Harley-Davidson revs up to lure Indian fans

For most Indians, the term “chopped hog” would probably summon up visions of roast suckling pig in Goa, one of the country’s few pork-eating states.

But recently, bike fans in Mumbai’s gritty former textile mills district got a taste of what American author Hunter S. Thompson meant by the term in his book, Hell’s Angels.

Harley

Hell of a ride: Harley allowed Indian enthusiasts to test drive some of its ‘hogs’
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In a publicity event before the formal opening of sales in India next year, US classic motorcycle maker Harley-Davidson turned over a collection of its “hogs” – the CVO, Touring, Softail, Dyna and Sportster models – to local enthusiasts for test rides.

“Maybe today a young Indian who sees a Harley can’t afford it,” Anoop Prakash, Harley-Davidson’s India director, says of the bike’s starting price of Rs700,000 ($15,000). “But if he falls in love with the bike now, he’ll buy it when he can.”

Harley-Davidson is the latest of the world’s motorcycle brands to target the Indian consumer. The country is the world’s second-largest two-wheeler market after China, with sales of 3.52m units in the first half of the fiscal year ending next March, up 15 per cent against a year earlier.

While Harley will appeal to the richest urban riders, the bulk of the Indian market – and the attraction for mainstream motorcycle companies – lies at the lower end of the consumer pyramid, particularly in the vast rural hinterlands.

Harley’s motorbikes serve every possible transport function, from commuter vehicle and family car to beast of burden and even a gift as part of a dowry.

The market leader is Hero Honda, 26 per cent owned by India’s Munjal business family and 26 per cent by Japan’s Honda.

The company, which began business in India in 1983 and today makes more than half the country’s motorcycles, has had a blockbuster start to the financial year in spite of the downturn, with sales up 21 per cent year-on-year between April and November to 3.04m units.

Its main competitor is homegrown motorcycle producer, Bajaj Auto, whose market share in November reached nearly 27 per cent, up from about 23 per cent earlier in the year, on the back of sales of new models. Bajaj sold 11 per cent more motorcycles between April and November against a year earlier.

Rural areas today account for about 40 per cent of Hero Honda’s sales, a number that is expected to rise steadily beyond 50 per cent in coming years as rural incomes increase, Pawan Munjal, the chief executive of Hero Honda, said.

With motorcycle penetration in rural India below 7 per cent of the market compared with about 25 per cent in urban areas, there is plenty of room for growth.

“The sales ratio between rural and urban sales is slowly inching up, and I do believe the bigger growth will keep coming from the rural market,” Mr Munjal told the Financial Times.

Some analysts believe a poor monsoon this year could curb rural spending, with farmers preferring to put on hold discretionary purchases such as motorcycles until the fate of their crops becomes clear.

“Farmers are indeed upgrading from bicycles to motorcycles. Even those who don’t need motorcycles are buying them. With the bad monsoon, they may put this on hold,” HSBC analyst Sachin Gupta said in a recent report.

But farmers still have extra money in their pockets after a $16bn government farm loan waiver.

The government has also increased its support prices for crops by 11 per cent, a move that should offset the loss of income from the monsoon, according to Jatin Chawla, an analyst at IIFL, a Mumbai-based brokerage.

The other much-touted threat to India’s motorcycle market is the emerging “ultra low-cost car” segment, led by the Tata Nano, with a starting price of about Rs100,000.

Tata Group chairman, Ratan Tata, says the Nano’s direct target market is motorcycle users. But analysts say motorcycles are still far cheaper to run. Not surprisingly, Hero Honda’s Mr Munjal is also a sceptic.

“The Nano is priced closer to premium end bikes, and the premium end bike user is not a Nano user,” says Mr Munjal.

Harley-Davidson’s Mr Prakash is not targeting Nano buyers. With other high-end motorcycles making inroads into India, such as Italy’s Ducati, he is keen to spread the religion.

Harley plans to open five dealerships in the country’s most prosperous cities and states next year.

Marc Billimoria, a banker and one of the test riders, said: “We’ve never had something like this in India ... it’s a dream come true.”