NEW DELHI: Time and again, United States President Donald Trump has used Indian import tariffs on luxury two-wheeler brand Harley Davidson to make the point that India levies high import duties on American products, and that existing trade deals are unfair.
Trump, late Monday, reiterated the point, going on to term India as “tariff king”. “India charges us tremendous tariffs. When we send Harley Davidson motorcycles, other things to India, they charge very, very high tariffs,” Trump said, adding that he had brought up the issue with Indian Prime Minister Narendra Modi, who he said was “going to reduce them very substantially”.
The last time when India cut down import duty on bikes of 500-800cc category and above 800cc category to 50 per cent, from 60 and 75 per cent respectively, it was expected that demand for luxury bikes will pick up. However, that did not happen.
Recent data available with Society of Indian Automobile Manufacturers (SIAM) shows that Harley Davidson’s India unit — H-D Motor Company India — sold 1,291 units in the April-August 2018 period against 1,445 units sold in the same period last fiscal. Its India rival, Triumph Motorcycles, also saw sales falling to 513 units from 577 units in the same period. The fall in sales is attributed to Central Board of Excise and Customs’ (CBEC) decision to hike customs duty on import of engines, gearbox and transmission mechanism, to 15 per cent from the earlier 10 per cent.
This, coupled with a higher tax rate under GST for bigger motorcycles and a new 10 per cent social welfare surcharge on imported items, have made them significantly more expensive as around three-fourth of the units sold in India are assembled here.
As a result, Triumph is considering importing more from Thailand in the short term via the Free Trade Agreement (FTA) route, as it is more cost-effective. India has an FTA with the 10-member ASEAN, of which Thailand is a part of.
However, for Trump, who wants to cut down his country’s trade imbalance with India there is no substitute to lower import tax and a more open Indian market. “Cut down 30-40 per cent taxes and the entry-level bikes of these brands will compete with Royal Enfield bikes that sell over 65,000 units per month. If Harley, which recently announced making smaller bikes for Asian market, gets such a favourable environment, it can serve a dual purpose — control falling global sales and reduce US-India trade imbalance,” said an industry expert. Harley’s share in the Indian superbike market has fallen to 46 per cent in FY17 from a peak of 92.35 per cent in FY13.
India’s trade deficit with US hovers around $21 billion. India imported $25.7 billion worth of goods from the US in 2017, while exports stood at $48.6 billion.