Why Harley Can't Rev Up in China

China’s population is almost 2,300 times greater than that of Milwaukee, where Harley-Davidson is based. Yet after six years operating in China, the motorcycle maker still sells more bikes in its hometown. The reason: About 100 cities in the world’s most populous nation, including Beijing and Shanghai, have restrictions on motorcycles, including banning them from elevated highways and major thoroughfares to curb noise and thefts, according to the state-affiliated Society of Automotive Engineers of China. “Regulations are a pain,” grouses Shanghai businessman Calvin Chen, who owns a $50,000 Harley V-Rod Muscle. “There are many roads you can’t ride on, and the rules differ from place to place.”

Harley is lobbying the Chinese to ease those laws in an effort to hike sales by as much as 40 percent annually through 2016, says Sean Jiang, its managing director for China. The biggest U.S. motorcycle maker is quadrupling its number of dealerships and supporting riding clubs to capitalize on a luxury car market that J.D. Power says will grow by about 35 percent this year. Whether new customers will actually bite is uncertain. “Any investment in China without addressing the regulatory requirements will be a castle built on sand,” says Jiang.