A Harley-Davidson is like a Big Mac

Sort off, as it is available worldwide. The present volatile financial markets do not help to stabilize the global economy, as it distorts price levels and dramatically change the competitiveness of the production locations. For the consumer, this can best be seen on the actual price differences for a Road King Classic in different foreign markets.

Globally exporting companies like Harley-Davidson can severely suffer or greatly profit from it, as not only do local regulations and tax distort the prices, but also the exchange rates. You can hedge yourself, but only to a certain degree. A weak local currency suddenly makes a foreign product look expensive for the consumer, but the producer can not adjust his export prices on a daily basis, as his production costs are domestic and static. But when foreign currencies strengthen, Harley smiles, as it gets more $$$’s for its Sterling, Euro or Yen on bikes sold abroad.

A exporter must also take the general foreign price level of goods into consideration. He will always try to sell at the highest possible price, as it does not make economical sense to sell a Harley-Davidson half the price of a comparable BMW in Germany or a Honda in Japan, just because he can, and it could damage the product’s image and brand, making them look cheap and low quality.

In modern analytics the so called Big Mac index is often used to visualize and compare the value and buying power of currencies, as a Big Mac is a very homogeneous product, broadly used in large quantities. Here a chart as of January 2010

A Road King Classic is not exactly a Big Mac, but as a bike identical and with only minor modifications in foreign countries. With the exchange rates as of April 2010, I compared the local prices, as displayed on the official Harley-Davidson websites, with the US$ equivalent amount of identical Road King Classic motorbikes, solid color, with ABS and Security, the “base” price is 19,214 US$.

But once you paid, forget the price, show no envy and enjoy a great ride in the country of your choice…

Advertisements

2 Responses to “A Harley-Davidson is like a Big Mac”

  1. Fully agree, with 27.5% total import duties it is more purposeful to try to change the reigning government and its tax-regime, as some will try on Thursday, then to import individually in the present times. This said, the actual exchange rate plays a important role too and can distort the calculation very quickly and dramatically.

  2. At only 32% (ha!) I am almost glad we live in the UK. Any readers should not think it would be better to buy one in the US and import it. You will have to pay 10% import duty and 17.5% VAT, then some for shipping and then even more for converting it to a UK spec before it can be registered over here. Believe me, I have looked into it.

    Gary
    http://garysusatour.blogspot.com/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: