Originally Posted by
Lao Jia Hou
One of the many reasons why domestic sales have been recently declining is the maturity of a purchase-incentive-program the government had for rural residents (i.e., farmers). This rebate program created a significant bump in sales during 2010, but it has largely run its course (hence, the statistical decline in sales). The majority of domestic sales is in rural China, for small, inexpensive two-wheeled motorcycles (Jialing's bread & butter).
Another reason, which city dwellers certainly notice, is the love affair with the automobile. But urban residents have always been a small proportion of overall domestic motorcycle sales. The impact of the automobile on urban motorcycle sales is actually quite negligible. Where the auto may show up is in the "upgrade" phenomenon. Motorcycle manufacturers have historically relied on entry-bikes leading to the subsequent purchase of an upgraded model (and one which is more profitable). In China, however, it is likely that the farmer-bikes may be upgraded to QQ-style autos.
Drilling down into the rural-urban split, however, one sees that larger displacement motorcycles (quite profitable) are overwhelming purchased by urban residents. Small displacement bikes have tiny margins and a manufacturer/dealer needs huge volumes. Unfortunately, subsequent to the rebate program, volume is down and there is a significant adjustment in the Chinese dealer network going on, with many smaller shops selling smaller bikes simply closing their doors. The pie is getting smaller, and a few of the larger shops are consuming larger portions of it. The pie is also changing its filling - profitability is now coming from larger, recreational motorcycles.
I recall reading an article that looked at the ratio between what customers spend on a new bike purchase, and what the customers spend on all of the aftermarket goodies. For small displacement bikes, the ratio was tiny. For large bikes (e.g., Harleys & BMWs), it was staggering. Harley, better than anyone, understands this perfectly. Get someone on a Sportster, and watch that customer's weekly salary be spent on customizing it. Then in a year, or two, upgrade the Sporty to a Dyna, and start the process over again. And, of course, also offer a full clothing line!
I came across some stats about the 3-wheeled vehicles, and discovered what you said is very true - the overwhelming majority of the 3-wheel sales are for tricycle-type vehicles/trucks. The sales number for sidecar motorcycles was microscopic. I forget the exact number, and it is not easily at hand, but it was something like less than a few thousand for all of 2010. Sidecars are a tiny, tiny, tiny market.
From what I have been reading about the North American market, the motorcycle industry is in very serious trouble. Sales throughout 2009, 2010 and again in 2011 have been plummeting. Unlike the craziness of the 80s and 90s, where having a Harley dealership ensured instant riches, many Harley dealers are now being forced to close their doors. Sales for 2010 in North America are less than half the sales of 2007. Preliminary reporting suggests 2011 will continue this downward trend.
What appears to be picking up overseas is the sales of fuel efficient scooters & small displacement commuters. Only BMW is bucking the trend with its large displacement bikes.
Almost all of the investment-based articles relating to the motorcycle industry that come across my desk focus on two things:
1) changing customer profiles;
2) disbelief & guffaws by the manufacturers.
Like the American auto industry in the 1970s, there is an arrogance with many motorcycle manufacturers & its dealer networks. They are refusing to recognize the reality that today's customers are interested in a different type of motorcycle. It is no longer a case of "they will buy whatever we produce." For example, again, as was experienced by Harley during the 80s and 90s in the USA.
All said, I still maintain a positive outlook for the Chinese motorcycle industry. The Chinese have proven, time and again, an immense ability to adapt. If you place a 1990s Chinese motorcycle against a 2010 Chinese motorcycle, the changes are mind-boggling. I am confident that the Chinese motorcycle in 10 years will be light years away from the current offerings.
On a personal note, having owned both the CJ750 (in various forms) and the JH600B, I can see the incredible differences. It reminds me of the difference between an AMC Gremlin/Pacer and a Honda Civic/Accord. The "B" ain't perfect, yet, but at least its parts stay attached to the bike.
