Harley-Davidson going to China

The main barriers the German company has faced are riding bans in big cities and motorways, high customs duties, poor insurance coverage and the huge gap between legally sold and illegally imported motorcycles, said Stefanie Lowenstein, spokeswoman for the BMW Group.

Liu Xintong, secretary-general of China Motorcycle Industry Association, said the result is that pent-up demand for large motorcycles is going unfulfilled.

"Motorcycle riding fans are still eager to get top machines like Harley-Davidsons," he said. "But the government policy seems not motorcycle-friendly at all."

Alan Tonelson, a research fellow at the U.S. Business and Industry Council, said all U.S. manufacturers still face a "very formidable array" of barriers to gaining access to the Chinese market. "U.S. government attempts to reduce, much less eliminate, these trade barriers, has been woefully ineffective," he said.

For now, Harley-Davidson is going to drive around them.

The company's managing director for China, Dave Foley, said the company has selected a dealer and that before summer, "more specific communication will be forthcoming."

He declined to say where it would be, but noted the Beijing area had the highest concentration of riders of imported heavyweight motorcycles in the country.

Motorcycles may not be operated within Beijing's Third Ring Road, a 30-mile highway that encircles the city, so Hoelter said a likely dealer location would be outside the city core.

But the company will have to sell its products, which can exceed $20,000 retail, in a country where most Chinese make around $1,000 a year.

"The potential is enormous but it's up to us to really develop that leisure-oriented market," Foley said. The company said it was too early to forecast sales, but estimated there were more than 1,000 heavyweight motorcycle riders in China, most of whom acquired their bikes through unofficial channels.

Analyst Timothy Conder of A.G. Edwards & Sons, Inc. said it may be slow-going but Harley-Davidson should eventually win out.

"What they're selling is Americana. I think they should do well," he said.

Chen Lexing, a 37-year-old real estate worker in Guangzhou, said he and his group of Harley riders leave the city before dawn on weekend outings in Guangdong Province. They can't obtain license plates in the city of Guangzhou because their bikes are some five times the allowed engine size of 250cc.

Chen said he worries that Guangzhou will ban motorcycles altogether next year, but is hopeful at news that Harley is making inroads.

"I hope Harley-Davidson moves into China, sells more motorcycles and works with the government so that more roads and places will open up to motorcycle riders," he said.

Hoelter said the road into China will be a long one.

"China is certainly today from the market-access perspective, our most daunting challenge," he said. "It's going to be a long-term effort, it will no doubt be a multifaceted effort and we're going to have to be patient."

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