China continues to lead the global motorcycle industry, turning out 50 percent of the world's entire supply of the product. The country's exports for the 10-month period between January and October 2005 amounted to US$1.4 billion, an impressive 47 percent increase from international shipments in the same period of the previous year. The growth in export volume closely mirrors that of value, slightly exceeding 46 percent in the 10 months to October 2005.
This is in contrast to when we last examined China's motorcycle industry in May 2004. That year, export value rose 30 percent while volume went up at a relatively slower rate of 22 percent.
The main reason behind the higher growth rate of export value is the 7 percent increase in the average unit value of motorcycles in 2004. In comparison, figures for the 10 months to October 2005 show that average unit value rose a mere 0.5 percent when compared to the same period in 2004.
The following are some of the key trends we see in China's motorcycle export industry:
This report covers the three major categories of motorcycles in China: street/road bikes, scooter-style and off road/dirt bikes. The majority of these motorcycles are fitted with 4-stroke, single-cylinder engines that are air cooled. The other key features and factors that influence pricing are discussed in the Products & Prices section.
The Manufacturing section discusses the difference between small, midsize and large suppliers in terms of production capability. It discusses the processes involved in the manufacture of key motorcycle parts and components and details the key QC tests motorcycles undergo.
China now has a relatively small base of motorcycle makers. About 70 percent of these 200 or so makers are locally owned companies. About 28 percent are foreign-invested while the rest are state-owned enterprises. The Industry Overview section elaborates on the composition of China's motorcycle industry, highlighting the key characteristics of the different types of suppliers.
The supplier base consists mainly of small makers that primarily function as the manufacturing subsidiaries of large companies. In addition, there are 15 to 20 midsize suppliers and 15 large makers.
Industry Overview
China's motorcycle industry is still consolidating rapidly with the number of existing suppliers down by more than 30 percent from 2004, even as exports continue to surge. Despite this change, the industry has maintained its status as a manufacturing and exporting powerhouse.
The bulk of motorcycle exports continues to go to low-end and midrange markets such as Asia, the Middle East and Africa.
More suppliers, however, have become aware of the strong potential for growth in the US and EU and have started focusing exports to these two markets. In fact, exports to the US have surged 93 percent from US$45 million in the whole of 2004 to US$87 million from January to October 2005.
Shipments to the EU are even more impressive: they soared 144 percent to US$100 million in the same 10-month period in 2005.
To further penetrate these two markets, suppliers are attempting to change China's reputation as a source of inexpensive reproductions of well known motorcycle brands to a source of quality, environment-friendly models with original designs.
This is all despite the roller coaster ride of boom and bust in the past decade. The surge in international demand for motorcycles in the past 10 or so years resulted in China's supplier base first ballooning and then being swamped by small suppliers with little or no regard for product differentiation. This resulted in a flood of inferior motorcycles mass-produced by these small makers.
To curb the influx of these cheap motorcycles, importing countries imposed protective measures that were primarily designed to discourage motorcycle shipments from China. A case in point is Vietnam, which was China's biggest motorcycle importer in 2001. Now, nearly three years after it increased import duties from 60 to 100 percent, Vietnam ranks 12th among the countries and regions importing motorcycles from China.
The most critical and drastic development in the past three years is the wave of consolidation that, at the time of our previous report on China's motorcycle industry, threatened to close down a number of companies. This consolidation has, in fact, already trimmed the supplier base from 300 in 2004 to about 200 in 2005.
In general, small suppliers that offer motorcycles at rock-bottom prices to cope with competition were the targets of the consolidation.
Chongqing makers, with the exception of a few well-established large suppliers, were particularly vulnerable. Having been used to engaging in or even triggering price competition by lowering profit margins, many of these makers were left financially insolvent after international buyers played suppliers against each other to bring prices down further.
The wave of consolidation will continue and even intensify in the future. The next three to five years will see the emergence of five or six of the strongest makers that will dominate China's motorcycle exports.
In addition, another 30 or so major suppliers will obtain a more significant position in the industry and a larger share of the market. While not necessarily large, these key suppliers will prosper because of their financial stability, substantial investment in R&D, focus on quality and product differentiation strategy.
Supplier Profile
China Jialing Industrial Co. Ltd (Group)
Ranked second in terms of motorcycle sales in the first half of 2005, China Jialing is one of the pioneers in own brand exports in China. Its in-house Jialing brand continues to have a strong presence overseas. OEM orders account for only 18 percent of exports.
The company has more than 30 sales offices, 3,800 branches and 5,300 service points in over 50 countries and regions including Indonesia, Vietnam, Colombia and the US.
China Jialing has been collaborating with Honda for more than 20 years. In 1992, it set up Jialing Honda Motors Co. Ltd, a joint venture that produces motorcycles, engines, general machinery and components.
Seventy percent of China Jialing's motorcycle output comes from its Chongqing facility, which specializes in straddle- and moped-style street/road bikes.
The company also owns a subsidiary in Shanghai for scooter-type motorcycles and another in Guangdong for street/road bikes with CG125cc engines. The company also makes motorcycle engines, of which 13percent is exported.
China Jialing has received the China Famous Brand mark, King of Chinese Motorcycles, National Quality and Profitable Advanced Enterprise, National Excellent Enterprise and National Customer Satisfaction Enterprise awards.
Products
Street/road bikes in 70, 90, 100, 110and 125cc displacements make up 83 percent of China Jialing's output with 50 to 125cc scooter-type models accounting for the rest. Products typically have air-cooled engines. Collaborative efforts with a European design company have enabled China Jialing to introduce a 600cc street/road bike in the EU in September 2005. It has previously released 70 and 125cc models in the EU with two of the 125cc bikes bearing E-mark certification.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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