[luky_13]

Originally Posted by Roy.S

The auto section of the Hindu carried this news today.
I get the feeling that costs will not come down that much. HD would probably not want to lose the 'premium product' tag by slashing prices by 80%. 15% or so seems to be a more realistic figure.
I hope I'm wrong.

The price advantage should be equivalent to the reduction in custom duty from 110% for new imports to 30% on CKD, so i'm assuming a this will be passed on to the end customer. After all they cannot do a lot of business at these exorbitant prices.

New Import
HD Sportster cost in US - $ 7,500
Duty on new import - $8,000
Total - $ 15,500 = Approx 7.5 lakhs, which is the asking price in India

CKD
HD Sportster cost in US - $ 7,500
Duty on CKD @ 30% - $2,250
Total - $ 9,750 = Approx 4.6 lakhs, which is the should be the price on once of assy operations have kicked in.

[EssYouWe]

This would be really attractive pricing!

Glad to see the market maturing

Time to start saving!

Cheers

[Roy.S]

Originally Posted by luky_13

............

CKD
HD Sportster cost in US - $ 7,500
Duty on CKD @ 30% - $2,250
Total - $ 9,750 = Approx 4.6 lakhs, which is the should be the price on once of assy operations have kicked in.

That would be a dream come true. If these prices become reality, then my next car is gonna be a bike.

[burnt.]

Originally Posted by luky_13

CKD
HD Sportster cost in US - $ 7,500
Duty on CKD @ 30% - $2,250
Total - $ 9,750 = Approx 4.6 lakhs, which is the should be the price on once of assy operations have kicked in.

What about the cost of setting up the assembly facility. That capital has to be recovered from the limited volumes that they do. End result - No dramatic changes in price. Might drop by around 20-30% only.

Besides duty is not calculated on the retail price in the country of import. It is calculated on the factory prices. That means your calculations don't hold water.

The price here is not just determined by : cost in US + duty. The cost of shipping, their infrastructure, all other expenses need to be recovered. In the CKD route, while the duty part of the price goes down, the investment part goes up exponentially. So considerable change in pricing is highly unlikely.

In the long term if volumes improve dramatically, then prices will definitely come down. The volume of business will be the deciding factor.

[gthang]

Since we are speculating(thats all that we can do for now) pricing, we should also consider the fact that $7500 for an 883 is MSRP, taking all US expenses and profits into account. Surely a knocked down kit for export should not cost that much.

That should throw a wrench into the calculations.

[aargee]

Originally Posted by nandishpal

the first lot of owners who bought bikes at a higher price will never be disappointed as the first lot of bikes has a customised clutch cover with FIRST TO RIDE IN INDIA embossed on it,
which is more than enough to boast & value the bike

Lol; that isn't true as I see two 3 possibilities...
1. Get the same customization done at local lathe
2. Place like Mumbai will have ppl who can steal them & sell it
3. There will be a local manufacturer who might get into this business on embossing such a stuff on steel or selling sticker

Originally Posted by downsouth

80% is way off the charts, that would bring the whole cost of the bike to a lot less than what people have already paid.

+1

Originally Posted by downsouth

I can live without...assembled in the US of A.

+1

Originally Posted by luky_13

The price advantage...exorbitant prices.

+1; strongly agreed

Originally Posted by burnt.

What about the cost of...limited volumes that they do.

Well, you forgot one more point - Service!!!
Also, setting up a manufacturing plant in India will be in Rs & when converted to $s will be lot lot less, since the pricing is almost same as in US, they'll be able to recover the cost & anyway the 30% tax they're collecting from us is going to Govt. So IMO, its perfectly justified as luky_13 says.

Originally Posted by burnt.

In the long term if volumes improve dramatically, then prices will definitely come down. The volume of business will be the deciding factor.

Yes it will; HD would've not even come to India unless they've surveyed the market properly here. Setting up factory is another story. If they're able to launch the 883 CC for 4.6L, that would be a killer seller.

[luky_13]

Originally Posted by burnt.

What about the cost of setting up the assembly facility. That capital has to be recovered from the limited volumes that they do. End result - No dramatic changes in price. Might drop by around 20-30% only.

Besides duty is not calculated on the retail price in the country of import. It is calculated on the factory prices. That means your calculations don't hold water.

The price here is not just determined by : cost in US + duty. The cost of shipping, their infrastructure, all other expenses need to be recovered. In the CKD route, while the duty part of the price goes down, the investment part goes up exponentially. So considerable change in pricing is highly unlikely.

In the long term if volumes improve dramatically, then prices will definitely come down. The volume of business will be the deciding factor.

