Harley-Davidson opens new ways to tap market

M. Taufiqurrahman, The Jakarta Post, Jakarta

The ever-increasing fuel price and the possible introduction of a new luxury tax is not standing in the way of the love affair Jakarta's nouveau rich have with big bikes.

Distributor of the U.S.-made Harley-Davidson motorbike Mabua Harley-Davidson (MHD) said that big-time lawyers, politicians and government officials were among the new rich who were lining up to get the latest model of the legendary steel horse.

As a result, the local distributor of Harley-Davidson motorcycles has registered a dramatic increase in the sales of customized bikes in the past three years.

"In 2004, we registered the sale of 242 bikes, an increase from 222 in 2003. For 2005, we expect a rosy year, as by August we had sold 261 bikes, an increase of 73 percent," president of MHD Jonnie Rahmat said.

Of the sales, Jonnie said that between 65 percent to 70 percent of buyers were residents of Jakarta. "And of those up to 65 percent are residents of South Jakarta," he said.

As part of its service to the bulk of Harley-Davidson riders and potential buyers in the southern part of Jakarta, MHD recently opened a shop at the newly-constructed Pondok Indah Mall 2 (PIM 2), the extension of the plush Pondok Indah Mall, that serves to sell accessories and gimmicks for one of American's most famous brands.

The retail outlet, the fourth in Jakarta and fifth in the country, sells Harley paraphernalia ranging from apparel such as T-shirts, children's wear and caps to cigarette lighters, all authorized by the U.S. brand owner.

MHD has the goal to operate 20 outlets by the year 2009.

Interested buyers could also place their orders at the shop and in no less than a month a brand new Harley Davidson, which is shipped from a plant in Singapore, could be in their possession.

To evade an extremely high luxury tax for a built-up Harley, the Indonesian distributor ships completely knocked-down bikes from the Singapore plant.

After receiving an order, the U.S. Harley manufacturer in Milwaukee dispatches a completely built-up bike to the Singaporean plant before being disassembled.

Under the present tax regulation, a completely built-up Harley will be a subject to 60 percent customs tax, 70 percent luxury tax, 10 percent value-added tax and 2.5 percent income tax.

Before owners can ride their bikes on the street, they have to pay a 10 percent registration fee to the police.

The government mulled raising value-added tax for luxury goods, cars and big bikes in June. The plan has been met with resistance from car distributors as it will dissuade consumers from buying new vehicles.

The move was to come into effect in tandem with a policy to persuade car owners to shift from low-cost fuel to Pertamax.

The opening of the new retail shop is one among many strategies developed by MHD to broaden the appeal of the Harley Davidson motorbike.

In recent years, MHD has started renting used Harley-Davidson motorcycles for customers interested in riding the famed bike.

"Currently there are five bikes on stand-by for customers who are interested in having a test ride," Willy A. Tjondrodiputero, General Manager of MHD said, adding that renting a Harley was similar to a test drive.

The cost of renting a used Harley-Davidson bike ranges between Rp 800,000 and Rp 1.7 million per day, depending on its type.

In the future, MHD will also hold more tours for Harley owners, including trips in the U.S.

The Harley-Davidson enterprise started in Milwaukee in 1901 when William S. Harley, aged 21, drew up plans for a small engine that displaced 7.07 cubic inches (116cc) and had tiny 4-inch flywheels. It was designed for use in a regular pedal-bicycle frame.

Thanks to the World War I, the small enterprise turned into the largest motorcycle manufacturer in the world in 1920, after it provided 20,000 machines to the military forces during the war.

World War I was the first time the motorcycle had been broadly adopted for combat service.