Harley-Davidson warns European tariffs will cause a 'tremendous cost increase'

Scott Olson/Getty Images)Harley-Davidson motorcycle engines are assembled at the company’s Powertrain Operations plant on June 1, 2018 in Menomonee Falls, Wisconsin. The European Union said it plans to increase duties on a range of U.S. imports, including Harley-Davidson motorcycles, in retaliation for the Trump administration’s new tariffs on EU metal exports.
  • Harley-Davidson said Monday that new European taxes on imported motorcycles will have a “significant impact” on its business, increasing the cost of motorcycles by $US2,200 on average.
  • Harley-Davidson also plans to shift building of EU-bound motorcycles outside of the US. The company sold more motorcycles in Europe than the US last year.
  • Shares of the company fell about 2% following the regulatory filing Monday morning.
  • Follow Harley-Davidson’s stock price in real-time here.

European tariffsimposed as retaliation forPresident Donald Trump’s taxes on imported steel and aluminiumwill add about $US2,200 on average to the cost of everyHarley-Davidsonmotorcycle exported to the continent, the company said Monday.

“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.” the company said in a regulatory filing.

“Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs. In the near-term, the company will bear the significant impact resulting from these tariffs.

Harley-Davidson exported 390,619 motorcycles to Europe in 2017, it said in its annual report, easily outpacing the 288,802 it sold in the United States for the same year.

Because of the importance of European sales, the company expects the tariffs to have an impact of approximately $US30 million to $US45 million in 2018, and rising to $US90 to $US100 million on a full-year basis going forward. To help mitigate some of the costs, the company also said it “will be implementing a plan to shift production of motorcycles for EU destinations from the US to international facilities.” However, that could take up to 18 months to complete.

Shares of the company fell about 2.3% in early trading Monday following the filing.

Monday’s news comes roughly a year into Harley-Davidson’s “The Journey” program. Launched in 2017, the 10-year strategy is designed to return Harley-Davidson to is former glory by converting more riders, launching new motorcycles, and consolidating some of its manufacturing locations.

Shares of Harley-Davidson are down more than 20% from their January highs as global fears of an all-out trade war and their resulting impact on commodity prices for raw metals weigh on the stock’s price.

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