Expo Indication of Struggling Chinese Industry

November 27, 2012
By David McMullan, International Editor ChinaMotor Magazine
CIMAmotor photo.

The Canton Fair is undoubtedly the oldest trade fair in the world. Boasting roots over a thousand years old the trading region of Guangzhou has seen it all, from silk, tea and opium through to high tech. In the years before the Chinese government designated CIMAmotor in Chongqing as their national and international level motorcycle expo, Canton Fair was the go-to place for foreign motorcycle importers. Held twice a year the motorcycle hall at the fair traditionally rocked with motorcycle industry types from all over the world. Thousands of white, brown, yellow and black faces jostled and fought to see the latest models and cheapest parts accompanied by their translators. It was trade at its best, excited, loud, and chaotic. In a word, it was crazy!

For the motorcycle importer Canton was the must see (at least once a year) event. A walk down one of the many aisles would reveal familiar faces year after year and the motorcycle hall was a sea of traders exchanging courteous nods to each other. Now the sea has parted.

Since I arrived in China in 2007 I have used the Canton fair as a gauge to judge the successes and failures of the Chinese motorcycle industry. This year was worse than 2008! As far as the motorcycle exhibitors went it was a case of roll out the old models. In fact the only real innovation I saw was from a group of Italian designers (previously of Piaggio) who had upped sticks and set up in China. Theirs was the most popular scooter booth at the show.

CIMAmotor photo.
The Chinese motorcycle industry is falling on relatively hard times, with slowing exports and rising costs.

Outside of the centre the buzz around the coffee bars told a story. Negativism about old models, complaints about rising prices, chatter about looking into trade with (Indian motorcycle companies) Bajaj and Hero Moto and lots of talk about never coming to Canton again. A chat with the Chinese guys and girls on the stands revealed what was already apparent. I cornered an export clerk for China’s biggest motorcycle export enterprise Loncin at the cafe. His reaction to the show was typical of those I had heard from his rivals. “This used to be the event of the year for us but unfortunately there is very little business around. I have spoken to some of my friends from the smaller factories and they have said that for the first time in their experience they have done no business in 4 days at the fair.”

The motorcycle hall at the fair was badly represented compared to previous years. The big guns all turned up with flash stands (which somewhat over-shadowed their motorcycle models) as a matter of principle but there were many middle sized operations choosing to give Canton a swerve this year. Also obvious was the lack of parts companies. In previous years it would have been difficult to count the number of smaller motorcycle parts exhibition booths, this year they were conspicuous by their absence. Wang Ping owner of MaCong Sprockets from China’s motorcycle capital Chongqing told me “we have had a terrible year and so have decided to throw everything into one last business push here in Guangzhou. So far it seems to be a bad decision as trade here has been worse than any other year I can remember. The European crisis and the rising labour and materials costs has had a bad affect on the whole industry as has the Chinese governments ridiculous decision to ban motorcycles from most urban centres. The lack of domestic sales has meant that our supply chain prices have gone up to a point where we’re not even competitive on parts anymore, and if China cannot be competitive on price, what has it got left? The government ministers running the transport sector are dabendan”

I will leave you to work out what that particular word in Chinese means.

CIMAmotor photo.
International buyers were frustrated by the overwhelming similarity between models on display at the Fair.

Choice was another problem for the international buyer as most expo stands seemed to feature the same models. Rio Wang of Motorhead Motos summed this phenomenon up thus. “The authorities were making a great big deal about cloning and told us that it would be in our best interests to take out patents on our developed models. I have developed a dirt bike [which looks remarkably like a Honda Tornado] and patented it according to advice. I have seen the same model on over 10 expo stands here and have asked the authorities here to remove them. I have even shown them the paperwork but nothing has been done. I feel like looking for another industry”

This negativity at the Fair is really indicative of the overall feeling of the industry workers. The Chinese motorcycle industry’s profit has dropped 12% this year and it is clear that if the government do not relax their bans and restrictions on motorcycles in urban centres things will become much worse before they get better. It wasn’t all doom and gloom though, I spoke to e-scooter manufacturer Yadea who commented “yes the fossil fuel two wheel markets is in disarray but the electric sector is increasing. The urban ban on motorcycles has meant that many are now buying our e-scooters; this is having a knock-on affect and our profits are up. This in turn gives us the opportunity to invest some money in the research and development of better lithium ion batteries and helps us to extend and increase both the range and speed of the models that we develop for the export market.”

This week Harley Davidson will help Chinese motorcycle body CAAM to petition the government over allowing bigger displacement motorcycles on all roads on China. If successful we could witness an upsurge in larger displacement manufacture here which is likely to have a knock-on affect on the export market. At the moment Loncin, Jialing, CF Moto and Keeway (Benelli) are successfully producing bigger engine bikes (that’s over 600cc here) and Shineray have launched a good looking 400cc dirt bike. If the petition works we could well see a host of companies jumping on this bandwagon. Watch this space!

David McMullan, the International Editor of ChinaMotor Magazine, offers his analysis of the motorcycle market trends from China. An Englishman covering the Asian market for almost a decade, McMullan notes the first half of 2012 show a decline in production and sales, which are at a six-year low. – MCUSA Ed

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