Harley-Davidson to take big hit from EU tariffs

Harley-Davidson will face up to $100 million in additional costs on a full-year basis as a result of the European Union’s (EU) increased tariffs on the company’s motorcycles.

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The EU decision to place tariffs on various U.S. products, including Harleys, was in retaliation to the U.S. imposing tariffs on steel and aluminum exports from the EU into the U.S.

EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%. As a result, Harley-Davidson said there will  be an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.

Harley-Davidson felt that if it passed on the cost increase to dealers and customers it would have an immediate negative impact on its business in the EU, including threatening the sustainability of its dealers’ businesses. For that reason, Harley said it would absorb the additional costs.

The company estimates the incremental cost for the remainder of 2018 from the tariffs to be approximately $30 to $45 million. On a full-year basis, the company estimates the aggregate annual impact will be approximately $90 to $100 million.

In addition, to address the substantial long-term cost burden from the tariffs the company plans to shift production of motorcycles for EU destinations from the U.S. to international facilities. This will avoid the tariffs.

Harley-Davidson expects ramping-up production in international plants will require investment and will take at least 9 to 18 months to be fully complete.

The company added, “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe.”