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The way forward for Chinese motorcycles in America



 

 

David McMullan talks to American motorcycle industry legend Frank White the American motorcycle industry’s premier adviser to the Chinese motorcycle industry

 

 

 

 

 

About Frank White:

 

Frank White’s introduction to the motorcycle business began at the age of 10 in 1967, when he and his brother were featured in many of the Yamaha TV commercials shown in America. Years later, with motorcycling still flowing in his blood, Frank White and his father Dale took over famous American motorcycle brand ATK in 1992 where Frank has served as CEO ever since. In 1995, Cycle World Magazine identified Frank as the man responsible for making ATK Motorcycles the motorcycle Industries ‘Success Story #1’ for that year. White also currently serves as a co-board member with Harley-Davidson on the USMMA, (United States Motorcycle Manufacturing Association) a chapter of IMMA (International Motorcycle Manufacturers Association). White (who is educated and trained as an engineer) is no ordinary desk bound CEO; he’s respected in the motorcycle community for winning several US national racing championships, including the 1995 USA Desert racing championship and also winning a Gold Medal at an ISDE National Enduro event in 2005 at the age of 48!  In 2002, White was appointed by the President Bush Administration to represent the Motorcycle Industry with the EPA. Since that time, White has served the US Government in many roles representing the motorcycle industry.

 

ATK is the second oldest continually operating motorcycle manufacturer in the United States and the only off-road (dirt bike) manufacturer in the United States. ATK’s brand strength is based on a reputation of quality and innovation. This reputation has been earned by winning international and national motorcycle and ATV racing championships. ATK has been first to corner the market in various innovations, including being the first motorcycle manufacturer to offer fuel injection, way back in 1991.  

 

David: Hello Frank, good to talk to you again, it seems like we’ve known each other for ever!

 

Frank: David, It has been a pleasure to know you these past few years, you’re a true character indeed. I read your stories on-line and it seems you have your hand on the pulse of the motorcycle business in China. Before we get into your specific questions let me give an overview of where I see the Chinese Motorcycle Market in relationship to the US market today.

 

David: Please do Frank, fire away!

 

I believe that “the Chinese will one day have motorcycle brands that will compete and rival the Japanese brands”; in the United States. Today, market conditions in the motorcycle industry are very similar to those of the late 1960’s / early1970’s. At that time the Japanese brands were trying to break into the American Market with unknown, hard to produce Japanese brand names (Kawasaki anyone?). The Japanese motorcycles suffered from inferior performance and had little or no after-sales support for the dealers. Back some 45 years ago the prestigious quality performance brands were; Harley-Davidson, BMW, Triumph, BSA, Husqvarna, to name a few but the Japanese brands were not included, but things changed fast. Looking back in history, one of the Japanese keys to success was to set up final assembly CKD facilities in the USA to help overcome American resistance to the “Made in Japan” label. American job creation also helped diffuse this aversion to the “Made in Japan” label. In my opinion, one of the keys to success for the Chinese is that they need an experienced American partner to CKD assemble their motorcycles in the USA as the Japanese did years ago.  

 

Over the years I have had several Chinese motorcycle companies contact me about a possible cooperative business relationship, but we weren’t too interested at the time because it would have really damaged our reputation being involved with a Chinese manufacturer. Today there are Chinese manufacturers, who actually have the ability to manufacturer very good motorcycles and engines for the Japanese and European motorcycle manufacturers. These Chinese manufacturers therefore can be equal in quality and performance to the Japanese motorcycles in some market segments, however, the Chinese need to find a way to distribute and service their motorcycles correctly to the American Market and as of today have not been very successful. Some of my responses to your questions may upset some of your readers; however, a company or industry must focus and admit to its weaknesses before it can become a great. I believe that there are maybe two or three Chinese brands emerge in five to ten years that could rival the best brands in the business, if they look long term and do things correctly.

 

David: What is the general condition of the motorcycle market in the USA?  

 

Frank: Some market segments of the motorcycle market are growing and some are almost evaporating to nothing. Much of the data I receive is from the MIC (Motorcycle Industry Council) which to me is the best way to really understand the US market. Any motorcycle company in China who wants to do business in the USA needs to either joins the MIC or purchase their very detailed sales reports. MIC membership also helps world manufacturers understand and prepare for North American government regulations. This is a must, must, must….

