India reduces tariffs on heavyweight motorcycles and components

European brands are likely to benefit the most

There has been much activity recently on tariffs, with President Trump first imposing and then a few days later suspending tariffs on Mexican and Canadian imports into the US. The proposed tariff of 25% was a general one, on all imports from both Mexico and Canada (save a lower 10% on Canadian oil imports). Both countries were able to offer some concessions to the President in order to have the tariffs fairly quickly suspended for the present, though not cancelled permanently.

Not long after, the President then announced a 25% tariff on all imports of steel and aluminium, to take effect from March 12. For Canada and Mexico in particular, this tariff, if imposed, would apparently be cumulative on the suspended 25% tariff on all imports - that is, the tariff on Canadian and Mexican steel and aluminium imports could go to 50% if the earlier 25% tariff is reactivated. What effect that will have on US manufacturing, given that Canada is the largest and Mexico the third largest foreign supplier of steel to the US, remains to be seen. Canada, Mexico and the EU condemned the tariffs, with the EU in particular referring to retaliatory measures. We have already talked about the prospects for the US motorcycle industry if that comes to pass.

Flying somewhat under the radar, at least in much of the mainstream media, was an announcement in the Indian budget that tariffs on imported heavyweight motorcycles would be reduced. Prime Minister Modi is due to meet President Trump in the US on Feruary 12 and 13 and the two will have much to talk about. President Trump has in the past highlighted India’s high tariffs, along with other matters such as visas, as irritants in the US-India relationship. Trump has also threatened to impose retaliatory tarrifs on other nations in direct relationship to the tariffs imposed on US exports. India appears to have decided to attempt to assuage the US in advance of the talks.

The reduced tariffs announced by India appear in part to be directly aimed at large capacity US motorcycles, such as those made by Harley-Davidson and Indian. The tariff on motorcycles over 1600cc is cut from 50% to 30% and those under 1600cc from 50% to 40%. In addition, the tariff on semi-knocked down kits (‘SKD’) is reduced from 25% to 20% and on completely-knocked down kits (‘CKD’) from 15% to 10%. Its worth noting that these tariffs are not the whole cost payed by buyers of large-capacity motorcycles in India - there’s additional taxes of around 30% payable.

The pre-exisiting tariffs and costs were the main reasons Harley-Davidson had invested in a manufacturing facility in India in the middle of last decade. The factory at Bawal, outside of Delhi, produced two smaller-capacity motorcycles (the ‘Street 500’ and ‘Street 750’), primarily for the India market but also exported to other Asia-Pacific markets and also to the US for use at Harley’s own rider training schools.

Crucially, those these bikes were assembled in India, many of the parts were still made in the US and imported as CKD. Sales of these motorcycles were never great and this was not helped when Indian authorities decided that the CKD kits were not sufficiently knocked down to qualify for the lower rate (10% at the time, it was subsequently raised to 15%), imposing instead the duty for SKD parts (30% at the time). Although this dispute was eventually resolved in favour of Harley-Davidson, it is likely that the costs incurred in the interim, combined with poor sales, hastened the decision to cease manufacturing in India.

The market is now served through an arrangement with Hero MotorCorp (the world’s largest manufacturer of motorcycles and scooters), which since 2023 also manufactures a Harley-Davidson-badged motorcycle (the ‘X 440’), based on one of its own motors but with Harley-Davidson styling cues. This model sits well in the Indian marketplace, which is dominated by smaller-capacity engines, in part due to the taxation regime mentioned earlier.

Given this arrangement, its therefore highly unlikely that this reductions in India’s tariffs for SKD and CKD kits will entice Harley-Davidson (or Indian) to manufacture in India, despite this being an aim in the Budget speech. The primary problem for Harley-Davidson in India is the fact that it simply doesn’t offer any models smaller than 975cc (not counting the X 440, or the 350 and 500cc models made in China). Its also likely that the reduction in tariffs for larger capacity models will not lead to a significant increase in sales. The first year after ceasing to produce motorcycles in India, Harley sold only around 700 imported models, dropping to half that number by 2023. The main driver for sales in India is now the X 440 model, for reasons already outlined.

While a twenty-percent reduction in tariff for motorcycles over 1600 and a ten-percent reduction for those under 1600 will potentially attract some new customers for US manufacturers, the cuts will also benefit competitors such as BMW, Triumph and Ducati, particularly since all of them offer several models in the under 1600 bracket. BMW motorcycles recorded its best ever year in India in 2024, so a tariff reduction should further stimulate its sales. For Harley-Davidson fans in India and for the Motor Company itself it seems likely that Hero-made products are the future; so in that respect, these latest tariff cuts are certainly too late, if not too little.