Milwaukee-based Harley-Davidson Inc. expects a ruling to come in a few weeks for the company’s appeal on a 50% tariff increase for Harley exports to Europe, president, chairman and CEO Jochen Zeitz told analysts on an earnings call today.
The motorcycle maker will seek temporary relief from the tariff increase, which would allow Harley-Davidson to continue importing to Europe with a 6% tariff until a decision has been made on the appeal.
Zeitz called the tariff increase “unprecedented, unfair and a deliberate attempt to create a competitive disadvantage” against European competitors, adding that “exiting Europe is certainly not an option,” he said.
“It bears repeating, if not for the tariffs, which are now threatening our recovering export potential, we could be investing in jobs in our American facilities, leading the world in electric innovation, researching, engineering, design and advance manufacturing,” Zeitz said. “Instead, we are facing huge tariffs in a trade war not of our making.”
The European Union increased its tariffs on 800cc and up motorcycles from 6% to 31% in 2018 in response to then President Donald Trump increasing tariffs on steel and aluminum. The new EU tariff is set to increase to 56% in June.
After the tariffs were announced, Harley said it would move production overseas to avoid the new costs. The company said the initial increase alone would add $2,200 to the average cost of a bike in the EU and it couldn’t afford to pass the cost on to dealers or consumers.
In the second quarter of 2019, Harley received approval from EU regulators to import bikes from a newly constructed facility in Thailand. The company had originally built the plant to increase its access to Asian markets. Like other international plants, the Thailand facility received parts for Harley and performed final assembly.
If Harley’s EU appeal is denied, the tariff increase would take immediate effect. However, if the appeal is granted, Harley would have the “legal certainty to continue to import at a rate of 6%,” Zeitz said.
One analyst asked Zeitz if Harley-Davidson would look to the Biden Administration for support.
“As you can imagine, we are pursuing all available remedies,” Zeitz said. “We do not talk about individual conversations but obviously conversations are to be had.”
In announcing its guidance for the remainder of 2021, Harley said its operating margins could be cut by 2 percentage points if the tariffs cannot be mitigated. Without mitigating actions, the company anticipates it would face $135 million in costs this year and $200 million to $225 million on an annualized basis.
Europe is a significant market for Harley. As recently as 2018, the company had more than 10% market share for new registrations of 601cc and up motorcycles. In 2020, Harley’s market share was down to 7.7% with around 31,500 bikes registered.
