Mr. Li Bin, the Secretary General of China Association of Automobile Manufacturers (CAAM) Motorcycle Section talks to David McMullan and Zo Fu of ChinaMotor Magazine
Even though the output and sales of the Chinese motorcycle industry has remained number one for 18 consecutive years, the competitiveness of the Chinese motorcycle industry is not as strong as it once was, nor is the overall development level of the industrial chain satisfactory. There has been no constant production R & D in the industry over the past 30 years. Motorcycle manufacturers have applied insufficient innovative abilities, and their products have not changed. The phenomenon of low-price competition and the insufficient development of first-class products is blighting the industry. The world motorcycle industry is in the middle of a period in which motorcycle technologies are constantly upgrading and the market demand structure, market pattern and competition pattern are all changing greatly; the Chinese motorcycle industry is facing great challenges.. The industry is now at the key stage for significant structural adjustment and industrial upgrade. No progress simply means regression.
Since the beginning of 2012, China's economic growth has slowed down and exports have faced more pressure. The Chinese motorcycle industry is greatly affected. China mostly exports its motorcycles to countries in Africa, the Middle East and South America. Since the beginning of 2012, the influence of a worsening European debt crisis, the appreciation of RMB and the rising production costs have been taking effect on Chinese motorcycle exports and caused a significant slump. The current global economic climate is complicated, the unemployment rate in the US is rising again, and the influence of the European debt crisis is far-reaching. The Chinese motorcycle industry faces harsh export prospects.
Reasons of motorcycle output and sales decline and the existing problems
China's economic growth has slowed down due to the influence of macroeconomic policies. China's PMI (released by HSBC), which had been decreasing continuously since the beginning of 2011, dropped to 47.8, hitting a record low over the past 10 months, showing that China's domestic demand was low and its manufacturing industry was depressed. From another point of view, China's CPI has remained at a record high since the end of 2009, and consumer goods prices soared. The overall level of CPI in China between January and August was up 2.9% from a year ago. According to the latest survey by People's Bank of China, 65.7% of people held that 'consumer goods prices were too high to be accepted’ and the people's confidence index for their future income was only 53.2%, the lowest level since 1999 when the survey first began. Motorcycle consumers in China are mostly low-income people, and soaring consumer goods prices have a greater affect on their lives.
The competition on the Chinese car market is fierce. Chinese car manufacturers are turning to the rural markets which are the traditional markets of Chinese motorcycles. The ban on the use or limit the use of motorcycles in Chinese cities has fostered the development of improper vehicles including 'illegal power assisted vehicles' and 'non-standard electric bicycles'. Meanwhile, the climate of the Chinese motorcycle market is dull, counterfeit and shoddy products are prevalent, and the sales of illegal power-assisted vehicles and non-standard electric bicycles are not controlled. These vehicles have taken up the market shares of motorcycles, and severely affected the sales of conventional motorcycle products.
The progress of urbanisation and the flow of young migrant workers into Chinese cities has 'hollowed' rural Chinese regions. So, motorcycle markets in rural areas are shrinking. The number of Chinese cities that 'ban the use or limit the use of motorcycles' is increasing every year, making motorcycle market shares shrink.
Since the implementation of the National III emission standards, Chinese motorcycle manufacturers have been busy dealing with it and have been slow in releasing new products. They lack technological innovation abilities. The average number of new products declared each month between January and August 2012 was only 40; the figure for the same period 2011 was over 100.
All regional governments implement land fiscal policies which lead to the price rise of land and property rent. Meanwhile, the product choices of many Chinese motorcycle manufacturers were not reasonable. Most of their products were low-end products. Their distributors made little profit to maintain their normal business operation. Finally, they just quit the motorcycle business.
Forecast on the development trend of the Chinese motorcycle industry
The 'Twelfth Five-Year' period is the period of change and revolution for the Chinese motorcycle manufacturers to survive and develop. Not to change is to go backwards. Innovation is a necessity for the development of the Chinese motorcycle industry. Accelerating the transformation and upgrade of Chinese motorcycle enterprises and accelerating product upgrading has great significance for the sustainable development of the Chinese motorcycle industry.
