Still too many companies
Back in 2009 China’s biggest motorcycle exporter Loncin bought out fellow (and by no means small) manufacturers Kinlon combining their customer base and supply chain with a company which already boasted a technical working collaboration with BMW. This merger propelled Loncin to giant status in China and was surely a sign of the shape of things to come, or was it? 2 years ago David McMullan wrote an article on what to expect from the Chinese industry, this included a report on expected takeovers and mergers that have, quite frankly, not happened.
China, and in particular Chongqing still has an over-abundance of motorcycle manufacturers. From one production line outfits supplying cheap 2-wheelers to small African nations to the likes of Lifan, Zongshen and other companies capable of producing 1 million plus units per annum. With the continuing drop in motorcycle sales (mainly due to the ban of motorcycles on domestic markets and the recent global recession) motorcycle industry workers are starting to question the sense in China sustaining so many competing companies. The Chinese are increasingly looking to the example of India where the growing motorcycle industry is driven by 2 giants, Hero and Bajaj and of course for a prime example of how to structure a motorcycle industry one must look no further than Japan.
On the Japanese subject ChinaMotor Magazine’s Mike Cai commented “It’s very apparent that the success of the Japanese motorcycle industry is in a large part due to the fact that in the 1950s, the Japanese Ministry of International Trade and Industry (MITI) warned the Japanese motorcycle manufacturers that there were only market opportunities for four brands. Due to this official advice the number of Japanese motorcycle manufacturers shrunk from around the 100 mark to the big 4 we know today. If no government intervention is forthcoming then we may well see motorcycle industry evolution by natural selection resulting in a survival of the fittest, or in this case best prepared for the future as we’ll see many motorcycle manufacturers going out of business.”
As is the often the case in time of business struggle some companies are changing their strategies. In days past it was always an option to market a new model domestically to boost sales, this is no longer possible, but other options have helped soften the blow. Where possible, motorcycle companies have invested heavily in the production of 3 wheel ‘tuc tucs’ both for passenger and cargo use. Dustin Liao of ChinaMotor magazine reveals “I’ve seen a marked increase in the amount of advertising enquiries from companies making 3-wheelers. China practically automated the developing countries by exporting affordable 2-wheelers and now it seems that the next stage has begun. These countries moved from using beasts of burden to motorcycles, and now it seems the next step in their logistical evolution is 3-wheelers.”
China’s international motorcycle expo CIMAmotor has changed its exhibition structure accordingly. Expo promoter Fen Liu told me “this year we have actively turned away some of the smaller factories wishing to exhibit in favour of including more OEM parts companies. This has been especially popular with overseas visitors who first commented on the lack of variation exhibited by some of the motorcycle stands, looking at one was like looking at 10 others! Of course, international visitors are our lifeblood and we have to respect their wishes so we cut back on the whole unit exhibitors and encouraged more parts companies that have export capability.”
Although there may be a glut of motorcycle manufacturers it’s a different story when it comes to parts companies. Although China is heavily populated with parts companies a very small percentage of them have export licenses. Raj Thakrar from Orange Imports in Cambridge informs us “because the Chinese parts companies are, on the whole, smaller than full unit manufacturers they also seem to lack the nous. When the whole world was crying out for Chinese parts due to limitation in the supply chain, I went to China and was astonished at the amount of big parts companies that hadn’t a clue about export; they were making all of their profit from the domestic market. This is still pretty much the case with Chinese parts importers reliant on agents to do the work for them, this of course is not ideal as they charge a percentage and will use the companies they have relationships with rather than the ones that are best for the job! I’ve heard that CIMAmotor will be concentrating more on OEM parts companies at their exhibition this October so I will be visiting Chongqing with some optimism. What we could really do with is a specialised Chinese motorcycle expo B2B somewhere in Europe. Finding Chinese parts exhibitors is getting more difficult in Milan and Cologne and practically non-existent at Birmingham. I hear now that Chinese units are outselling Japanese (in terms of units sold not total revenue SK) in the UK! It’s about time we had something we could attend once a year locally that solely concentrated on the growing China motorcycle market.”
Despite the general consensus that there are too many factories new factories are opening. Fuego Power with its Motorhead brand opened to fanfare recently. I asked company owner Ruby Zhang about this decision. “Yes it is true that there are too many motorcycle factories in China, but it’s also true that they are all manufacturing the same products as each other. What we are trying to do is create a factory that will supply motorcycles that are not currently available from China. One of our projects is to produce a café racer; this has never been done in China so as you can see we are not pursuing the usual ‘copy a Japanese model’ method. To state that there are ‘too many motorcycle manufacturers in China’ is true, but to say that they all produce the same models without any innovation is even more valid.”