Harley-Davidson Is Dropping Its Biggest Opportunity

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Harley says goodbye to India, California is saying goodbye to selling gas-powered cars, and automakers are selling too many SUVs in Europe. All that and more in The Morning Shift for September 24, 2020.

1st Gear: Harley Out Of India

India is the biggest market for motorcycles and scooters in the world, according to the Financial Times, and about 17 million motorcycles and scooters were sold there last year, or about the same number of cars that were sold in the U.S. in the same time frame. That still isn’t enough to keep Harley-Davidson around.


From Reuters:

U.S. motorcycle maker Harley-Davidson said on Thursday it expects to report $75 million in additional restructuring costs for 2020 related to actions including discontinuing its sales and manufacturing operations in India.

The announcement comes two months after Harley unveiled a strategy to shift focus back to more profitable motorcycles and core markets such as the United States.


Harley has shifted strategy pretty dramatically under CEO Jochen Zeitz, who was appointed to the job in March. Previously, Harley’s plan was to expand internationally and rely less on sales of its biggest and most expensive motorcycles to American boomers, but now it appears its strategy is something approaching the opposite of that, getting smaller and leaving some markets.

I foresee Tata buying Harley in a few years at a cut rate price.

2nd Gear: California Is Done With Cars And Emissions By 2035

I saw this reported in various places as a ban on internal-combustion-engine cars, but that isn’t quite right the actual order by California Governor Gavin Newsom is that new cars sold in California by 2035 must emit zero emissions. That describes electric cars, of course, but also allows room for creativity.


From Newsom’s office:

The transportation sector is responsible for more than half of all of California’s carbon pollution, 80 percent of smog-forming pollution and 95 percent of toxic diesel emissions – all while communities in the Los Angeles Basin and Central Valley see some of the dirtiest and most toxic air in the country.


Following the order, the California Air Resources Board will develop regulations to mandate that 100 percent of in-state sales of new passenger cars and trucks are zero-emission by 2035 – a target which would achieve more than a 35 percent reduction in greenhouse gas emissions and an 80 percent improvement in oxides of nitrogen emissions from cars statewide. In addition, the Air Resources Board will develop regulations to mandate that all operations of medium- and heavy-duty vehicles shall be 100 percent zero emission by 2045 where feasible, with the mandate going into effect by 2035 for drayage trucks. To ensure needed infrastructure to support zero-emission vehicles, the order requires state agencies, in partnership with the private sector, to accelerate deployment of affordable fueling and charging options. It also requires support of new and used zero-emission vehicle markets to provide broad accessibility to zero-emission vehicles for all Californians. The executive order will not prevent Californians from owning gasoline-powered cars or selling them on the used car market.


That last sentence is also key. No one is coming to take your shitty old E30 that you like to wrench on any time soon. Unless, of course, you would like to sell it to me.

3rd Gear: Automakers Can’t Stop Selling SUVs In Europe

And it’s becoming kind of problem, since automakers there also have to comply with stricter emissions regulations. Fines might kick in for automakers who miss the emissions targets after stricter ones went into effect this year. And as The Wall Street Journal reports, the European Union is only getting more serious about lowering new car emissions.

At the end of the first six months of this year, Peugeot was the only company that had already met the targets, according to the International Council on Clean Transportation. Unless Volkswagen narrows the gap, it faces potential fines of 3.5 billion euros, equivalent to $4.1 billion, which represents nearly 1.5% of its 2019 global revenue. Daimler, which is the only manufacturer moving further away from the targets, could face a fine of up to €1.4 billion.

Undeterred by the pandemic, the European Commission is stepping up its efforts to fight climate change. Last week, European Commission President Ursula von der Leyen said the EU’s executive body would propose slashing the CO2 ceiling for cars to 47.5 grams/km in 2030, from a previous target of 59.4 grams/km.

The only way for the industry to reach this new 2030 target would be for fully electric vehicles to make up at least 60% of new car sales, compared with 4.3% today, said Hildegard Müller, president of the German Automobile Manufacturers’ Association.


The WSJ says that SUVs are almost half of all sales in many countries in Europe, so something has to give.

4th Gear: Tesla And Lithium

This was one of the few parts of Battery Day that really did sound kind of fishy to me. Reuters says that a lot of people in the industry are also suspicious.

The move would make Tesla the first company in the world to commercially produce the white metal from clay. Lithium is produced either from brine, commonly found in South America, or spodumene hard rock, usually in Australia.

In Nevada, Tesla plans to mix clay with table salt and then add water, which it says causes a reaction where the salt would leach out with lithium, which can then be extracted. The leftover clay would be put back in the earth to mitigate environmental damage.

“It’s a very sustainable way of obtaining lithium,” said Musk, who did not say where in Nevada the company had obtained the lithium rights or whether development has started.

The plan drew backlash almost immediately, with critics describing Musk’s plan as too simplistic and light on details. Returning rock to the earth after minerals are extracted, for instance, is already common industry practice through the use of tailings dams.

“This plan from Tesla brings up a lot more questions than it answers,” said Chris Berry, an independent lithium industry consultant. “Are we just supposed to take Elon Musk’s word for it that the cost will be lower than existing lithium projects?”


“Mining lithium is very challenging,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF, which holds shares in Tesla and lithium producers. “If Tesla really wants to fly solo, we’re talking about four to five years to really see any kind of lithium production.”

Tesla’s plan also would likely require substantial amounts of water, forcing the company to battle with cattle ranchers for access to underground reservoirs in the arid state.


It’s not hard to envision Tesla maintaining a private army in the upcoming Water Wars, which might be its next venue for profitability. We’ll see I guess!

5th Gear: The Tokyo Motor Show Isn’t Sure If 2021 Will Happen

The show, held every two years, is currently planned for next fall but no one really knows if that will happen.


From Automotive News:

“Honestly, we don’t have any scenarios for the Tokyo Motor Show next year at the moment. It remains unclear whether it will be possible to physically hold a crowd-gathering event in this coronavirus outbreak and what new ways we can organize such an event,” said [Toyota President Akio Toyoda, who also chairs the show’s organizing group].


Toyoda held out optimism for the Tokyo show, citing positive remarks about holding next summer’s Tokyo Olympics that were recently made by the chairman of the International Olympic Committee. If the Olympics go ahead in 2021, so too might the auto show, Toyoda reasoned. The 2020 Tokyo Olympics were set to open last month but were postponed when the pandemic hit.


Reverse: Honda


Neutral: How Are You?

Because I’m still not quite over it: Would a $25,000 Tesla be cheap enough to get you to buy? I think that would be just low enough for me to at least consider it. Electric cars remain way too expensive, though. Or maybe the government subsidies just aren’t enough.