China’s flagging domestic motorcycle industry

Recently there have been a lot of issues concerning the Chinese domestic motorcycle markets and it has left some wondering what effect, if any, it will have on the international bike markets around the world.

There really isn’t an obvious industry for the sale of second hand cars in China. Practically nowhere can a sales lot be found lined with used cars like they are in some many other countries. Second hand cars seem to be mostly traded through private sales. It’s not like car sales are replacing motorcycles for the majority of the working classes but still motorcycle sales within China are falling.

People are often amazed when they find out that the majority of big Chinese cities have banned the use of internal combustion engine bikes within the urban areas. This prohibition is a contributing factor to the decline of domestic bike trade.

CAAM (Chinese Association of Automobile Manufacturers) has made requests to the government for the motorcycle ban to be lifted due to a massive multi-year low in output and sales.

Despite supplying half the world’s total motorcycles China’s companies are facing tough times at home. Output has taken a hit and CAAM says that another problem, along with the slump in domestic demand, is that of poor management by company bosses. Mr. Dong Yang, a member of CAAM, commented “the motorcycle sales decline is not caused by consumption substitution, but cause by management problems. Motorcycles are not substituted by cars, but by electric bikes and mopeds. The industry difficulties are affecting senior motorcycle manufacturers all over China.”

Motorcycle exports have suffered and according to the latest data sales remained low towards the close of the year. Output and sales registered less than 2 million units each month. Many producers are worried and aren’t sure what the future holds. Mr. Li Bin, who is the secretary general of CAAM Motorcycle Chapter, told me that it’s “the worst time ever for the Chinese motorcycle industry. China is executing the world’s strictest standards for motorcycle production, even stricter than those in Europe. What’s more important is that more than 190 Chinese cities and towns ban the use of motorcycles, and this has greatly affected motorcycle sales in China. China is the only country in the world that bans motorcycle usage in cities.”

With over 200 million electric bikes and scooters in use around China and their popularity constantly growing they are a direct challenge to the petrol engine motorcycles. Needing no licence and not a casualty of the ban in the cities more and more people are going electric. Scooter rider Lui Huang (a local government official) was asked if he would like to see motorcycles returned to the city street – “Although my electric scooter is usable in Beijing I do notice that if I do not stick to the bicycle lanes it tends to be a bit precarious on the road, especially when taxis are going somewhere in a hurry; they would not hesitate to cut you up and on an electric scooter you don’t have the power to pull away from trouble. I can only see the accident figures increasing under the current policy and I would certainly get back on a gas motorcycle given the chance.”

According to Mr. Li Bin, CAAM is coordinating with many local governments with the hope of persuading them to gradually lift the ban on the use of motorcycles to ease the crisis in the industry.

It could be difficult to see the correlation between the domestic and international markets but they are both linked and affect each other. It’s all to do with the supply chain. China’s biggest producer is Haojue. On the international stage Haojue aren’t too well known because their main focus is on domestic sales for Chinese customers. If their sales drop then they produce less which in turn means they buy less raw materials. By not maintaining the same purchase levels the price of raw materials rises and that is then felt by every motorcycle manufacturer in China despite their target market. A company like Loncin, who are the biggest motorcycle exporters, will be forced to raise their prices which will leave customers looking elsewhere for cheaper products. A chance for India to take a piece of the cake.

India has no such restrictions on urban motorcycle riding (nor does any other country) and so its motorcycle market forces are gaining strength as the supply chain becomes busier (and cheaper) enabling India to enter in to direct competition with China on many markets. At a recent meeting of the Chongqing Motorcycle Council Chinese motorcycle historian Guo Changjun had the last word, stating “if the Chinese government doesn’t review its policy on motorcycle riding in cities and towns our rank in the world could be behind India within 5 years.”






February 28, 2016