Harley-Davidson Inc. will not be raising the retail or wholesale prices of motorcycles to combat the European Union tariffs, the company has announced.
On June 22, the European Union placed a tariff on various U.S.-manufactured products — including Harley-Davidson motorcycles — in response to tariffs President Donald Trump imposed on steel and aluminum exported from the EU to the U.S.
The EU tariffs on exported Harley-Davidson bikes will increase to 31% from 6%, the OEM wrote in a SEC filing on Monday. This will add about $2,200 per motorcycle shipped from the U.S. to EU.
To compensate for the tariffs, Harley will not raise the retail or wholesale pricing, but it is considering moving some of its production from the U.S. to its European facilities.
“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses,” the OEM said in the filing.
Harley-Davidson will bear the cost of the tariffs and estimates that the incremental cost for the remainder of 2018 to be approximately $30 to $45 million, while the full-year cost due to the EU tariffs will be approximately $90 to $100 million.
Moving more production to Europe is “not the company’s preference” but it is the “only sustainable option” in order to maintain business in Europe, according to the filing. The European market is the second-largest for Harley, with 40,000 riders buying new motorcycles in 2017.
However, the OEM is facing political pressure from the president who Tweeted about the company on Tuesday.
A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!
— Donald J. Trump (@realDonaldTrump) June 26, 2018
As for how the tariffs and Harley’s production decision will affect new and used motorcycle sales, it could take some time before any cause and effect is notable.
“The tariffs are probably going to take a while to trickle down to where we are going to see them,” Scott Yarbrough, Editor of the Black Book Official Motorcycle & Powersports Value Guide, told Powersports Finance. “[The European tariffs] are going to be a problem for Harley-Davidson on the corporate level and how they maneuver around it on the political level, but it’s not going to be something that will affect values here yet.”