Harley-Davidson to make smaller bikes in China

Harley-Davidson Inc, the iconic American motorcycle company, will move some of its production to China to make a small motorcycle.

The Milwaukee, Wisconsin-based manufacturer announced on Wednesday that it will partner with Qianjiang Motorcycle Co to make a motorcycle that will be more compact than its trademark "big Hog".

The bike will go on sale in China next year as the brand aims to penetrate the Asian market over the next decade. Harley said it wants half of all its sales to come from outside the US by 2027.

Its core American customers — or "hog riders" — tend to be in their 50s, but have gotten older and are buying fewer bikes, according to The Wall Street Journal.

The lower sales in the US combined with rising production costs due to tariffs have also hurt the company's bottom line.

"We're excited about this opportunity to build more Harley riders in China, one of the world's largest motorcycle markets, by creating new pathways to our brand," Matt Levatich, CEO of Harley-Davidson, said in a statement.

China's motorcycle and moped market could be a major growth area for Harley, as sales in the country grew by 27 percent in 2018 compared with a year earlier.

Analyst Brian Yarbrough of Edward Jones told the Milwaukee Journal Sentinel that China could represent a growth opportunity.

"Think about the emerging middle class over in China and how rapidly that's growing and the affinity of Chinese consumers for American brands," he said.

Last year, Harley said it would increase production in its Thailand plant, in part, to avoid the tit-for-tat European Union tariffs on motorcycles shipped from America.

The EU raised its tariffs from 6 percent to 31 percent in June 2018, in response to US President Donald Trump's tariffs on aluminum and steel. That would have equaled around $2,000 per bike for Harley.

Levatich shut an assembly plant in Missouri last year as sales in the US slumped. But the company's overseas plans angered Trump, who went so far as to encourage customers to boycott the company last year.

"A Harley-Davidson should never be built in another country — never!" Trump tweeted in June 2018. "Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end."

Harley said it chose to work with Qianjiang, a subsidiary of Geely, which owns Volvo, because of its expertise in producing small bikes. Qianjiang also has a stake in Daimler AG, the parent company of Mercedes Benz.

The new bike would be one of the company's smallest, with an engine displacement of 338 cubic centimeters. Harley's typical motorcycle sold in the US has a 601 cubic-centimeter engine.

Lightweight bikes and small scooters are very popular in Asian countries like Thailand, where the company has a manufacturing plant. It's also able to avoid additional import duties by making bikes there. Harley also has a manufacturing plant in India.