Kolkata, India — Some 25 Harley Davidson motorcycles from the United States roared through the streets of India’s capital New Delhi on Sunday, aggressively announcing their arrival in one of the world’s largest motorcycle markets. The Milwaukee, Wisconsin-based macho brand is riding into India on a one-of-a-kind trade deal made in mid-2007, in exchange for relaxed U.S. import curbs on Indian mangoes. But for India’s king of fruits the ride has been anything but smooth.
India’s lofty hopes of swamping U.S. markets with its wide variety of mangoes, when the two countries inked the deal, are rapidly turning sour as mango exporters grapple with a myriad of problems.
Exports over the last two years have been only 400 tons against an expected annual export of 1,500 tons. A major reason is lack of irradiation facilities in India, which involves exposing the mangoes to Cobalt 60 gamma rays to kill harmful bacteria, pests and parasites – a condition imposed by the U.S. government. The Bhabha Atomic Research Center near Mumbai, the only place in the country that can do that, has limited irradiation capacity.
Also, India exports its mangoes by air. This adds to their cost, making them uncompetitive vis-a-vis Mexican and Philippine mangoes exported to the United States.
Mango exporters say what appeared to be an assured market two years ago has turned out to be a tough nut to crack, with exports ending up in a trickle.
In April 2007 – when Kamal Nath, the Indian commerce minister and Susan Schwab, the U.S. trade representative signed the deal following former U.S. President George Bush’s approval a year earlier – the swap was touted as a major coup by India’s United Progressive Alliance government. Mangoes from India had been banned in the United States for the past 18 years following quality and health concerns by the U.S. Food and Drug Administration.
But while that ban deprived Indians in the United States of their favorite fruit, it also hurt India’s pride, since Indian mangoes were already famous and accepted in many other parts of the world.
So when financially struggling Harley Davidson pleaded with India to relax its strict emission norms and lower import duties for entering the country, India struck back by demanding the lifting of the U.S. mango ban as a quid pro quo.
After a year of bickering, India agreed to change its emission rules to allow sales of motorbikes with engine capacities of over 800cc that meet Euro-III emission norms, but did not lower the import duty. The United States also agreed to import mangoes from India, provided they went through the World Health Organization-approved irradiation process and stringent packaging norms.
Exports of mangoes started immediately thereafter. For Harley though – since it was waiting for the “right time,” according to Harley’s president and chief operating officer, Matthew Levatich – the entry was delayed until last weekend. The company announced on Friday that Harley bikes would start selling in India from early 2010.
“The sheer size of the U.S. market and the pent-up demand for Indian mangoes among the 2 million strong Indians were enough for us to hope for at least 1,500 tons of exports a year to start with,” said Parag Gandhi of Om Mango, the largest mango exporter. “However, India so far has managed to export a measly 400 tons.” The U.S. market is estimated at about 250,000 tons a year.
Exporters say that Indian mangoes are losing out heavily to competition. The biggest reasons are logistical problems and inadequate irradiation capacity, both of which are raising mango prices.
“India hasn’t been able to work out a way to export using the sea route and that is adding US$9 to US$12 to the shipping cost,” said a spokesperson from APEDA. The additional cost is calculated per box of 3.5 kilograms.
“Besides, competition from countries like Mexico and the Philippines is taking its toll as well. Since these countries are not required to adhere to the norms applicable for India, the U.S. market is getting increasingly tough for us.” said Gandhi.
Sources say that Mexico, a U.S. neighbor, does not have to incur irradiation costs and has been able to price its mangoes over US$10 cheaper than India's US$32 to US$35 per box. And the Philippines is able to beat Indian prices by shipping them through the much cheaper sea route.
For that matter the Indian market may not be easy for Harley either. “India is the second-largest motorcycle market, but that's for inexpensive bikes, so certainly our initial volume targets are modest in the context of Harley Davidson worldwide,” said Levatich in an address to the press. China is the world’s largest market for motorcycles.
Harleys that are sold in India will have engine capacities of 800cc and above and carry a hefty price tag of US$14,000 for entry-level models, which includes the 104 percent import duty.
“Harley’s initial target is about 20 bikes in the first year. That may not have much of an impact,” said Dilip Chenoy, director general of the Society of Indian Automobile Manufacturers. “The overall two-wheeler market in India is 8 million, most of which belong to the below-250cc segment. High-end bikes constitute less than 1 percent of that and for super bikes, the likes of Harley, this market is even smaller.”
The other worry is that Harley needs young followers. Given its steep price, will it be able to get enough converts?
Still, for Harley the India foray is of strategic importance. "As India continues to extend its global reach, so does Harley-Davidson,” said Levatich. “India is important to our long-term vision of being a truly global company.”
Like in China, Levatich is banking on India’s rapidly growing economy, rising middle class, and significant investments in new highways that could open the door to leisure motorcycle riding.
“When other high-end auto brands like Mercedes Benz, BMW, Audi, etc., made their forays in the Indian market there were similar doubts. But all have found enough room at the top, and so would Harley perhaps in the next few years,” said Chenoy. Harley said it is looking at reaching a target of 100 bikes a year in about two years from 2010.
Meanwhile, mango exporters are hoping that their problems will be overcome soon. “We are trying to work out a sea route for shipping to the U.S. and the government is trying to increase irradiation capacity. We hope to be able to increase exports considerably after these measures. Receding recession in the U.S. has also raised our hopes,” said Gandhi.
Similarly, Harley too is “looking at the vast opportunity in the world’s second-largest two-wheeler market,” said Levatich, and is hoping that India’s “buoyant economy" will make the ride easy soon for the niche-bike segment.
In any case, both mangoes and motorbikes have a good deal of travel to do to woo the palate and passion of consumers.
Source : upiasia.com