Developed countries are rethinking the importance of the real economy. The roles that the manufacturing industry plays in helping economic balanced and sustainable development are being revalued and reassessed. America puts forward the idea of revitalising its high-tech manufacturing industry. Germany puts the stress of its economic construction on revitalising industries. The real economy will have development opportunities in the future.
In the short run, the European debt crisis and China's economic development will touch bottom next year. With the sudden change in the development preference of the European and American economic development, the 'golden decade' that China experienced in the past in foreign trade development will become history. The global and domestic motorcycle markets will be dull. The estimated total motorcycle output in China is about 25 million units in 2012, motorcycle exports will be about 9 million units, and domestic sales will reach about 14 million units, down 10% in the whole.
There are internal reasons, general economic climate and national policy reasons for the current gloomy motorcycle market. However, market consumption structure will gradually change. High-end leisure motorcycle products will see fast growth. The market shares of traditional motorcycles will drop. Consumers will have better awareness for brand popularity. The competition on the Chinese motorcycle market will be further internationalised.
Countermeasures for the development of the Chinese motorcycle industry
The fast development of motorcycle markets in 2009 in China made Chinese motorcycle manufacturers develop by expanding their output capacities and competing by low production costs and low price sales. They lacked the technological application for product R & D and product planning. Their products were more or less the same, and their R & D is restrained by market development.
Improving technical content and promoting innovation are the only ways for Chinese motorcycle manufacturers and the Chinese motorcycle industry to survive and develop.
Differential product development planning
A motorcycle enterprise should make product development planning in accordance to the characteristics of the enterprise. The enterprise carries out minor changes every year and big changes every two years based on the product planning, and then form the distinct product specialties of its own. The enterprise will achieve technical accumulation and technical advantages by international cooperation, sub-contract development, joint development and independent development. Then, the enterprise will achieve the interaction between product development and market demand. The previous product development strategy, 'producing one generation of products, researching & developing a new generation, and pre-researching a generation', of Chinese military industrial enterprises is still applicable. Many overseas motorcycle manufacturers are researching or have already developed engines suitable for phase-IV emission standards, and they can save fuel by 35%.
Establishing Chinese motorcycle key parts & components innovation system
Motorcycle parts and components are the basic things for product innovation. Due to substandard parts quality or poor parts production consistency, some newly-developed large-displacement motorcycles by some Chinese motorcycle manufacturers cannot be mass-produced, or have problems after mass production. Establishing key parts & components innovation & a guarantee system is the basis and assurance for motorcycle product technical innovation, advanced performance and stable quality.
The Chinese motorcycle industry is planning to unite popular, technically-advanced and strong parts and components makers to set up a 'China Motorcycle Key Parts & Components Industry Alliance' with the hope of strengthening planning, coordination, help and guidance for product R & D, technology introduction, production management and quality assurance system in the motorcycle key parts and components industry. Then, the key parts & components guarantee that the system will be participated in by many outstanding parts and components R & D enterprises. Meanwhile, the scale effect of advanced parts & components R & D, performance and quality guarantee, costs and risk sharing will be successfully achieved.
Establishing 'motorcycle industry key parts and components innovation system' in the Chinese motorcycle industry is a great push for motorcycle product innovation and development, and a great measure to achieve mutual benefits and common development between motorcycle manufacturers and motorcycle parts makers.
Marketing strategies that can be adapted to new situations
The marketing mode should transform from selling motorcycles to selling motorcycle culture and services, and then expanding business in areas of motorcycle accessories, motorcycle apparel, motorcycle modification, motorcycle leisure and recreation. Motorcycle manufacturers should put in more effort in developing export, Chinese medium and big cities as well as their surrounding markets for the sales of leisure and recreational motorcycle products. They should set up the new multiple-marketing mode with rural markets as its foundation, medium and high-end export motorcycle markets as its growth points, and set up the profit model of making product technology as its foundation; culture and services as its additional value creators.