Possible rises in the price of Chinese motorcycles (and what causes them).

May 3, 2018

Possible rises in the price of Chinese motorcycles (and what causes them).

By David McMullan  englishmaninchina@gmail.com

 

The price of producing a Chinese motorcycle is due for an increase in the near future due to factors that are out of the hands of the manufacturers.  This phenomenon may trigger a knock-on effect down the line to importers and dealers and ultimately to the end user. Here I will identify and explain some of the aspects of this price rise.

 

Material costs

In the early part of 2016 the industry received warning signs that coal and steel were subject to the trend of rising prices mainly due to the Chinese government’s growing concern for environmental issues and the effort to reduce factory and mine emissions and pollution for these industries. The implementation of better safety and pollution reducing measures has had a huge effect on the coal, steel and chemical industries and therefore on all the industries dependent on these products. Fast forward to summer 2017 and we are now seeing the knock-on effects of this phenomenon in the motorcycle manufacturing industry as factories are being forced to raise prices in line with the growing material costs.

It is feared that this may create a price war in which the larger manufacturers (with better resource to ride-out the material price increase) will suspend their prices while smaller manufacturers (who will struggle to compete) lessen the quality of their products in order to stay in the game.

 

Currency rates

One of the key factors affecting the price of motorcycle manufacture is the rising currency exchange rate. In the last month (August) the Yuan RMB has dropped 5% against the dollar (all Chinese business use the dollar as their default currency for pricing both domestically and for export). This rise has caused many motorcycle manufacturers to hike the price of their models by an equivalent 5%

 

Stricter policies and upgrades for the domestic market

The Chinese domestic motorcycle market is facing further pressure as the Chinese government look to implement ‘no. 4 national standards’. These standards will come in to affect from July 1st 2019 and will require the full development and usage of electric fuel injection on all new motorcycles. This will bring enormous pressure on a domestic industry which is already suffering the effects of the motorcycle ban in urban centres and cities. These measures will affect the export industry in the following ways. Many producers of Chinese domestic commuter bikes will not be able to reach the technological requirements necessary for the new national standards and will therefore go out of business. If the numbers of constructed motorcycles decrease so then does the amount of parts on the supply chain thus driving up parts prices in the whole industry (including the export models).

 

 

Environmental protection

There is no doubt about it environmental protection is a good thing but there is also no doubt that in the case of China it is paramount in effecting the price of products from the motorcycle industry.  From the motorcycle bans in cities and urban centres to the new implementation of green technology upgrades environmental issues have caused the biggest overall decline in the Chinese motorcycle industry with dozens of manufacturers going out of business every year.

 

 

Summary

I have long said that the implementation of better technology and the ‘culling’ of many of the smaller and less professional factories is the only way forward for the Chinese industry. The price of Chinese motorcycles may have to rise and the export sales of Chinese motorcycles may well suffer the same fate as their domestic counterparts in terms of units sold but it is my belief that this natural progression (evolution, survival of the fittest if you like) is the only way for the Chinese industry to step up and compete on the same markets as the Japanese and Europeans worldwide.

One of the possible positives trade wise could be the development of better and more useful electric bikes and scooters. China’s ban on ICE bikes in urban centres has led to the development of the biggest (by far) electric bike industry in the world as commuters rush to replace their combustion engines with electric motors. A trip to any Chinese city (with the exception of Chongqing) will reveal swarming flocks of electric scooters and pedelecs fighting for road space. There is reckoned to be at least 100 million electric bikes and scooters in China not and Chinese EV factories are very keen to up the stakes export wise by developing lithium-ion batteries which charge quickly and give the bikes a decent range. Many of the smaller motorcycle manufacturers have started to turn their attention to producing electric bikes or at least electric bike parts and it is commonly felt to be the business of the future for China’s 2-wheel industry base.

 

 

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