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Race to the Bottom of the Motorcycle & ATV Market, Why?



 

I became a dealer/importer/distributor for Chinese ATVs, Motorcycles, Scooters, and Go-Karts beginning back in 2004. I launched my 1st retail dealership with my own energy and my own bank account in 2007. I had high hopes to create a business that could be passed on to my sons – a business with the kind of reputation for integrity and quality that keeps customers coming back year after year. My goal was for Long term, and healthy annual growth.

 

I bought thousands of dollars of new vehicles, parts, gear, tools, employed skilled mechanics, and opened a large dealership that I expected would be sustainable. An underlying assumption on my part was that a dealership like this would also support its customers with parts and service. It is expected in the USA model of business. Selling an unsupported product borders on fraud, and very few people will trust, or buy.

 

I did not know at the time that my competitors would not be required to buy, or lease, or maintain an actual store. Nor would they need to keep an inventory of parts or hire mechanics to service the vehicles they sold. These dealers would take advantage of the “No Factory Contract” business model and operate without much overhead costs, or ethical concerns. They could sell the same products as I sold, but they would not have any or very little after sales support. When our competitor’s customers needed parts or service, they found themselves out of luck. This created a huge negative impression of Chinese vehicles in the USA. When they break, they become junk. Cheap to buy, but impossible to maintain. This is not a reputation you can maintain, and stay in business for very long. Would you buy a Mercedes Benz if you could not find parts or service? For a vehicle at any price, it’s the same principal. No after sales support, don’t buy it.

 

I have had to battle the negative impression of Chinese vehicles from the beginning of my time as a dealer. I often need to take my customers on a tour of our dealership sales dept, large parts dept, service dept, riding gear dept, warehouse and more. This tour shows and proves that we are just like a Honda or other mainstream dealership, and that we full support what we sell. I maintain a large super clean show room with a display of hundreds of shiny new vehicles in all sizes and prices.

I have been able to run a profitable dealership for 11 years – but it is getting harder all the time. Two years ago I wrote (ATV or Ferrari in a Box…Really? December, 2012 ) about the race to the bottom that Chinese ATV manufacturers seemed to be aiming for. I observed an industry competing for ever cheaper products to send out to the world’s markets, resulting in low profits for everyone involved.

 

I certainly understand from a business viewpoint that we all need to make a profit to survive. What I also understand, as a dealer in America selling these vehicles, is that the pride of a large showroom of shiny vehicles at rock-bottom prices begins to dim when I view the whole picture: When I attempt to expand my product line or even to support what I have, I run into the same problems over and over.

 

What are those problems? Here’s the list:

 

  1. I have no reference catalog for parts and prices. Finding parts becomes a nightmare of calls to various independent parts dealers. The search is made harder because often I have no part numbers to give the parts vendor. I have to describe the part as best I can and hope that we understand each other.

 

  1. There are no product or technical manuals to explain how to do in-depth repairs. This causes my mechanics to spend much more time figuring out something that should have been spelled out in a technical manual.

 

  1. Tech and mechanic training is non-existent. I have to pay mechanics to learn on my time. When they make mistakes because of the lack of instructions, I have an irate customer on my hands and I have to pay the mechanic to try again.

 

  1. Distributors of the vehicles from China (the middle man) can and do sell to anyone calling themselves a dealer. In reality, some of these “dealers” are liquor stores, gas stations, auto parts stores, and shady online sellers. A customer may be happy that he got a good price on his product from the online seller, but when he opens the box, sees all that needs to be assembled, frustration quickly sets in. Often there is No assembly instruction, or the buyer simply does not have the mechanical skills to get this vehicle properly put together, and running safely. & to make things worse, the dealer they bought from is no help – as they only sell the product.

 

  1. There is no factory enforced or set standard for retail pricing, so anyone can call themselves a dealer and make their own price tags. This really destroys the market!!

 

  1. The Research and Development department in most Chinese companies are often slow to respond to dealer requests, or, more importantly, to make improvements in safety, quality, modernization, and consumer desirability.

 

  1. Product liability insurance is a nightmare! Many Chinese manufacturers do not back up their dealers on these issues like American, Japanese or just about any other countries’ manufacturers do. I would be forced to pay for attorneys and court fees out of my own pocket. Even though I did not build the vehicle. If we ever were to encounter a defective product wrongful death, or serious injury law suit from a rider of one of the vehicles I sell, it could easily put me out of business for ever. Japanese dealerships do not have this worry, or risk.

As an American-owned business I find it very hard to be able to make profitable deals directly with Chinese-owned manufacturers. The profitable deals and best pricing most often go to Chinese-owned distributors and importers. Unfortunately, Chinese Manufacturers choosing a Chinese owned Importer/USA Distributor is not always the smartest way to distribute a product in the American market. Who understands the retail customer, culture, and market better in the USA…. a Chinese business person, or an American business person?

Only Chinese manufacturers do business this way. No Japanese, Korean, Taiwanese, German, Spanish, British, Italian, or Indian, would consider this business model. It is like no other in the world.

There is a place in the American market for Chinese ATVs, scooters, motorcycles, and dirt bikes. A much better place than it now occupies. Customers walk in the front door at my dealership and are dazzled by the color, variety, and the low price of our vehicles. But, many of them are first time buyers who do not become second time buyers because of the problems we are discussing here. If Chinese manufacturers were to address the problems in my list above, it would raise the cost of the product very slightly – but we will still have by far the best priced products on the market. First time buyers will come back over and over for parts, service and, eventually, for new vehicles. This is the model we want….. Right??

With the current situation, the American market for Chinese manufactured ATV and motorcycle products will dry up. The decline will be slow at first but as the American market runs out of first time buyers, the losses will increase. Eventually, it will be impossible to stop the decline in sales.

 

Chinese manufacturers as a whole have shown themselves to be resourceful, clever and able to keep costs down, but changes are now needed. These changes will take planning, time, and a small amount of money, but will address the problems of why the market is not advancing, or growing as much as it really could be. There is minor short term pain from change, but a major long term $$ gain. Please Chinese ATV and Motorcycle factories, distributors like me really hope to see your big changes. With the advantages you owned, improve every motorcycle business steps, from R&D, manufacturing, sales, to after sales service, I believe Chinese products will beat many competitors in the world. At that time, we can better work together and we can all be far more successful in the future!


March 13, 2016
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