Harley-Davidson announced it is moving production of its Pan America, Sportster, and Nightster bike models from the U.S. to Thailand.
Harley’s growing Thailand production is directly incentivized by 60% Thai motorcycle tariffs and corporate tax breaks.
Thailand’s pro-manufacturing trade policies have succeeded in attracting global investment, creating jobs, and boosting production and exports.
In the U.S., Harley is breaking its promise that all Harley models sold in the U.S. will be American-made, raising concerns of additional job losses.
Harley-Davidson, the iconic American motorcycle manufacturer, recently announced a decision to move a substantial part of its motorbike production overseas yet again. For the U.S., the move is bad news. Harley-Davidson announced it will relocate the production of its Pan America, Sportster, and Nightster bike models from the United States to its existing manufacturing facility in Thailand.
However, the move is evidence that industrial policy, including tariffs and tax breaks, can work to build an industry and create jobs. Thailand has become the world’s fifth largest producer of motorbikes, thanks to intelligent industrial policy and its highly competitive costs. Thailand’s policy is a testament to what we have called tariff-jumping investment.
Broken Promises and Lost Jobs
Harley-Davidson claims this decision to move production out of the United States is to save costs for the company. However, the real costs will be in American work and production.
“Harley-Davidson’s announcement to ship our work and jobs to Thailand is a kick in the teeth to American workers and a betrayal of the company’s legacy as an American icon,” said Brian Bryant, President of the International Association of Machinists and Aerospace Workers (IAM).
This is not the first time Harley-Davidson has made a move like this. In 2019, the closure of Harley-Davidson’s Kansas City factory (with 572 jobs lost) coincided with a shift in production to its then brand-new Thailand facility. At the time, Harley blamed the production shift on the European Union’s 31% tariffs on U.S.-made bikes, a retaliatory EU move against President Trump’s steel and aluminum tariffs. But in November 2021, the EU allowed motorbike tariffs to revert back to the standard 6% as a result of a U.S.-EU agreement replacing U.S. metals tariffs with a quota.
With the new planned shift of Harley models based on the Revolution engine, it is jobs in Wisconsin and Pennsylvania that are most at risk. Harley’s York, PA facility is its main bike manufacturing location with about 1,000 union employees. Harley’s Menomonee Falls, WI facility is its main engine production center and has about 600 union employees.
Harley has maintained that its production shifts to Thailand will have no impact on American jobs, but it is unclear how this will be managed. This is the first time Harley will be manufacturing motorcycles for sale in the U.S. market that are not made in America. Harley CEO Jochen Zeitz’s previously pledged that “Harley-Davidson motorcycles sold in America will always be built in America,” and now that promise is being broken by this most recent shift sending all Pan America, Sportster, and Nightster model production to Thailand. If Zeitz is breaking this pledge, how much value should we put in his pledges to preserve U.S. jobs?
Thailand’s Alluring Tariffs
Beginning in 1976, Thailand incentivized the development of a domestic motorcycle industry with an outright ban on imports of complete bikes and 70% local content requirements for the parts used to assemble bikes inside Thailand. In 1996, Thailand began to liberalize these requirements and allow imports. However, soon Thailand saw an opportunity to protect and promote a complete domestic motorbike industry. In 2012, the Thai government’s Board of Investment implemented a plan to incentivize foreign manufacturers to set up final production in Thailand. The plan includes 60% tariffs on imported motorbikes and a corporate income tax “holiday” for (at least) three years.
The plan has been a success, with Honda, Suzuki, Kawasaki, Triumph, BMW, and Harley all producing complete bikes in Thailand. According to a Thai industry analyst, Thailand has 12 motorbike factories producing bikes under 14 brand names. Thai production is around two million units a year, with some 20% of the output exported.
The manufacturing facilities built by Harley and other bike producers have been used to support exports throughout Southeast Asia where there is a huge demand for motorbikes, as well as to Europe and China. As shown in Figure 1, Thailand’s tariff strategy that incentivizes companies to build manufacturing facilities has allowed the country to nearly triple its motorcycle exports since 2016.
FIGURE 1:
Now, for the first time, Harley’s Thai facility will start exporting motorcycles to the United States as well, further expanding exports. This comes at the cost of lost opportunity for U.S. production and jobs. And current U.S. trade policy does nothing to discourage this practice or protect American jobs. The U.S. has zero tariffs on motorcycle imports, meaning Harley-Davidson or any other company can move production overseas, cut U.S. employment, and sell those bikes right back to the U.S. market. And there’s nothing within current U.S. trade policy even discouraging them from this offshoring.
Harley-Davidson risks alienating its U.S. customer base with these moves. Its customer base tends to be patriotic Americans, many of them riding with an American flag on their leather jackets or pinned to their Harley “hogs.” Harley faces other business challenges, including a U.S. market stagnant at around 500,000 units sold each year, an aging customer base, and a limited range of smaller bikes to entice new buyers into the market.
Conclusion
Harley-Davidson’s relocation of production to Thailand marks a big win for Thailand’s industrial policies based on high tariffs and a significant loss for U.S. manufacturing and an iconic American brand name. It also poses serious risks of additional losses of American jobs and production in places like Pennsylvania and Wisconsin.
