Harley-Davidson (NYSE: HOG) is the latest American automaker to expand China operations in a big way to enhance growth. Joining General Motors (GM) and Tesla (TSLA), the popular auto brands currently ramping up their presence in China, Harley-Davidson this week entered into a partnership with a China-based firm to manufacture a small-sized bike for that market.
The company is apparently trying to overcome the slowing demand in the local market and headwinds from the ongoing US-China trade war, which escalated recently. It has also been burdened by the heavy tariffs in Europe. The move complements the management’s strategy to increase the share of units sold in the overseas market to about 50% in the next eight years.
The company is trying to overcome the slowing demand in the local market and headwinds from the ongoing US-China trade war
The Milwaukee, Wisconsin-based superbike maker had a dismal show in the first quarter when earnings and revenues dropped in double-digits, due to a sharp fall in the demand for the popular models. The decline in sales across all geographical regions points to the need for the company to revisit its strategy for the international market.
The company Wednesday said it has teamed up with Qianjiang Motorcycle Company to manufacture a mall motorbike, which is expected to hit the road next year. Qianjiang is owned by China-based Geely, which holds major stakes in global brands like Daimler AG.
Related: Harley-Davidson Q1 2019 Earnings Call Transcript
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The displacement of the new bike will be below 350 cubic centimeters, nearly half of the capacity of standard motorcycles sold in the US. The management is encouraged by the sharp rise in sales in the Asian country last year.
The other countries where Harley-Davidson is increasing capacity are Thailand and Australia. Facing criticism from President Donald Trump for moving production outside the country, the company recently assured that all bikes sold in the US will be manufactured locally.
The slowdown in sales is visible in the performance of the company’s stock, which is currently trading a near-ten-year low. Since last year, the shares lost 20%.