In the first quarter of 2021, Harley Davidson showed good financial results: global sales grew by 9%, and by a significant 30% – in the home, North American market. However, the tests for HD are far from over: sales of the company’s products in Europe, which are already experiencing a decline, clearly will not be facilitated by new news.
The European Union is preparing to introduce a 56 percent duty on all Harley Davidson motorcycles. The move marks Europe’s next move in a transcontinental trade dispute that began in 2018, when the Trump administration imposed new duties on steel and aluminum, in response to which the European Union imposed duties on unique American goods such as Kentucky bourbon and Harley Davidson motorcycles. HD seemed to have managed to circumvent the duties by selling motorcycles built in factories outside the United States in Europe and paying the usual six percent duty. But from June 1, the duty will be increased by 50% and will be levied on all motorcycles of this brand, regardless of where they are produced.
The company said it plans to file a claim against the duty. In addition, there is hope that the Biden administration will find a way to resolve the issue of mutual duties inherited from the previous administration with the EU authorities, but there are no guarantees that this will happen.
This is an unprecedented situation that underscores the real damage from the escalating trade war suffered by both stakeholders on both sides of the Atlantic, ”said Harley Davidson Chairman and Chief Executive Officer Jochen Zeitz.
According to him, the duty “goes against all principles of free trade” and will significantly affect the company. In its financial report for the first quarter of 2021, the company said the duties would result in $ 200 million to $ 225 million in damage annually. Also in the statement, Harley Davidson notes that European manufacturers in the United States pay a maximum of 2.4 percent – more than half the current European 6% and significantly less than the forthcoming 56%.
Results of the 1st quarter of 2021
In general, Harley Davidson’s 1Q2021 financial results are quite positive: sales, revenues and profits are growing. Global motorcycle retail sales were up 9 percent in the first quarter year-over-year, but mainly due to strong sales growth in North America (up 30 percent). Meanwhile, sales in Europe, the Middle East and Africa fell 36 percent to 4,900 as the company stopped supplying Sportster and Street models to Europe. The company’s share of the European market for cubic (more than 600cc) motorcycles fell to 3.9 percent (compare with 48.3 percent in the US), and if the final price of new HD motorcycles increases by another 50% from June, it is difficult to hope for sales growth. …
Harley Davidson forecasts full-year revenue growth of 30 to 35 percent. Operating profit margins are forecast to be between 7 percent and 9 percent if Harley overcomes the effect of European tariffs. If it fails, then the margin is expected to be from 5 to 7 percent. In other words, it is what is happening in the European market that will determine the difference for Harley between “an expected good year” and “an unexpectedly great result”.