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Expanding presence in China – April 24, 2006

April 24, 2006
Filed under Features

Working its way into the Chinese marketplace, Harley-Davidson (NYSE: HDI) took a big step forward recently when it appointed Beijing Feng Huo Lun as the first authorized Harley-Davidson dealer there.

Beijing Harley-Davidson is set to open this month. Headed by FHL founder, owner and Executive Director Wan Jidong, the dealership is located in northeast Beijing and will have an initial staff of 14. In addition to motorcycle sales and service, the dealership will offer rider training and organized rides and events buoyed by a large existing riders’ club in Beijing.

Opening a dealership franchise is just a part of Harley-Davidson’s plan in China. Ultimately, the company wants to develop a leisure motorcycle market there.

“We think that the growth in China’s economy holds long-term opportunities for us and motorcycles,” said Bob Klein, Harley-Davidson’s manager of corporate communications.

Entering the mainland China market has been and will continue to be a gradual process, the company said. Harley-Davidson first announced its intention to be part of the marketplace in China in summer 2004. The company has had employees in the country for about a year and maintains an office in Shanghai.

“That office has really been doing the ground work in terms of exploring the market and identifying a dealer and a location for a dealership,” Klein said.

Getting into new markets is nothing new to Harley-Davidson. The company has a presence in more than 60 countries globally, and entering each market is unique, Klein said.

The Chinese market presents some particular, although not unheard of, challenges.

First, there are riding restrictions or bans in 170 Chinese cities. In some cities, there are rules about where motorcycles can and cannot be ridden. In others, there are rules about licenses — some cities limit the number they grant. There are also riding restrictions and bans on a number of highways and freeways.

Harley-Davidson is working to revise or reverse these laws, in order to open up the market. Possible revisions will be addressed over the long-term, but already the company’s government relations team has begun to meet regularly with government officials to discuss policies, Klein said.

“It’s our experience that [addressing the issues] may take some time,” Klein said. “We’ve worked successfully with governments in a number of countries to address a number of similar issues.”

The second challenge is China’s economy is still developing and many citizens have limited, but growing disposable income. As the people’s buying power grows, Harley-Davidson would like to fill a niche there. But this, too, will be a long-term process, Klein said.

“Currently, the huge majority of motorcycles sold in China are for basic transportation: smaller, lightweight motorcycles,” Klein said. “We see the opportunity to grow a leisure market and that’s going to be our focus: motorcycles as great recreational products.”

Harley-Davidson sees FHL as the opportune dealer to help them reach that goal.

“Wan has more than 10 years’ experience selling and servicing motorcycles,” said David Foley, Harley-Davidson’s managing director in China. “He and his management team are motorcycle enthusiasts who share a passion for riding and who understand the market.”

FHL is based in Beijing, which has the most leisure motorcycle riders of any metropolitan area in China. The company also sells imported motorcycles throughout China. Their experience in the country was a major drawing point, Klein said.

“[FHL] understands motorcyclists and has a proven track record owners have come to expect,” Klein said. “It is a company that has experience at the premium end of the market.”

Like all Harley-Davidson dealerships, Beijing Harley-Davidson will be an independent, stand-alone store.

What does the future hold for Harley-Davidson in China? Klein won’t speculate on specifics. The Beijing dealership is a first step and is where the company’s immediate focus is, he said. From there, Harley-Davidson will continue to learn about the motorcycle market in the country and adjust as it sees fit. psb

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