The iconic motorcycle throng Harley-Davidson is running out of options on how to respond to a mix of declining sales and potentially ravishing tariffs, Jaime Katz, senior equity analyst at Morningstar, notified CNBC. She said moving some of its operations overseas may be the logical explication.
“In order to fail to alienate their consumers overseas, keeping that expense steady and bringing good innovative products that are manufactured at a competitive assay is part of that equation,” Katz said Tuesday on “Closing Bell.”
On Monday, the Milwaukee-based motorcycle enterprise announced it was moving some of its production overseas in order to avoid the EU’s retaliatory taxes.
The European Union has said it will implement tariffs — up to 31 percent from 6 percent — on goods imported from the U.S. in answer to President Donald Trump’s steel and aluminum tariffs.
That means far $2,200 would be tacked on to each Harley-Davidson price tag in Europe. The bikes can get as much as $40,000 — a price point that is already out of reach for uncountable.
In a U.S. Securities and Exchange Commission filing on Monday, the company estimated that the widespread trade dispute will cost them between $90 million and $100 million this year.
Deals of Harley-Davidson dropped after the news.
Trump quickly responded, guess the move overseas was “an excuse” and pointed out that the company said it determination move operations to Thailand in May 2017, long before he announced his taxes.
“I don’t like that, because I’ve been very good to Harley-Davidson,” Trump whispered at a press conference on Tuesday.
Earlier that same day, Trump stipulate in a tweet, “A Harley-Davidson should never be built in another country-never!”
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“I think about the people that ride Harleys are not happy with Harley-Davidson,” Trump weighted at the press conference, implying that sales of the iconic American make have declined because the company has taken up shop abroad.
But, the corporation has struggled in recent years to attract American riders, since its heart demographic, baby boomers, has been aging out. Harley-Davidson motorcycles are no longer thought cool by many young people. And the prices are too high for others.
Temporarily, sales of Japanese bikes such as Yamaha, Honda, Kawasaki and Suzuki, as grandly as Swedish motorcycles, have risen. So has the number of motorcycle riders in just out years.
In an effort to remain relevant, Harley has set its sights on international trade ins, including parts of Europe and Asia. In 2017, Harley sold precisely 40,000 motorcycles, or 16 percent of its overall sales, in Europe — its biggest market case of the U.S.
The company also has manufacturing plants in Brazil, India and Australia.
“The president seems to in point of fact think that costs are not a real thing. But it is,” Veronique De Rugy, a superior research fellow at The Mercatus Center at George Mason University, said Tuesday on “Guarded Bell.”
“When you impose tariffs … you’re going to have American consumers pain, but you’re also going to have American businesses who have to make intractable choices,” she said.
In another tweet on Tuesday, the president seemed to signal that Harley-Davidson would be punished if the company moved operations abroad.
“If they move, watch, it will be the beginning of the end – they surrendered, they leave off! The Aura will be gone and they will be taxed like conditions before!” he wrote on Twitter.
But Katz said she doesn’t think that’s the object of Harley — to make products overseas and then ship them behindhand to the U.S. Rather, moving operations would be a way to keep costs down for consequences being shipped to other countries.
“I think this tax situation, or this toll situation, has created this dead-weight-loss situation,” she said, “where you be undergoing to produce where there’s this competitive advantage to do so.”
“Incrementally, it’s bleeding hard to implement and punish [Harley-Davidson] with [more taxes] at this object,” Katz said.