Call it the tale of the Dragon and the Hog. Soon, Chinese highways may ring out with the distinctive growl dear to motorcycle fans worldwide, as Harley-Davidson (HDI) in April opens a Beijing dealership, its first authorized outlet in the mainland. While Chinese biker culture today may be more about pedal-power than Harley-style hyper-horsepower, the company is betting that will change as the mainland's economy continues to surge. "We are looking at China as a long-term market exercise," says David Foley, Harley's managing director in the country.
Long-term may be the operative phrase. Harley's lineup, which will include the Touring, Softail, and VRSC series, will cost more in China than those models do in the U.S., once import duties and taxes are added in. Harley's American lineup of 30-odd bikes ranges from about $6,600 to $21,000. That may make rounding up Chinese customers a tough proposition. The average U.S. Harley owner earns about $83,000 and has little problem financing a coveted Hog. But in China, per capita yearly income is all of $1,200.
WEEKEND WARRIORS? Die-hard Harley fans with the financial means may well buy Hogs. Harley "does represent the quintessentially American brand, and will likely thrive in time," says Lubo Li, a senior director of business development and marketing with auto consultancy J.D. Power Asia Pacific in Shanghai. But he thinks it may be years before China really develops a big community of leather-clad bikers (and the doctors and lawyers who like to don their leather and tool around on weekends).
The move into China is part of Harley's push to take its bad-boy image global. In the U.S., the $5.3 billion motorcycle manufacturer rules the heavyweight premium-bike segment with a 48.9% share, well ahead of Japanese rivals such as Honda (HMC) and Suzuki. Overseas is a different story. Although Harley's international deliveries grew 15% in 2005, the U.S. still represents more than 80% of the company's sales.
And its biggest foreign market isn't fast-growth Asia, but Europe, where it sold about 30,000 bikes last year. Canada came next, with 11,700, followed by Japan with 11,400, according to company data. Harley groups China into an "all other countries" category of about 11,200 bikes in 2005.
SLOW START. Harley says it's not expecting immediately to twist the throttle in China. After the Beijing dealership opens, Foley suggests any further roll-out may be slow. And Harley has no immediate plans to manufacture in China, which would help make its prices far more competitive.
In 2004, the company signed a memorandum of understanding on a possible joint venture with Zongshen Motorcycle Group, one of the mainland's biggest bike manufacturers. But nothing has come of it, Foley says. Honda, the biggest foreign motorcycle maker in China, with just under 10% of the total market, has been producing and selling scooters and midsize bikes with partners since the early 1980s.
One advantage of the new dealership: It will discourage illicit smuggling of Harleys and the development of a black market. With its own outlet, Harley will be able to better protect its brand and provide the kind of service that is essential to building up a brand loyalty. "Customers will now have an opportunity to buy officially authorized Harleys," says Foley. "And we can offer them factory-trained technicians and warranties."
CULTURE CLUB. That's not to say that China isn't home to pockets of Harley fanatics. A handful of Hogs have been on Chinese highways for the better part of a decade, piloted by the likes of Qin Huan. He is a longtime Harley owner, and founder of the Beijing Chrome Horse Motor Club. His group today provides service for Harleys, but Foley says the club won't be an authorized repair shop.
That treatment has angered Qin, who thinks the company is being narrow-minded when it comes to loyal customers. "I believe Harley is more about culture than business," he says. "Without the culture it stands for, Harley loses its meaning."
Foley and the team at Harley don't see it that way. The company believes a more formal structure will better serve Chinese consumers. Either way, it seems that more Hogs are likely to be poking their noses into the dragon's lair.
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