US President Trump has repeatedly flagged import duty imposed by India against fully assembled bikes as a “discriminatory” trade practice.
But the rage seems logically congruent and misdirected as it is not consistent with the ground situation in the trade.
Why is Mr. Trump’s rhetoric flawed?
Tax cut - Recently, the Indian Finance Ministry slashed Customs duty on fully assembled motorcycles of engine power over 800cc to 50%.
Previously, import duty on new bikes with engine capacity of up to 800cc, was 60%, and that on bikes with capacity of over 800cc, was 75%.
But despite the current duty cut, President Trump had made it clear that it wasn’t enough and that he was expecting more.
Notably, Mr. Trump’s statements have specifically highlighted the cause of legendary U.S. bike maker “Harley Davidson”.
Misdirected rage – The market scenario reflects that the import duty on fully assembled bikes would have little impact on Harley Davision’s sales.
This is because the company has been assembling motorcycles in India at its CKD assembly unit at Bawal in Haryana since 2011.
Harley-Davidson offers a range of about 13 models in India, of which eight (including its two bestsellers) are assembled at the Bawal unit.
Only the high-end modes of “Touring range and the CVO”, which carry price tags of over Rs 30 lakhs, are brought into India as full imports.
These models, however, are a minuscule portion of the total sales in India.
Significant Miss - Contrarily, Mr. Trump seems to have missed out the more significant tariff hike for automobile parts in the 2018 budget.
Motorcycles imported in a “Completely Knocked Down (CKD) form” (further dismantling is not possible), was hiked from 10% to 15%.
Notably, India is only the second country where Harley-Davidson has set up CKD assembly operations outside the US, after Brazil.
Hence, the CKD duty would be the greater worry for it, rather than the duty on fully-built bike imports.
How does the future look?
India is currently the world’s largest motorcycle market, and 2017 alone saw close to 18 million two-wheelers being sold.
Despite this, Mr. Trump’s tax cut demands to enhance U.S. bike sales seems irrational and will do little to help the industry there.
His threat of reciprocal taxation on Indian motorbikes also won’t have much impact on the Indian companies that are importing bikes to the U.S.
Notably, U.S. was traditionally never a significant market for Indian bikes and Royal Enfield is the only Indian brand to have a market presence there.
Royal Enfilend too has limited sales there and carters to a niche clientele which is mostly the Indian Diaspora that is looking for a 2nd bike.
