The rise and fall of the Chinese motorcycle industry (and how to revive it)!
David McMullan in Chongqing
In March of this year CAAM (China Association of Automotive Manufacturers) announced that production in the Chinese motorcycle industry has dropped year on year for the 8th year running and shows no signs of recovering to its former glories. Li Bin, the chairman of the association told me, “The development speed of Chinese motorcycle factories has slowed down and will continue to slow down for the foreseeable future. This trend started during the global economic recession in 2008 and is still the recurring theme in 2016. The biggest threat to motorcycle manufacturing companies in China is that they have developed manufacturing centres that are too big, much bigger than what is necessary for them to survive and they need to adapt and cut down on space and staff.”
During the 2008 recession China was one of the least affected countries in terms of the domestic economy but one of the major problems faced was that of the export industry. Many of China’s export partner countries and also future target countries were struggling in the credit crunch and applying types of protectionist schemes that severely dented China’s export programmes. 2 years later the Chinese government implemented the ban of internal combustion engine 2-wheelers in most of its tier one and tier two cities, an act that decimated the Chinese motorcycle industry’s sales figures and served to negatively affect the parts making companies thus forcing them to increase their prices to remain in business. This shift in prices was passed on to the motorcycle manufacturers and served to cut down on the Chinese industry’s biggest advantage- price competitiveness. Chen Huang from the Yingang Motorcycle Company confirms this. “For a Chinese manufacturer to thrive it’s all about price. Chinese motorcycles were worth the money but if their prices started to increase and become closer to the prices of the technically better Taiwanese or Indian bikes sales would suffer and this is exactly what happened in previously huge Chinese markets like Latin America, Iran, Turkey, Egypt and others. Also the rise of the Indian motorcycle manufacturing industry has been a thorn in the side of its Chinese counterpart for the last 5 years. One of the main differences in the industries is that India only has 5 motorcycle manufacturers whereas China currently has almost 200 competing with each other on the same markets.”
To facilitate to renaissance of the Chinese motorcycle industry the Chinese government has recently issued the following advice.
‘In the past motorcycle manufacturers have only needed to manufacture basic motorcycle units and sell them. In this new environment old manufacturing philosophies will have to be abandoned in favour of rigorous research and development in the fields of innovation, low emissions and smart technology. Reliance on profit by selling big numbers is not affective in the world market currently.’
‘There must be bigger attention paid to internet trends and more effort put in to the market research of target countries.’
‘In May this year the Chinese government will implement its 13th 5 year plan. Motorcycle manufacturers are advised to lobby for the removal of motorcycle bands in China’s urban centres.’
These announcements came just before the production and sales statistics for March were released. March showed a slight upturn in China’s fortunes hopefully a taste of things to come for the Chinese industry. Here’s the latest report.
In March, Chinese motorcycles enjoyed growth on both a monthly and yearly basis. In this month production and sales reached 1,505,000 and 1,521,000 units, up 31.7% and 36.4% than that of the previous month. Compared with last March, the production and sales were up 1.3% and 2.4%. To summarise, the production and sales of three-wheelers were 225,000 units and 235,000 units, up 26.2% and 30.9% year on year.
For the first three months of 2017, the accumulated production and sales of motorcycles reached 3,886,000 and 3,954,000 units respectively, down 0.9% and 0.7% from the previous year. The decrease rates narrowed 1.1 percentage points and 1.7 percentage points compared with the first two months; and narrowed 13.1 percentage points and 12.8 percentage points when compared with the same period of last year.
In March, motorcycle exports enjoyed growth on both a monthly and yearly basis. In this month, the export volume reached 654,000 units, up 40.6% on that of last month, and up 10.3% from the previous year. In summary, the export of motorcycles reached 618,000 units, up 7.5% year on year. The exports of three-wheelers numbered 37,000 units, up 97.5% year on year.
For the first three months of 2017, the accumulated exports of motorcycles reached 1,730,000 units, up 0.1% year on year ending a continuous decline. In summary, the export of two-wheeled motorcycles reached 1,640,000 units, down 1.9% year on year. The exports of three-wheeled were 90,000 units, up 61.1% year on year.
To conclude, it’s pretty clear that the Chinese industry has to (and is) turning to new markets for its evolution but whether it can be the force it once was seems to be reliant on the details of the government’s new five year plan and moreover its intentions for the motorcycle industry.