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Joint ventures bearing fruit in China

 

Written by David McMullan the ‘Englishman in China’

[email protected]

 

 

International joint ventures have proved invaluable to the Chinese motorcycle industry. From technology sharing to promoting brand recognition, JV’s have long been the difference between success and failure for some Chinese motorcycle companies.

 

China’s  latest automotive industry policy release advises that foreign investors will be permitted to control stakes of more than 50 percent in automobile and motorcycle joint ventures with Chinese partners if their JVs are built in China's export processing zones and aimed at overseas markets, making China a lucrative manufacturing ground for many big motorcycle companies.

 

As if to qualify this phenomenon, BMW Motorrad has announced an increase in their cooperation with Chongqing giant Loncin. On October 23rd, Loncin entered into a long-term supply agreement of large-displacement engines with BMW Motorrad, and the supply is expected to be 30,000 sets.

 

Loncin will manufacture and supply high-tech water-cooled motorcycle engines for BMW according to product technical plans provided by BMW Motorrad, as part of this deal Loncin will invest about RMB100 million. Loncin first entered into a JV agreement with BMW Motorrad to manufacture BMW 650cc single-cylinder engines in 2005 and the company remains the only large-displacement engine supplier of BMW in Asia. Experts in the industry indicate that as the output of BMW 650cc single-cylinder engines last year exceeded 10,000, this new supply of large-displacement engines will become an important growth point for the future performance of Loncin.

 

After Loncin agreed their initial cooperation with BMW I was invited to the factory to look over the BMW section. It was a time of great excitement for Loncin as they had just bought out fellow Chongqing motorcycle company Kinlon expanding their export operations (they are now the biggest exporters in the Chinese motorcycle industry) and with the added prestige of the joint venture with BMW, Loncin was buzzing. What was instantly noticeable was the difference between the standards of the Loncin factory and the BMW section which was decked in higher technology with the workers donning Teutonic standard safety equipment in contrast to the rather less stringent safety rules of the rest of the factory. Since then all JV co-operations (on the Chinese side) have started to look at and revue their safety in the work place policies, this is a direct positive result of joint ventures.

 

Piaggio and Zongshen have long been partners and have set up a JV factory in Foshan, Guangdong province ‘Zongshen Piaggio’ where they produce motorcycles and scooters. Zongshen also aid Piaggio in the marketing and sales of Vespa, Aprilia and Moto-Guzzi on the Chinese mainland.

 

 

 

The Japanese are also in on the act with Honda Motor Co, the world’s 2nd largest motorcycle manufacturer seeing motorcycle production in China grow every year. In 2012 Honda manufactured nearly 1.5 million motorcycles through its joint ventures, and is now even selling Chinese made Honda models in Japan as well as exporting them to other Asian countries.

 

Honda now runs three motorcycle joint ventures in China with local partners Sundiro Motorcycle Co Ltd, Wuyang Honda and Jialing Industries Co Ltd with fellow Japanese giant Yamaha in a long established manufacturing JV agreement with Jianshe, and Suzuki joining forces with Jinan province’s Qingqi (who also make scooters for Peugeot). Suzuki’s JV with Qinqi is more about commercial opportunities with the ChinaMotor magazine report last year stating ‘Suzuki Motor Corporation will launch two large displacement motorcycles in China from 1 July, 2012 through its motorcycle production and sales joint venture company Jinan Qingqi Suzuki Motorcycle Co., Ltd. and sales subsidiary Suzuki Motor (China) Investment Co., Ltd. The two models are Suzuki’s flagship motorcycle GSX1300R Hayabusa (displacement 1300cm3) and cruiser type BOULEVARD M109R (displacement 1800cm3). By making CBU exports from Japan, they will be sold at a dealer in Beijing and two dealers in Shanghai. The sales channel is planned to be expanded gradually in the future, mainly to large cities where demand can be expected.’

On October 17 this year I attended a press conference at the China International Motorcycle Trade Exhibition (CIMAmotor 2013) which announced that the KTM brand was officially entering the Chinese market as a joint venture partner with progressive Chine motorcycle company CFMoto. At the KTM exhibition stand the 1190 Adventure, 1190 Adventure R, RC8 R, 690 Duke, 690 Duke R, 200 Duke, 390 Duke, 350 EXC-F and Freeride 350 were among the first batch introduced to China and caused no little excitement among Chinese visitors.

 

Also at CIMAmotor, KTM’s senior management introduced a new model that is especially designed for the Chinese market the KTMR2R. As the strategic partner of KTM in the Chinese market, Mr. Lai Guogui, Chairman of Zhejiang CFMOTO Power Co., Ltd. stressed at the press conference that the CFMoto and KTM joint venture was a good match. “We both emphasise high-end, recreational and personalised products in brand positioning and advocate an active and healthy motorcycle lifestyle. It is because of the essential common points that we come together. In the future, we will cooperate with KTM in promoting races and events in China, bring original KTM products to Chinese customers and provide them with the true experience of high-performance products and better after-sale services brought by a world leading motorcycle brand. Meanwhile, to CFMoto, we will learn KTM’s operation ideas through cooperation, trying to make contributions to the branding of China’s motorcycle market.”

 

KTM is not the only European marque to go down the JV road. Italian manufacturers MV Agusta have a distribution agreement with Chongqing giant Lifan to sell their products through their multitude of dealerships and ar4e just beginning to pick up momentum through extensive MV brand recognition campaigns.   

 

 

With all this JV activity occurring in China there is a new widespread view that the ‘great leap forward’ of Chinese motorcycle technology will be heralded in mainly by collaboration with international companies that have technical nous and are willing to share it in what Chinese companies are fond of calling ‘win win’ situations.

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