It is universally known that the Chinese motorcycle industry had experienced rapid progress since China’s “reform and opening up” in the 1980s, but that development had begun to slow down after the global recession hit in 2008.The decline 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 of the use of motorcycles in Chinese cities has seriously affected motorcycle sales in urban Chinese areas, the (still) all too homogeneous products, the growing influence of Indian motorcycles on traditional Chinese markets, unitary marketing methods and the slow reform and transformation of the industry all added to the stagnation of the industry in 2014.The Chinese government was cautious when describing the sales performance of the motorcycle industry in 2014 as “encouraging but frustrating.” The 2014 year’s predicted sales statistics suggest that the domestic market continues to decrease in light of the on-going ban on motorcycle in urban centers and the availability of cheaper cars combined with higher spending power. The prediction also indicates that although export figures may be slightly down, profits are up due to increases in western markets and the increased quality of Chinese P2W.
During the first eleven months of 2014 the accumulated exports of motorcycles reached 7,791,700 units, down 7% from the previous year with the export of two-wheelers reaching 7,524,400 units, down 8.3% year on year. The export of three-wheeled vehicles was 267,300 units, up 60.8% year on year.The Ban & Restrictions on the Use of Motorcycles
The prohibiting and limiting of the use of motorcycles in Chinese metropolises is an old topic but one that needs to be re-visited in light of the yearly report as it is the key factor that impedes the development of the Chinese motorcycle industry.There was no sign of a lift of the ban in 2014; conversely, the Chinese government expanded the ban to more cities and urban centers. An issue that further complicates the problem is the fact that more and more rural areas are urbanizing and consequently falling under the authority 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 have shifted in to the developing auto and 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 and creating a negative knock-on effect for the export industry.The Impact of Conventional Family Cars and 2-wheeled Electric Vehicles Significant for Downturn
Multi-industry competition (car, EV and motorcycle competition) as well as improved public transport services continued to affect the Chinese motorcycle industry in 2014. The infamous ‘battery crisis’ which disturbed the EV industry was resolved in 2012 increasing its progress and naturally many Chinese electric vehicle manufacturers further strengthened their urban and rural sales networks and developed new markets that posed a significant threat to the profits of the Chinese motorcycle industry.In the urban centers where motorcycle riding is still permitted many consumers who had originally intended to buy conventionally powered 2-wheelers have chosen to buy electric bikes and scooters which the consumers consider to be more light, manageable, environmentally friendly and economical.Government forecasts project a demand for around 80 million motor-tricycles on the provision that 1 in 3 farming families (out of an estimated 900 million farmers) will eventually purchase one. It will take 20 to 25 years for Chinese motorcycle manufacturers to meet projected market demands. The current annual motor-tricycle output capacity is around 4 million units so it is very likely that we will see more of the major motorcycle factories taking advantage of this growing market.The output and domestic sales of motor-tricycles has enjoyed a steady increase in 2014. Motor-tricycles are used as both transport and production tools in China as there are designs suitable for both 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 has been gradually improving. More and more major motorcycle enterprises have begun to pay attention to the development of motor-tricycles and Lifan, Zongshen, Dayun, Dayang, Yinxiang and others have increased their financial investments into motor-tricycle production in 2014 to augment their product lineup and improve existing technologies. The potential of the motor-tricycle market is growing mainly due to the employment of government subsidies and the increasing incomes of Chinese farmers.Larger Motorcycle Factories also Impacted by Negative Factors
Well-known Chinese motorcycle enterprises are also beginning to struggle to turn a profit. CAAM predicts that of the top 20 motorcycle manufacturers, only seven companies will enjoy a sales increase. The remaining 13 companies will suffer various drops, some as much as 45% year on year with top tier motorcycle manufacturing giants suffering the most.Chinese motorcycle manufacturing companies faced varied difficulties in 2014 including factors such as increasing raw material prices and rising labour and operation costs all of which further affect the profits of motorcycle manufacturing projects. The stagnant economic climate has also greatly affected import/export market purchasing power and caused significant motorcycle sales decline.This has greatly slowed down the expansion of numerous motorcycle companies and many have been forced to reduce spending in sporting/ racing activities, product R & D, and marketing. Some of the smaller motorcycle manufacturers were forced into liquidation. All of these factors are actively delaying the further expansion of the Chinese motorcycle industry and need to be addressed in 2015: watch this space!