and could possibly erode sales of Harley’s Street 750.
- Triumph Motorcycles Could Threaten Harley’s Dominance
The British motorcycle maker Triumph also entered the Indian market late last year. The company will compete with Harley-Davidson in the premium bike market, and plans to open 9 dealerships in the country by March this year. Unlike Polaris’ Indian bikes, Triumph assembles six of its models in CKD units in India, and therefore will evade import taxes levied on completely built units, just like Harley. This could hamper Harley’s growth prospects in India, as Triumph aims to sell 500 units this year, 1000 in 2015 and a further 1,500 units in 2016. 
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