Harley-Davidson, Inc. HOG will be building a plant in Thailand to cater to the Asian market more easily. The company has chosen Rayong province, southeast of Bangkok, for the facility.
This plant will help the company take advantage of the tax breaks due to the trade arrangement among members of the Association of Southeast Asian Nation (ASEAN). Moreover, Thailand’s 60% motorcycle import tax will also be exempted. The location of the facility will make it more competitive for the company to target the ASEAN region and China.
Per a Harley-Davidson spokesperson, the increased access and affordability of customers in the region will help in overall growth of the company. This comes amid the company facing slow demand in the U.S. (its primary market) due to changing demographics.
However, post the announcement, United Steelworkers (USW) International’s president stated that the decision jeopardizes the company’s brand that is based on being American. USW represents members at Harley plants in two U.S. states and 850,000 workers in North America. The company claimed that the move would not lead to changes in the production being carried out domestically.
While the decision can add to the company’s profitability in the long run, the decision to manufacture outside the U.S. can hurt sentiments. Harley-Davidson is one of the very few American companies that have continued production domestically despite low cost production being available in other countries.
Shares of the company fell 0.3% to close at $51.86 on May 25, 2017.
Harley-Davidson is working toward improving its international reach. In first-quarter 2017, the company added seven new dealerships in China, India, Norway, Slovenia, Spain and Thailand. The company aims to add 150–200 new dealerships internationally by 2020. Moreover, the company aims to create 2 million new Harley-Davidson riders in the U.S. and grow the International business to 50% of total annual volume sales.
Harley-Davidson underperformed the Zacks categorized Automotive-Domestic industry. The company’s shares lost 9.1% in the last three months compared with the industry’s 2.3% decline.
Zacks Rank & Stocks to Consider
Currently, Harley-Davidson carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the auto space include BorgWarner Inc. BWA, Lear Corporation LEA and GKN plc GKNLY. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BorgWarner has an expected long-term growth rate of 8.7%.
Lear has an expected growth rate of around 7.1% over the long term.
GKN has an expected long-term growth rate of 6%.
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