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David McMullan's blog

Chinese motorcycle factories adapting to stay profitable

Posted by Shem on June 12, 2018 at 11:55 PM

In 2017 Chongqing off-road motorcycle and quadbike specialist Shineray joined forces with auto-maker Brilliance Auto to produce the SWM X7 SUV car and join the growing list of motorcycle manufacturers who are moving into the automotive market. This move displays a trend for motorcycle manufacturers to either diversify or expand in order to continue trading in an era when the market cannot support the multitude of motorcycle factories manufacturing in China, especially in light of the general trend of declining sales.

Back in 2006 there was over 100 motorcycle companies operating production lines in Chongqing alone, a good proportion of them ‘one line’ export factories that provided super-cheap models for the African and domestic markets. Unlike India in which the Hero Group and Bajaj share a huge proportion of the market the Chinese market was shared by a multitude of smaller companies. The number of Chongqing motorcycle factories still operating is now less than 40 relevant companies and is likely to reduce even further over the coming years.

Joining forces

Many of the smaller companies that have remained manufacturing have joined together with other similar sized companies to become middle-sized in an effort to compete with India on traditional markets and to expand their range to new territories. A representative example of this was explained to me by Troy Ma, an ex-export clerk for motorcycle manufacturer Kington-Liyang who reported that “Kington’s supply chain and buying power was not big enough for the company to expand in certain areas including the development of a range of dirt bikes with DOT and EPA for the US market. They were approached by a rival company called ‘Andes’ and after negotiation it was decided to merge the two companies to increase buying power of parts and increase the range of the supply chain. This is a phenomenon that we now see happening all over China. In Zhejiang province the biggest rivals to the Chongqing companies are Keeway (the company that own Italian marque Benelli) and in Guangdong province it is Qianjiang. They have been snapping up smaller companies for the last few years and have expanded their influence world-wide. It’s not just smaller motorcycle manufacturers coming together, the whole buying out or merger phenomenon started 12 years ago when Loncin, who are obviously a very large company, bought out another large company in Kinlon. That was the start of it all”

Electric bikes

In recent years the upsurge in the demand for electric bikes has been a catalyst for change in the industry as more urban centres ban traditionally-fueled motorcycles from their roads. It is now estimated that there are more than 150 million electric bicycles, scooters and motorcycles on China’s roads and motorcycle manufacturers are beginning to react to the trend by producing their own EV. A good example of this is Chongqing giant Zongshen who have previously set up a company called Zongshen PEM Power Systems which is dedicated to “electric motorcycles, electric bicycles and other e-vehicles in China for the Chinese domestic and international markets. Zongshen PEM Power System's largest shareholder is Zongshen Industrial Group, one of China's largest manufacturers and distributors of engines and power equipment.”

Cars and vans

As mentioned above (Shineray and brilliance) more and more Chinese motorcycle manufacturers are looking at diversifying by entering in to the manufacture of cars and vans. The biggest and most famous of these companies is Lifan (who were for many years China’s best known motorcycle manufacturer) who sell close to 300 thousand cars a year and was “successfully listed in Shanghai Stock Exchange as the first private passenger car A stock listed in China.”

The smaller (but still bigger than motorcycles) end of the auto spectrum sees mini-van releases by Dayun, Loncin, Dayang and many others.

Joint ventures

While not strictly a recent phenomenon bigger Chinese manufacturers have often joined forces with more famous foreign manufacturers for the sake of improving their technical nous or just plainly to use a brand that is recognizable to the motorcycling public (especially in light of the fact that a huge percentage of exported Chinese motorcycles are re-branded). Some of the more famous examples are Loncin (BMW), Zongshen (Piaggio and Norton), Qinqi (Suzuki and Peugeot), Jianshe (Yamaha), Lifan (MV Agusta), Qianjiang (owners of Benelli), Jialing (Honda), and CFmoto (KTM).

These joint ventures come in many guises; some are full-on manufacturing deals like Jianshe manufacturing Yamaha’s commuters for the Chinese market and the agreement for Loncin to make BMW engines and scooters, Lifan who sell MV Agusta machines through their dealerships. Some arrangements are for tech as in Norton’s contract to supply Zongshen with engines for 20 years. There are them just straight forward buy outs of foreign companies as in Qianjiang’s procurement of Benelli and Shineray’s purchase of SWM from Italy (incidentally Shineray is using the SWM brand for its new car along with a shiny badge showing the Italian flag)!

So here we can see that Chinese manufacturers are adapting rapidly in order to keep profits up, but then we never suspected that they were building motorcycles for the love of riding anyway.

 

 

 

 

 

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