While the United States’ tariffs remain an obstacle to Harley-Davidson’s international markets, CEO Matthew Levatich hopes to use the company’s Thailand plant to access the European market with lower costs.
Levatich spoke about the tariffs and Harley-Davidson’s new electric motorcycles at Code, an annual technology conference. Levatich defended Harley-Davidson (NYSE: HOG), which has been criticized by President Donald Trump in the past year.
Last year Trump attacked the company in several tweets for plans to move part of its production of motorcycles abroad and over the closure of the company’s Kansas City factory, which had its last day of production less than two weeks ago.
“To set the record straight, we sell motorcycles in over 100 countries across the world over 90% of them are made in our plants in the United States. The engines have been built in Milwaukee since the very beginning,” Levatich said.
“If you walk around our factories there’s no doubt about the fact that we are heavily invested in American manufacturing,” he continued.
Though Harley-Davidson is largely U.S.-based, the company was not immune to the effects of a trade war between the United States and Europe. In response to U.S. steel and aluminum tariffs, in June of 2018 the European Union enacted retaliatory tariffs on U.S. imports of bourbon, jeans and motorcycles.
These tariffs raised the duty rate from 6 percent to 31 percent overnight, Levatich said.
Because of uncertainty about when tariffs will end, Harley-Davidson plans to use its Thailand plant to assemble U.S.-made components of motorcycles to keep tariffs at 6 percent.
While President Trump called the shift oversees a capitulation, Levatich called it necessary.
“We run the business based on facts and circumstances. Those are significant costs to the business. We have no idea when the tariffs are going to go. We have to figure out a plan and our investors want to know what our plan is. These are our obligations as a company,” he said.
The increased tariffs would have caused a $2,000 increase in the price of motorcycles in Europe — if the company had not assumed the cost.
“We made the decision to cover that tariff to pay that toll and preserve our retail prices in Europe and to carry that burden,” he said.
And the burden came with a price tag of $100 million a year, said Levatich.
While Harley-Davidson was forced to make some hard decisions, the company didn’t stop innovating. Harley-Davidson is working to grow its ridership through its introduction of electric bikes, Levatich said. The company is expected to ship its first ever electric bikes, LiveWire, in August.
In the summer of 2013, Levatich rode one of the first prototypes of LiveWire. The bike, while like the traditional gas-powered Harley-Davidson in many ways, bears one significant difference. The engine is quiet.
During his ride, Levatich recounted cresting a Milwaukee hill at high speeds and being able to hear birds and even crickets.
“It’s not what you don’t hear, it’s what you now hear,” Levatich said.
Levatich hopes the electric motorcycle will draw new riders to Harley-Davidson because of its easy use. Without a clutch or gears, operating the bike is a simple “twist and go,” said Levatich. And with an acceleration of zero to 60 mph in three seconds, riders can go far.
“This company was founded by four young men in Milwaukee in 1903 who wanted to go farther faster with more fun,” Levatich said. “Throughout the entire history of the company we have been fixated on the ride.”
And though the ride may be different without the loud engine, Levatich thinks that the new design will be popular with a younger, urban generation of riders.
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