 

The core motorcycle / ATV rider reached their maximum earning and spending potential in back in 2002 when the average age of the motorcycle rider was 46 years old.  Many current motorcycle / ATV riders began their riding careers back in the 1970’s on small displacement very inexpensive Japanese motorcycles. Today, the demographic curve is virtually identical to the 1970’s. Although the world is certainly a different place now, there are over 76 million children between the ages of 2 to 24 born to America’s largest and wealthiest market segment, the “baby boomers”. These boomers have lifestyles that indicate an overwhelming desire to ride and own a motorcycle. In addition there are record numbers of minorities and women now wanting to enter the motorcycle world who need an affordable motorcycle to get started on. The Chinese make these affordable motorcycles and the challenge is to get the right dealers to sell them and this hasn’t happened yet.

 

David: Is the market growing due to fuel prices or receding due to cheaper cars?

 

Frank: Fuel prices are now going down real fast in the USA, however, cars are not becoming cheaper either. Back around 2009 when fuel prices started to increase real fast due to Obama’s failed energy strategy there was a real increase in motorcycle sales, however, this has leveled off. I think entry level (small displacement sales 250-650cc) will remain strong, and motorcycle sales over 650cc will flatten out or even decline, contrary to what my friends at Harley-Davidson think!

 

David: Have you seen a rise in Chinese motorcycle sales in America?

 

Frank: No, not really. I know the Chinese can make good motorcycles; however, the Chinese manufacturers really alienated the American Motorcycle Dealer Network and the entire industry some years back, so the challenge for the Chinese Manufacturers is to gain the trust of the American Dealer who sells the motorcycles. After sales service/parts are vital in being successful in the US Market and the Chinese really screwed this up years ago. If the Chinese partnered with the right American people in the USA, there is a possibility the lost trust with the Chinese can be regained. Also I don’t believe the Chinese manufacturers report their sales to the MIC so it’s hard to tell about their sales in the USA.

 

David: What are peoples attitude to Chinese motorcycles?

 

Frank: Cheap and poor quality, the same attitude we had in the 70’s regarding the Japanese bikes. One way to overcome this poor quality issue is through racing. If you recall the Japanese put a big push on racing in the 70’s and had very good success building their brand from that.

 

David: Why racing?

                          

Frank: Racing done correctly in certain racing venues can build positive brand recognition real FAST!   It’s a fact; American riders and dealers both perceive Chinese products to be of poor performance and quality. One of the best ways to overcome this quality perception of poor performance-quality is to win races and racing championships. Winning racing championships gives a perception of quality and commitment. Winning racing championships is the same path the Japanese motorcycle brands took in the 1970’s when much of their marketing focus was around racing and it worked. History, I have learned, repeats itself.  

 

David: What are the main selling models? I.E commuters (cubs, scooters), Japanese sports bikes, American cruisers etc…

 

Frank: The main selling models are small and mid-size street motorcycles. I believe sport bike sales are down, one reason is that they are very expensive for the rider to insure because of the many accidents with kids riding these too fast. The American cruiser market is on the decline too. I think the new Indian motorcycle owned by Polaris will take some of Harley’s market share and that will be interesting to watch, however, I would advise the Chinese to focus on 650cc and smaller. I believe the scooter market will grow some but most men in the USA don’t like to ride scooters because they portray a feminine outlook. American men like to look macho and a scooter doesn’t do it. Regarding the ATV and side by side UTV; the market was strong, however, the market on the ATV is 20% of what is was a few years ago and the side by side UTV market is over-saturated with too many competitors. The key to product development is knowing the demographics of the current and future rider. To me this is where the Japanese and Chinese fall short by continuing to make motorcycles / ATV’s that there is no real retail demand for.  

 

David: What certificates are needed for Chinese companies to export motorcycle models to the US?

 

Frank: As far as the national government is concerned EPA, NHTSA, DOT, CPSC to name a few. Also many of the 50 individual states the past 10 years are now getting involved too on the sales side. California also has CARB (California Clean Air Board) which I hear is very difficult on Chinese manufacturers because some cheated in the past and have had an attitude of not wanting to really comply with the regulations. There are several companies and individuals we at ATK deal with that have the trust of the government who do all of this regulatory compliance for us and for many of the European and Japanese brands. The Chinese manufacturers need to deal with reputable regulatory compliance companies, engineers and certified labs in the USA and if they don’t they have real trouble. This is another reason the Chinese need an American partner that can deal with the government.

 

David: Why would American riders choose a Chinese model? Why not a Honda for example?

