OFF THE WIRE
http://www.motorcycle-usa.com/2/15589/Motorcycle-A
Analysis of 2012 Chinese Motorcycle Industry
By David McMullan,
The state of the Chinese motorcycle industry in 2012 was
described dramatically by the Chinese government as 'walking on thin ice, and in
great difficulty'. The market was dismal, sales were falling, and motorcycle
output and sales were slumping; motorcycle sales in some areas of China
experienced declines of up to 50% year on year, setting an historic low.
According to CAAM statistics, the output and sales of the
Chinese motorcycle industry (including export) between January and October were
19.505 million units and 19.5772 million units, down 11.94% and 11.86%
year-on-year respectively. The output and sales of two-wheeled motorcycles were
17.5872 million units and 17.6607 million units, down 12.99% and 12.94%
year-on-year. The output and sales of motor-tricycles were 1.9178 million units
and 1.9165 million units, down 0.96% and 0.43% from 2011.
The Chinese motorcycle industry had enjoyed rapid development
since China's ‘reform and opening up’ in the 1980s but that development began to
slow down after a recession hit 2008 and the slump became ever more obvious
after the implementation of National III emission standards in China in 2011.
Other problems still compound the progress of the industry; problems like the
banning or limiting the use of motorcycles in Chinese cities' has seriously
affected motorcycle sales in urban Chinese areas, the all too homogeneous
products, unitary marketing methods and the slow reform and transformation of
the industry all added to the misery of the industry in 2012.
Top Tier Companies Not Exempt from Crisis
Established Chinese motorcycle enterprises are beginning to
struggle to survive. CAAM statistics show that of the top 20 motorcycle
manufacturers (as of October 2012), only six companies experienced sales
increases year-on-year, these being only slight increases. The other 14
companies suffered various drops (of up to 30%). Those who suffered the biggest
decline were mostly first-tier companies.
Chinese motorcycle enterprises faced varied difficulties in
2012, and competition on the domestic market grew fiercer as sales networks were
shifted from urban to rural areas. Meanwhile, factors such as soaring raw
material prices and rising labor and operation costs further affect the profits
of motorcycle enterprises. The dismal general economic climate has also greatly
affected import/export market purchasing power and caused a significant
motorcycle sales decline. This greatly hindered the development of numerous
motorcycle enterprises, and many were forced to reduce expenditure in
activities, product R & D, and marketing. Some motorcycle manufacturers were
even forced into liquidation putting the stability of the Chinese motorcycle
industry in unprecedented difficulty.
Some leading Chinese independent motorcycle manufacturers were
still trying to find ways to fight back, notably Qjiang changing to a high-end
product strategy, Lifan's e-commerce business and Jianshe's MOTOMAN concept and
series of products.
The Ban & Limitation on the Use of Motorcycles
The banning and limiting the use of motorcycles in Chinese
cities is an old topic. It is also the key factor impeding the development of
the Chinese motorcycle industry.
There was no sign of a lift of the ban in 2012; on the
contrary the Chinese government expanded the ban to more cities and urban
centers. Further complicating the problem is the fact that more and more rural
areas are urbanizing and therefore falling under the jurisdiction of urban
governments causing bigger areas and more consumers to be hit by the motorcycle
ban.
In many cities motorcycle retail is becoming rare. This
decrease of motorcycle retail trade greatly reduces distributors' benefits and
many secondary level distributors have found it hard to survive and many have
moved over to the growing auto or EV industries.
As purchasing power in rural areas is generally weaker,
manufacturers have paid less attention to quality and more to reducing prices in
an effort to maximize profits, thus hindering progressive research and
development having a negative knock-on effect for the export industry.
The Impact of Electric Vehicles and Ordinary Family Cars
Significant
Multi-industry competition (auto, EV and motorcycle
competition) became increasingly apparent in 2012. The infamous 'battery crisis'
which troubled the electric vehicle industry was solved by early 2012 boosting
its development. Meanwhile, many Chinese electric vehicle manufacturers further
strengthened their urban and rural sales networks and developed new markets
posing a significant threat to the profits of the Chinese motorcycle industry.
In urban centers where motorcycle riding is still permitted many consumers who
had originally intended to buy conventional motorcycles have chosen to buy
electric vehicles that are light, environmentally friendly and more economical.
The General Administration of Quality Supervision, Inspection
and Quarantine of China and the Standardization Administration of China modified
the national standards (Motor Vehicle Safety Technical Requirements GB7258-2004)
and put them in to effect on September 1st. This revision has further improved
the quality of Chinese EV and posed a further challenge to the conventional
industry.
Joint-Venture Motorcycle Manufacturers and Tricycle
Manufacturers the Exception
In early 2012 when the sales of most of the Chinese motorcycle
manufacturers were plummeting, China's four major joint-venture motorcycle
manufacturers, Wuyang-Honda, Jianshe-Yamaha, Sundiro-Honda, Jinan-Suzuki, all
made high profile announcements stating that they had set their sales targets at
1 million units per year within three years, and were the first to positively
act against the market downturn.
Wuyang-Honda put their own ‘1 million units' plan forward at
their annual summit early in 2012 to celebrate the 20th anniversary of its
establishment. Jianshe-Yamaha held a grand 'ice-breaking' ceremony at their
national distributor meeting in June, and set a similar target. The other two
joint-venture motorcycle manufacturers, not willing to be left behind, set their
target to reach sales of 1 million units per annum within three years.
According to the latest statistics, the total sales of Wuyang-Honda
between January and October 2012 were 800,000 units, up 9.48% year-on-year; the
total sales of Sundiro-Honda were 770,000 units, up 11.05% year-on-year, Jinan-Suzuki
and Jianshe-Yamaha sales were the equal of 2011.
The collective launch of the strategies of joint-venture
motorcycle manufacturers will inevitably arouse a new round of market
competition which may change the pattern of the Chinese motorcycle market and
encourage growth.
The output and domestic sales of motor-tricycles has enjoyed a
steady increase in 2012. Motor-tricycles are used as both transport and
production tools in China as they designed to be used as passenger and freight
transports. Their practicality is greatly favored by Chinese farmers and private
small business owners in towns.
Along with the fast development of the motor-tricycle
industry, its status and market have been gradually improving. More and more
major motorcycle enterprises begin to pay attention to motor-tricycles and
manufacturers including Lifan, Zongshen, Dayun, Dayang, Yinxiang, Summit, and
Wanhoo have increased financial input in to motor-tricycle production in 2012 to
augment their product lineup and improve existing technologies. The potential of
the motor-tricycle market is growing thanks to the implementation of government
subsidies and the steady income increase of Chinese farmers.
There are Currently Around 900 Million Farmers Living and
Working in China.
Government forecasts project a demand for about 75 million
motor-tricycles on the provision that 1 in 3 farming families will eventually
purchase. It will take 20 to 25 years for Chinese motorcycle manufacturers to
meet projected market demands. The current annual motor-tricycle output capacity
is 4 million units so it is very likely that we will see more of the major
motorcycle factories taking advantage of this growing market.