These prices are as on HD's USA website, $6999.
2010 New Bikes | Harley-Davidson USA

This is the retail price in USA, which includes 'all costs' assembly+manufacturing+marketing but still i added an additional $500.00 for additional charges in India. You are right in saying that there are costs to additional infrastructure they are setting up in India, but these are not exponential when they are planning on only 200 bikes a year. Which does not translate to even 1 bike / day!

[axp817]

Originally Posted by burnt.

What about the cost of setting up the assembly facility. That capital has to be recovered from the limited volumes that they do. End result - No dramatic changes in price. Might drop by around 20-30% only.

Besides duty is not calculated on the retail price in the country of import. It is calculated on the factory prices. That means your calculations don't hold water.

The price here is not just determined by : cost in US + duty. The cost of shipping, their infrastructure, all other expenses need to be recovered. In the CKD route, while the duty part of the price goes down, the investment part goes up exponentially. So considerable change in pricing is highly unlikely.

In the long term if volumes improve dramatically, then prices will definitely come down. The volume of business will be the deciding factor.

+1.

I agree that a lot of the numbers being presented here haven't taken into consideration the capital expenditure that setting up a local assembly involves.

Not that I know a whole lot about the automobile business, or the duty structure in India, but doesn't the CKD car industry provide a standard/reference for approximation?

The Mercedes C and E, and the BMW 3 and 5 series models that are sold in India as CKDs, cost ~ Rs.33,00,000 and Rs.45,00,000 respectively.

At an exchange rate of $1/Rs.44, this is ~ $75,000 and $102,000.

Similar (not exactly the same though, larger engines) models in the U.S., cost $39,000 and $48,000 respectively, which is roughly two times.

If we were to extrapolate these calculations to HD, the cheapest Sportster in the U.S. which costs $7,999, would cost $16,000 = Rs.7,02,000 in India, which isn't a whole lot less than what the CBU Sportster sells for.

Maybe relative costs in the motorcycle CKD business are lower than in the CKD car business, which might bring this number down, but probably not by much.

And I like to give the other party the benefit of the doubt, so we'll assume that the build quality will be on a par with HD USA.

To summarize, pricing probably won't change significantly, not all models will be available as CKDs, lead times will improve, and Harley could leverage this facility to fulfill demand in the rest of Asia although I wouldn't be surprised if that last item doesn't happen.

[axp817]

Originally Posted by luky_13

These prices are as on HD's USA website, $6999.
2010 New Bikes | Harley-Davidson USA

This is the retail price in USA, which includes 'all costs' assembly+manufacturing+marketing but still i added an additional $500.00 for additional charges in India. You are right in saying that there are costs to additional infrastructure they are setting up in India, but these are not exponential when they are planning on only 200 bikes a year. Which does not translate to even 1 bike / day!

That was the 2010 Sportster, the cheapest 2011 Sportster is $7,999.

Yes, lower volumes loosely translates to smaller investments, but those volumes are for the near term and not permanent, and investments in long term assets aren't necessarily incremental in nature, unless this is truly a "pilot" project, where they build a facility that can produce about 200 units a year, see how it goes, and then expand as they go along.

And how about the disadvantage of not having economies of scale that lower volumes pose? Economies of scale are probably why the U.S. prices are the way they are.

Just look at other big name auto companies in India - BMW, Mercedes, Yamaha, Suzuki, Honda. The regulatory environment that they operate in, the availability of labor and manufacturing capabilities, etc. are all the same.

The way the competition is, their margins are probably very similar as well.

In fact, the Japanese motorcycle companies even have the advantage of an established and existing relationship with local partners, and they have still been slow and cautious in exploring the CKD market.

Harley is in the same market, and will have to deal with the same factors.

Although, they do seem to be the ones with the most enthusiasm. Or maybe it just seems that way because my interest, hence exposure, is focused only on Harley and not these other companies.

Here is my prediction,
- The Sportster family, and probably not the entire line up, will be available as CKDs.

- The models that are available as CKDs, will not be available as CBUs, of course.

- The CKD models won't be more than 25-30% cheaper than if they were sold as CBUs. Of course, the same models won't be available as CBUs at that point, so there won't be a reference point, but we can come back to the 2010 HD India price list to make comparisons.

[luky_13]

Originally Posted by axp817

That was the 2010 Sportster, the cheapest 2011 Sportster is $7,999.

The sportster sold in India is the 2010 883L (L - Low), priced at $6,999.00 in the US. $7,999 is the Sportster Iron 883 which is quite different.

[gthang]

Originally Posted by axp817

Just look at other big name auto companies in India - BMW, Mercedes, Yamaha, Suzuki, Honda. The regulatory environment that they operate in, the availability of labor and manufacturing capabilities, etc. are all the same.

