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.
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.