Much is reported of the Chinese motorcycle industry in relation to CBU motorcycles but it would be remiss to negate the huge motorcycle parts industry. As with its built-up counterpart the parts industry has been having its troubles. China is the biggest producer of motorcycle parts in the world, producing parts not only for Chinese brands but also for many of the best known global motorcycle manufacturers. Chongqing is the national centre for motorcycle parts production and this year the CIMAmotor expo has greatly increased the amount of motorcycle parts exhibitors at the show. Last month I spoke to a selection of motorcycle parts company bosses China-wide and asked them their opinions of the future of the motorcycle parts industry.
Mr. Lin, sales manager of Sanyang Plastic Parts (Guangdong branch) announced "This year, 1 in 5 motorcycle parts manufacturers have quit the motorcycle market. The parts industry reshuffle is accelerating, and small manufacturers almost have no way out.”
Mr. Ma, who is CEO of a fuel tank factory, stated “last year profits of parts factories fell sharply due to sheer price drop in both overseas and domestic orders, plus the large increase in labour costs. Although there is little change in raw material prices, manufacturers' profits on traditional models are quite low. Some models even yield zero profit and due to this we have suspended our operations in Chongqing and Shanghai for the time being with the hope that we can reopen when times change.”
The more established and brand marketed parts manufacturers enjoy booming business. Parts from other manufacturers, like Maxxis and Kenda Tyres, WLJF Sprockets and KEIMA carburetors are hot products in the market and regarded as a selling point by all motorcycle manufacturers!
Mr. Xiao, sales director of Feiying Motorcycle (FYM), has cooperated with parts factories for many years and is well versed in the motorcycle parts industry’s development. He commented “the parts industry is dividing. Some factories keep growing and have marketed their brands successfully so that they have become well-known while others shrink in size to consolidate or even go bankrupt. Eventually, parts manufacturer brands will be more concentrated, we will see a situation where the bigger parts companies will buy up the smaller ones. This works in 2 ways for the bigger companies; firstly they can add the purchased company’s customer list and supply chain contacts; secondly they eliminate the smaller company from their sphere of competition.”
Mr. Zheng, manager of Zhengxin Industry (HK) Co., Ltd., told us that they believed that parts for large displacement motorcycles were profitable, and they were contacting motorcycle manufacturers to negotiate how to enhance parts quality for large displacement motorcycles. He stated “the market is swamped with companies selling parts for commuter motorcycles and scooters, so swamped that it has forced us to look at another avenue of business. We will investigate the larger motorcycle market. Firstly, this is a growing market domestically, which is more than we can say for the commuters; secondly it will give us an advantage with global exports.”
Transition to Electronics and Automotive Industries
Consequently, some manufacturers choose to change their business orientation. According to the Chongqing Economic Times, more than 10 local motorcycle parts enterprises in Chongqing have elected to branch in to IT industry (Chongqing is now the biggest manufacturer of lap-top computers in the world). Many of them have received orders from the Foxconn Company, and others have applied for the certification to follow suit. A number of enterprises are planning to quit the automobile and motorcycle parts industry altogether and enter the growing IT industry. A good example of this phenomenon is HCLL Plastics (Chongqing) Co., Ltd. which has started cooperating with Foxconn to develop the plastic parts for laptop shell, keyboard, and mouse.
In 2012, Chongqing Jieli, the China’s largest manufacturer of motorcycle wheels signed a cooperation agreement with global-leading automotive wheel giant CITIC Dicastal to invest 1 billion Yuan and create Chongqing Dicastal Jieli wheels. The wheels are customised for Mercedes-Benz and BMW, targeting Chinese and global markets. This cooperation was the biggest news in the parts industry last year and it involved transition.
Important choices often require careful consideration. "Actually, there are only a few manufacturers who are considering complete transformation. It is not so easy for us to transit to other industries immediately after more than a decade’s operation in motorcycle parts. Many of us hang in there and are hopeful that the future can become brighter. If it does there is no way back for the companies that have completely mutinied from the motorcycle parts industry. "We have no choice but to accept new product development. Although it requires hundreds of thousands of Yuan to develop new design exterior parts, many manufacturers still actively join the development regardless of costs. This is because parts for new motorcycle models have become important guarantee of profits if the companies supplying them have the right resources and set up. The scale effect is more distinct among general products. Large-scale manufacturers can effectively reduce costs of the same products through large scale production, while small manufacturers will be kicked out of the market. In other words, large manufacturers take market share from small ones. Therefore, small manufacturers can survive only by producing differentiated products.
Mr. Wu Yi of Vrooom! Motorcycle Parts in Chongqing summed up the necessary attitude. “We have found that there are intrinsic problems with many smaller and medium sized motorcycle parts companies when it comes to overseas supply. Many times they specialise, this means that the customer has to order parts from many different companies to fill his/her demand. This can be a logistical and economic nightmare saying nothing of the man-hours wasted and red tape it causes. Also, sometimes communication isn’t so good. Here at Vrooom we have had to adapt to what the global market needs and that includes supplying any motorcycle part for any model made in China. We have developed a ‘one stop shop’ by networking with companies that we have known for over 15 years. We also employ native speakers of English, Spanish and Portuguese to make sure that the communication flows. The problem is that many companies are not willing to make the extra effort, they just think about profits NOW! When we acquire a new customer we look long term at satisfying his/her needs for the term of the business relationship which is why we are the fastest growing motorcycle parts company in China and are not suffering the same problems as others. It takes effort and foresight.”
In a concerted effort to re-start the moto parts export industry the China International Motorcycle Trade Exhibition (CIMAmotor) has greatly increased the participation of parts companies. CIMAmotor partner David McMullan explains “it’s great for foreign trade visitors to see the new models released at CIMAmotor especially with the leaps in style and tech happening now in China but I constantly find that motorcycle industry lads and lasses are here for parts and accessories. This year we have greatly increased the representation from the parts sector in line with consumer wishes.”