Harley Looks East

By Rick Aristotle Munarriz
June 9, 2004 | Comments (0)

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Does the thought of Harley-Davidson (NYSE: HDI) in China get your motor running? It should. Last night, the motorcycling world's king of the road announced that it had signed a memo with China's Zongshen Motorcyle Group, paving the way for the company to begin exporting its signature hogs to the populous nation.

Harley plans on making its motorcycles here and then working with Zongshen to sell them in China. It won't be easy. China's economy isn't at the point where the masses can pay up for a pricey Harley. What's worse, China imposes a substantial duty on imports. That duty is scheduled to drop from 50% to 30% by next year but will still make a difficult task more daunting.

Still, isn't it easy to ponder the possibilities? It's not just the massive population at play here. We're also talking about a country where two-wheelers -- motorized or pedal-powered -- rule the road.

And other American companies are already entrenched in China. McDonald's (NYSE: MCD) plans to open 100 new restaurants there annually. Home Depot (NYSE: HD) is looking to followWal-Mart (NYSE: WMT) in, and Disney (NYSE: DIS) and General Electric's (NYSE: GE) Universal subsidiary both are erecting theme parks in the country.

If this group can break into China, Harley-Davidson has a pretty good shot of making this work. Its products are already in demand. As for pricing, it remains an issue, but an improving economy in the rapidly developing nation should help on that front.

With Harley coming off its centennial celebration last year, one was right worry about its near-term prospects. Even the company seemed nervous, lowering prices and extending the warranties on its 2004 models. But roads circle the globe -- and Harley-Davidson's journey is just getting started.

What do you think of Harley-Davidson breaking into China? The company surprised analysts by kicking off the 2004 year with a healthy first quarter, will the rest of the year prove to be as rewarding? All this and more -- in the Harley-Davidson discussion board. Only on Fool.com.

Longtime Fool contributor Rick Munarriz was born to be wild. He owns shares in Disney. How's that for wild?

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