Current United States’ trade policy does nothing to discourage this kind of offshoring. The U.S. has tariffs of 1% to 2.4% on imported motorcycles made in Thailand or elsewhere. In stark contrast, Thailand’s trade policy of high tariffs on motorcycles is the primary reason behind Harley’s decision to build a manufacturing facility there. Tariffs work to secure and protect jobs and production in an industry that creates good, highly-paid jobs, and delivers investment and technological progress for businesses.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Harley-Davidson Moves More Production to Thailand, Thanks to Thai Tariffs and Tax Incentives
KEY POINTS
Harley-Davidson, the iconic American motorcycle manufacturer, recently announced a decision to move a substantial part of its motorbike production overseas yet again. For the U.S., the move is bad news. Harley-Davidson announced it will relocate the production of its Pan America, Sportster, and Nightster bike models from the United States to its existing manufacturing facility in Thailand.
However, the move is evidence that industrial policy, including tariffs and tax breaks, can work to build an industry and create jobs. Thailand has become the world’s fifth largest producer of motorbikes, thanks to intelligent industrial policy and its highly competitive costs. Thailand’s policy is a testament to what we have called tariff-jumping investment.
Broken Promises and Lost Jobs
Harley-Davidson claims this decision to move production out of the United States is to save costs for the company. However, the real costs will be in American work and production.
“Harley-Davidson’s announcement to ship our work and jobs to Thailand is a kick in the teeth to American workers and a betrayal of the company’s legacy as an American icon,” said Brian Bryant, President of the International Association of Machinists and Aerospace Workers (IAM).
This is not the first time Harley-Davidson has made a move like this. In 2019, the closure of Harley-Davidson’s Kansas City factory (with 572 jobs lost) coincided with a shift in production to its then brand-new Thailand facility. At the time, Harley blamed the production shift on the European Union’s 31% tariffs on U.S.-made bikes, a retaliatory EU move against President Trump’s steel and aluminum tariffs. But in November 2021, the EU allowed motorbike tariffs to revert back to the standard 6% as a result of a U.S.-EU agreement replacing U.S. metals tariffs with a quota.
With the new planned shift of Harley models based on the Revolution engine, it is jobs in Wisconsin and Pennsylvania that are most at risk. Harley’s York, PA facility is its main bike manufacturing location with about 1,000 union employees. Harley’s Menomonee Falls, WI facility is its main engine production center and has about 600 union employees.
Harley has maintained that its production shifts to Thailand will have no impact on American jobs, but it is unclear how this will be managed. This is the first time Harley will be manufacturing motorcycles for sale in the U.S. market that are not made in America. Harley CEO Jochen Zeitz’s previously pledged that “Harley-Davidson motorcycles sold in America will always be built in America,” and now that promise is being broken by this most recent shift sending all Pan America, Sportster, and Nightster model production to Thailand. If Zeitz is breaking this pledge, how much value should we put in his pledges to preserve U.S. jobs?
Thailand’s Alluring Tariffs
Beginning in 1976, Thailand incentivized the development of a domestic motorcycle industry with an outright ban on imports of complete bikes and 70% local content requirements for the parts used to assemble bikes inside Thailand. In 1996, Thailand began to liberalize these requirements and allow imports. However, soon Thailand saw an opportunity to protect and promote a complete domestic motorbike industry. In 2012, the Thai government’s Board of Investment implemented a plan to incentivize foreign manufacturers to set up final production in Thailand. The plan includes 60% tariffs on imported motorbikes and a corporate income tax “holiday” for (at least) three years.
The plan has been a success, with Honda, Suzuki, Kawasaki, Triumph, BMW, and Harley all producing complete bikes in Thailand. According to a Thai industry analyst, Thailand has 12 motorbike factories producing bikes under 14 brand names. Thai production is around two million units a year, with some 20% of the output exported.
The manufacturing facilities built by Harley and other bike producers have been used to support exports throughout Southeast Asia where there is a huge demand for motorbikes, as well as to Europe and China. As shown in Figure 1, Thailand’s tariff strategy that incentivizes companies to build manufacturing facilities has allowed the country to nearly triple its motorcycle exports since 2016.
FIGURE 1:
Now, for the first time, Harley’s Thai facility will start exporting motorcycles to the United States as well, further expanding exports. This comes at the cost of lost opportunity for U.S. production and jobs. And current U.S. trade policy does nothing to discourage this practice or protect American jobs. The U.S. has zero tariffs on motorcycle imports, meaning Harley-Davidson or any other company can move production overseas, cut U.S. employment, and sell those bikes right back to the U.S. market. And there’s nothing within current U.S. trade policy even discouraging them from this offshoring.
Harley-Davidson risks alienating its U.S. customer base with these moves. Its customer base tends to be patriotic Americans, many of them riding with an American flag on their leather jackets or pinned to their Harley “hogs.” Harley faces other business challenges, including a U.S. market stagnant at around 500,000 units sold each year, an aging customer base, and a limited range of smaller bikes to entice new buyers into the market.
Conclusion
Harley-Davidson’s relocation of production to Thailand marks a big win for Thailand’s industrial policies based on high tariffs and a significant loss for U.S. manufacturing and an iconic American brand name. It also poses serious risks of additional losses of American jobs and production in places like Pennsylvania and Wisconsin.
Current United States’ trade policy does nothing to discourage this kind of offshoring. The U.S. has tariffs of 1% to 2.4% on imported motorcycles made in Thailand or elsewhere. In stark contrast, Thailand’s trade policy of high tariffs on motorcycles is the primary reason behind Harley’s decision to build a manufacturing facility there. Tariffs work to secure and protect jobs and production in an industry that creates good, highly-paid jobs, and delivers investment and technological progress for businesses.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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