Auto Industry

Lacking acceleration

China’s motorbike industry is facing problems both at home and abroad

Lacking acceleration

An industry under water?

In many ways, Chongqing is the perfect place to hold the annual China International Motorcycle Trade Exhibition (CIMA). The city is not only the heartland of China’s sizeable motorbike industry, it is also the only major city not to have banned motorcycles on its streets.

The latest exhibition (in October) was an opportunity for manufacturers to show off their latest products and to sign deals.

But CIMA has also become the venue where the industry gets together to discuss its future. Some of the chat will not have made for easy listening, with experts predicting major upheaval on the horizon. That looks like leading to industry consolidation: of the 200 companies in the industry, there is probably only scope for about a dozen manufacturers to survive.

The business climate worsened in the summer of last year, when the government rolled out new measures relating to bike emissions. National Standard III imposes tough technical restrictions that have to be met before a licence plate can be obtained. In addition to the new regulations, many individual cities have banned motorbikes and scooters from municipal streets, in part due to pollution concerns, but also as a measure perceived to improve the city image.

Restrictions on motorbike registration now cover more than 170 cities or more than 550 million people, “killing most of us,” Zuo Zongshen, chairman of Zongshen Group, one of China’s largest bike groups, complained to 21CN Business Herald.

This makes the domestic sales environment look increasingly unattractive, with the only mass market left residing outside the cities.

But rural consumers are less likely to pay for bikes manufactured in line with the new national standards, which make them much more expensive than non-compliant bikes.

International demand looks unlikely to save the day too, with exports still to recover from the pre-financial crisis period.

In 2008, China produced 30 million motorcycles, of which half were sold overseas. The following year, exports dropped to just six million. And although exports are expected to creep back up to 10 million this year, the long-term outlook isn’t as bright as in the past. Even if demand does return to pre-crisis levels, Chinese manufacturers will have to compete with producers from other emerging markets, especially from India.

The lacklustre outlook means that manufacturers are looking for new strategies. One option is to chase high-end business, where motorbikes are purchased for leisure purposes rather than everyday transport. The problem here is that Chinese firms may have a cost advantage over foreign rivals but they lack the brand image that attracts premium customers. International brands like Suzuki, Honda and Harley-Davidson have already cornered the market.

The other avenue is to go green. At this year’s CIMA event, electric bikes were being shown as competitors to their gas-guzzling cousins. Zongshen Group recently acquired a permit to produce China’s first electric motorbike, while Qingqi is also considering the launch of an electric cycle, reports 21CN.

WiC has written about ‘e-bikes’ before – they are conventional bicyles that have a battery attached, meaning riders can travel at higher speeds. However, as we pointed out in issues 19 and 44, even they aren’t without issues. For safety reasons the city of Nanning has banned them, and given problems with disposing of their batteries, environmenalists worry they’re not that green.

Still, some producers say that demand is growing. “Compared to the downward motorcycle sales, our [electric] sales are on the rise,” a representative of manufacturer Yadea told 21CN. It sold 1.5 million electric bikes in the first nine months of the year, with price tags between Rmb2,500 and Rmb4,500.

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