China’s flagging domestic motorcycle industry
Over the last few months a lot has been alluded to about the Chinese motorcycle domestic market and its roll on affect for export trade, but what exactly ails the Chinese domestic motorcycle industry?
China does not have an obvious ‘used’ car industry. It is very rare to see a forecourt of used cars (I have never seen one) and all the used car transactions that I know of are private affairs. It seems that cars are not replacing motorcycles for the working and agrarian classes but still the domestic market profits and sales are plummeting season after season.
I get incredulous looks from motorcycle trade persons at global expos when I tell them that the Chinese government has banned the use of petrol driven motorcycles in a majority of China’s cities and sprawling urban centres. But it is the case, and the motorcycle industry is suffering as a result.
CAAM Calls for the cancellation of the Motorcycle Ban due to Motorcycle Output & Sales Recording a 6-Year Low
The Chinese motorcycle manufacturers which are supplying half of the world's motorcycles are experiencing an unprecedented crisis. The output and sales of the Chinese motorcycle industry both fell over 12% in the first half of 2012, hitting a six year low. According to the China Association of Automobile Manufacturers (CAAM), the crisis is not caused by consumption substitution, but by management problems.
According to the latest data, the output and sales of the Chinese motorcycle industry remained low in the first half of 2012. Both output and sales registered at less than 2 million units each month. The total motorcycle output and sales in the first half of 2012 were 1.163 million units and 1.174 million units respectively, both down about 12% year-on-year, an enormous deficit. Meanwhile, motorcycle exports have suffered. The total number of motorcycles exported in the first half of 2012 was 4.49 million units, down 9% from a year ago. Mr. Li Bin, who is the secretary general of CAAM Motorcycle Chapter, told me that it's “the worst time ever for the Chinese motorcycle industry. China is executing the world's strictest standards for motorcycle production, even stricter than those in Europe. What's more important is that more than 190 Chinese cities and towns ban the use of motorcycles, and this has greatly affected motorcycle sales in China. China is the only country in the world that bans motorcycle usage in cities.”
Mr. Dong Yang, the secretary general of CAAM, commented “the motorcycle sales decline is not caused by consumption substitution, but cause by management problems. Motorcycles are not substituted by cars, but by electric bikes and mopeds. The industry difficulties are affecting senior motorcycle manufacturers all over China.”
There are now more than 200 million electric bikes and scooters on Chinese roads. As well as avoiding the ban they also require no licence to ride. I asked Beijing resident and electric scooter rider Lui Huang (a local government official) if he was in favour of motorcycles being returned to the streets of Beijing. He answer was in the positive. “Although my electric scooter is usable in Beijing I do notice that if I do not stick to the bicycle lanes it tends to be a bit precarious on the road, especially when taxis are going somewhere in a hurry; they would not hesitate to cut you up and on an electric scooter you don’t have the power to pull away from trouble. I can only see the accident figures increasing under the current policy and I would certainly get back on a gas motorcycle given the chance.”
According to Mr. Li Bin, CAAM is coordinating with many local governments with the hope of persuading them to gradually lift the ban on the use of motorcycles to ease the crisis in the industry.
Fernando Reyes a motorcycle importer from Venezuela recently asked me why it was that the domestic down-turn has affected export figures. He didn’t see that there should be a correlation between the separate markets. As I explained to him it is all to do with the supply chain. The biggest producer of motorcycles in China is Haojue. Haojue are little known as a brand on the world market because they concentrate most of their strengths on domestic trade. If their sales in China drop then they will not be purchasing the same amount of raw material that they usually do. If they lower the amount of material and parts that they purchase the price of said material will increase. The material increases will be felt by every motorcycle manufacture in China regardless of their market target, even affecting giants like Loncin who are the biggest exporter of Chinese motorcycles forcing them to raise their prices. Previously, in a world where expensive Japanese models were their only competition, a price hike would be suffered by the customer who basically would have had much of a choice. Enter India stage right!
India has no such restrictions on urban motorcycle riding (nor does any other country) and so its motorcycle market forces are gaining strength as the supply chain becomes busier (and cheaper) enabling India to enter in to direct competition with China on many markets. At a recent meeting of the Chongqing Motorcycle Council Chinese motorcycle historian Guo Changjun had the last word, stating “if the Chinese government doesn’t review its policy on motorcycle riding in cities and towns our rank in the world could be behind India within 5 years.”