The way the competition is, their margins are probably very similar as well.

In fact, the Japanese motorcycle companies even have the advantage of an established and existing relationship with local partners, and they have still been slow and cautious in exploring the CKD market.

Is it fair to compare CKD assembly plants of car manufacturers with bike makers? The infrastructure will be drastically different.

Japanese have only been interested in huge numbers in India, which means cheap and reliable, and was never interested in premium/CKD. Dont think they ever will.

Harley does not have that option. They knew coming in their range is premium, in all markets, and tried their best to convince Indian govt. to reduce tax, which at 110% puts it way out of reach for a lot of people. Google on this and you will find stories dating back to "Harleys for Mangoes" days.

Their primary goal in making a plant here is to reduce cost. If govt. isnt going to reduce taxes, they have no other choice. They need to sell bikes to survive. Their domestic market is shrinking, and as you might have heard, India is booming. Obviously they will reduce from current prices. And assembling one range or complete range should not make a big difference in facility setup.

[aargee]

Originally Posted by luky_13

The sportster sold in India is the 2010 883L (L - Low), priced at $6,999.00 in the US. $7,999 is the Sportster Iron 883 which is quite different.

You're bang right on the price
Source - 2010 New Bikes | Harley-Davidson USA

We're yet to get the Iron 883 model. No one knows inside out of HD other than you do

Originally Posted by gthang

Their domestic market is shrinking, and as you might have heard, India is booming. Obviously they will reduce from current prices. And assembling one range or complete range should not make a big difference in facility setup.

Absolutely right. If they do not setup the factory, they aren't making money. IMO, they're in the right time to do this as no one else have been thinking about setting up a motorcycle factory (an exception could be Kawasaki Heavy Industries).

[axp817]

Originally Posted by gthang

Is it fair to compare CKD assembly plants of car manufacturers with bike makers? The infrastructure will be drastically different.

Japanese have only been interested in huge numbers in India, which means cheap and reliable, and was never interested in premium/CKD. Dont think they ever will.

Harley does not have that option. They knew coming in their range is premium, in all markets, and tried their best to convince Indian govt. to reduce tax, which at 110% puts it way out of reach for a lot of people. Google on this and you will find stories dating back to "Harleys for Mangoes" days.

Their primary goal in making a plant here is to reduce cost. If govt. isnt going to reduce taxes, they have no other choice. They need to sell bikes to survive. Their domestic market is shrinking, and as you might have heard, India is booming. Obviously they will reduce from current prices. And assembling one range or complete range should not make a big difference in facility setup.

The absolute costs will certainly differ between cars and motorcycles, but the infrastructure expenses as a percentage of sales will probably be about the same. And I have acknowledged this fact in post # 23.

I think you're right about the Japanese. Their focus in India is probably on the commuter segment more than the leisure rider, I didn't realize that earlier.

And I just read somewhere on this thread that the duty on CKDs was 30%, where did that number come from? The media report (that was attested by HD India) that I read, said 60%, I think.

Assuming the duty on CBUs is 100%, a savings of 60% on duty is a savings of 20% on the final price (A $100 bike that would sell for $200 as CBU, now sells for $160 as CKD. Savings = 40/200 = 20%). This is without including the costs of setting up and running assembly operations.

That said, doesn't it seem that a very optimistic figure for savings is still about 25%? Not that 25% is small...

[axp817]

Originally Posted by aargee

You're bang right on the price
Source - 2010 New Bikes | Harley-Davidson USA

We're yet to get the Iron 883 model. No one knows inside out of HD other than you do


Absolutely right. If they do not setup the factory, they aren't making money. IMO, they're in the right time to do this as no one else have been thinking about setting up a motorcycle factory (an exception could be Kawasaki Heavy Industries).

I was looking at 2011. The 883 is not available in 2011, atleast not in the U.S. The cheapest Sportster for 2011 is the Ultra Low, which is priced at $7,999.

Although, you're probably right, the CKD Sportster in India will most likely include the 883.

[luky_13]

In my opinion HD, India doesn't need a very elaborate arrangement to assemble bikes in Gurgaon. Targets for the first year are a meagre 200, not very ambitious i must say for a giant. HD knows that India is an extremely cost sensitive market and thats why they have taken this rare call of assembling their 'Made in USA' bikes on our soil. They wouldn't have taken this step unless it were for major cost savings.

The duty breakup is as follows
1. Peak customs duty on CKD = 10%
2. CVD, Counter Veiling duty = 8%
3. SAD, Spl additional duty = 4%
4. Misc = 4%
Total = 26%, average it out to 30%

Refer Custom Duty :: SIAM , heading no. 87.11*