Harley-Davidson Records Positive Q1 2021 But EU Tariff Threat Looms

Harley-Davidson reported a 9% increase in motorcycle sales volume and 12% increase in sales revenue over the first quarter of 2021, encouraging signs that the new Hardwire business plan is paying off.

According to its first quarter 2021 report, Harley-Davidson reported sales of 44,200 motorcycles, compared to 40,400 motorcycles sold in the same period last year. The increase was fueled almost entirely by North American sales, which saw a 30% jump to 32,800 units over the quarter. This was enough to more than offset a 36% decline in European sales, which was impacted by the company’s decision to stop selling Sportster and Street models in those markets.

Motorcycle sales generated $1.02 billion in revenue, up from $899 million in the first three months of 2020. Smaller gains in parts and accessories plus general merchandise raised the total revenue to $1.23 billion compared to $1.10 billion last year. Overall, Harley-Davidson reported a net profit of $259 million in the first quarter, up from $70 million in Q1 2020.

“I am very pleased with the pace of recovery that we have seen across our business, as demonstrated by the strong financial results this quarter,” says Jochen Zeitz, chairman, president and CEO, Harley-Davidson. “We can see the initial signs of consumer excitement and optimism returning and I am confident Harley-Davidson in 2021 is a significantly leaner, faster, and more efficient organization which is ready to win and successfully deliver on our 5-year Hardwire strategy, as the most desirable motorcycle brand in the world.”

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The first quarter financial report wasn’t all good news, though, as Harley-Davidson faces a new challenge with European Union import tariffs on its products about to jump from the current 6% to a staggering 56% as of June.

Since 2019, Harley-Davidson operated with what are called Binding Origin Information (BOI) credentials which allowed it to import products to E.U. markets at a 6% tariff rate. As of April 19, however, the E.U. revoked the BOI, raising the tariff to 31%. Barring any changes, that figure is set to increase to 56% as of June 1. The tariff applies to all Harley-Davidson products imported to E.U. states, regardless of their place of origin. By comparison, motorcycles from European OEMs shipped to the U.S. face a 1.2% tariff for displacements up to 800cc and 2.4% for motorcycles with larger engines.

“This is an unprecedented situation and underscores the very real harm of an escalating trade war to our stakeholders on both sides of the Atlantic,” says Zeitz. “The potential impact of this decision on our manufacturing, operations and overall ability to compete in Europe is significant. Imposing an import tariff on all Harley-Davidson motorcycles goes against all notions of free trade and, if implemented, these increased tariffs will pose a targeted competitive disadvantage for our products, against those of our European competitors.”

Ironically, the BOI was revoked just days after the 38th anniversary President Ronald Reagan signing Presidential Proclamation 5050 which placed a 45% tariff on motorcycles imported to the U.S., a move that Harley-Davidson petitioned for.

Harley-Davidson will be lodging a legal challenge on the revoking of its BOI. If the petition fails, a 56% tariff would severely affect Harley’s ability to compete in Europe. The recently launched the Pan America 1250 was in part designed to attract customers in Europe where adventure bikes dominate sales.

With the additional E.U. tariffs, Harley-Davidson expects to see an operating income margin of 5-7% for 2021, but the outlook is a rosier 7-9% if it is successful in mitigating the tariffs.

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