 

Frank: At this point low price is the only reason. If a Chinese manufacturer builds a reputable brand in the USA they will be able to charge Japanese prices.   It’s all about brand building in the USA. Brand building takes years and lots of money. It will be interesting to see what Chinese manufacturer takes the time and spends the money to build a brand and do it right. I’m convinced there are some who are on the right path.

 

David: What improvements have you seen in the Chinese motorcycle industry?

 

Frank: I have ridden some Chinese motorcycles and was quite impressed with the advancement in their technology. The other month I rode a 250 Dirt Bike with a Zongshen motor in a magazine test and was very impressed. I told the Editor of the magazine that the bike felt like a 2010 Honda 250 which is very impressive because of the price point. I hear the reliability (quality) is much better too. It seems like the Chinese bikes are taking two year advances to the one year advance the rest of the industry takes. You could say the Chinese are catching up fast on the product but can they get really good dealers to sell them?

 

David: What advice would you give to the Chinese industry with regard to progress and the evolution of the export industry in America?

 

Frank: Find and American company who really knows the market and develop a symbiotic relationship with. Co-develop a 5 year strategy (that is doable strategy and not a wish) and have a buy-out clause between you and the American Company. You will need to work closely with the American company for some years and then want the option to buy out their interest in the Joint Venture to allow you to be in complete control over that company. Most Americans will want that too. We in America call that an exit strategy.

 

David: What do you see as the main negative factors of the Chinese industry?

 

Frank: Mainly trust. Many people in the motorcycle industry tell me not to trust the Chinese, and I respond that if you structure the deal correctly trust will come from both sides. I know that the Chinese manufacturers feel the same way. Business is based on trust and with no trust there is no good business. I go back to the history thing too. Back in the 60’s / 70’s many Americans didn’t trust the Japanese for many reasons, but over the years Japanese did things right to regain the trust of the Americans.

 

David: China’s dominance is under threat from India, have you noticed this in the states?

 

Frank: No not yet, but I hear its coming. Actually we have had a couple of companies from India wanting to do business with ATK; however, it hasn’t happened yet. The Indians have linked up with good people and good companies in the USA. Bajaj with KTM, Hero with Buell and I know the American boss (Rod Copes formerly the number three guy at Harley-D) with Royal Enfield and I’m sure they will all be successful over time. The Indians know the importance of teaming up with the right companies and people.

 

David: What advice would you give to a Chinese manufacturer looking to break in to the American Market?

 

Frank: First; as I said earlier, team up with a good American partner who knows the market. You can’t do it on your own. Many have tried and all have failed. What is critical as you with your American partner need to both develop an achievable strategy to build your brand in the USA. Second; know what you are good at manufacturing and exploit that. Don’t try to develop too many products when that market segment is declining or over saturated with competition. Third, remember this is going to take years to develop and cost lots of money so be prepared.

 

David: Are there any motorcycle exhibitions that Chinese companies could attend to promote their products?

 

Frank: Yes, there are many, however, before they think about exhibitions they need to think about the right American partner and right distribution. Promoting products before you have a good partner / distribution can and will have a negative effect on getting good dealers signed up. It’s a balancing act to get it right.

 

David: Do American motorcycle trade people come to China to see the industry?

 

Frank: Several American trade people that I know have travelled to China and were very impressed on what they saw, however, many like me are afraid to travel to China without the assistance of the Chinese locals so they need to make sure they provide assistance. Also many will take the time off to travel, however, plan to pay for their airfare and accommodations. This is a very good way to change American’s perceptions about Chinese manufacturers.   

 

David: Can you give us some information on the top 5 Chinese motorcycle importing companies in the USA.

 

Frank: I have no idea because the MIC who reports the numbers is not involved because the Chinese manufacturers don’t report numbers.

 

David: Please tell C2W readers about your company and its goals.

 

Frank: Were actually going to diversify a little into the Hybrid E-Bicycle Business this next year. We see the market potential for his being unlimited. We have developed some E-Hybrid Pedal Assist Hybrid Bicycles that work really well. Our strategy is to leverage some of our off-road Motorcycle technology and know-how in making Hybrid E-Bicycles that we will sell through motorcycle dealerships. On the motorcycle side of our business I think the timing is now right to team up with a good quality Chinese manufacturer who wants to do it right and would be happy to talk to them as well. To me business is all about leveraging synergies to form a strong union.

 

 

As always, my thanks go to Frank for his honest opinions and great advice. If you would like to know more about Frank’s company and future intentions for cooperation with China please contact me at the usual email address   englishmaninchina@gmail.com

 

 


February 29, 2016
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