Chinese motorcycles find local market a bumpy ride
Chinese motorcycles find local market a bumpy ride
Peter Janssen, Deutsche Presse-Agentur, Jakarta
Motor industry pundits predicted not long ago that Chinese motorcycles would this year grab 50 percent of the Indonesian market.
But the reality has proved to be good news for those terrified by the threat of cheap Chinese goods flooding into Southeast Asia as the region slowly liberalizes trade.
In the first half of 2002, a plethora of Chinese models with odd-sounding names such as Tosso, Turbo, Beijing, Gaza, Happy and Sumo have barely claimed 9 percent of the country's motorcycle sales - which are expected to reach 2.5 million units this year, according to industry sources.
Indonesia liberalized its car market in 1998, slashing import duties on imports and lifting bans on completely built up (CBU) vehicles, including motorcycles. The liberalization prompted a huge influx of cheap Chinese-made bikes in 1999 that rattled the market, traditionally monopolized by Japanese brands assembled locally with Indonesian partners.
"In the beginning the Chinese motorcycle imports dominated around 22 percent of the market, hence the optimism that they would reach 50 percent in three years," recalled Ridawan Gunawan, president of the Indonesian Motorcycles Industry Association.
In 1999, Indonesian traders flooded the market with Chinese motorcycles at low prices ranging from US$600 to $700 a unit, compared with $1,000 to $1,100 for similarly sized, locally- assembled Japanese brands. Prices of the Chinese products were initially kept down by smuggling the bikes in, or using easily exploited loopholes in the country's customs regulations. The regulations were finally tightened up last year.
When customs began to impose 25 to 35 percent import duties on the imported Chinese bikes, the price differential between imported and locally-assembled Japanese motorcycles fell to about $100 to $200, said Gunawan.
Other factors that have taken the shine off Chinese brands has been their lack of after-sales services and quality controls, all of which are assured by the better established networks of the Japanese giants - Honda, Suzuki, Yamaha and Kawasaki.
"The lesson from the Chinese motorcycle short story was that they basically offered motorcycles at a very low prices, but with fewer quality controls," said Urwan Herlambang, vice-president director of P.T. Semesta Citra Motorindo. The Semesta group, owned by Minister of Industry and Trade Rini Suwandi, launched its own Kanzen motorcycle brand on the Indonesian market early last year.
Initially Semesta advertised their product as locally designed and assembled motorcycles with multi-sourced parts and components from China, South Korea, Taiwan and Japan. Now they are going out of their way to play down the Chinese connection.
"Unfortunately, when we started this business we were caught up in the hustle-and-bustle of the Chinese products," said Herlambang. "We have tried very strongly to change the image, because we are not a Chinese product," he told Deutsche Presse- Agentur dpa.
Kanzen is assembled in Indonesia with 60 percent of its parts and components imported from Korea, 35 percent sourced in Indonesia and the remaining 5 percent sourced from Taiwan, Thailand and China.
"We have learned that the quality of components from China is not consistent," he noted. Semesta, which plans to source 62 percent of its parts and components in Indonesia by the end of the year, hopes to market itself as an Indonesian motorcycle using Korean technology.
The group has established 70 distribution offices nationwide that are matched by 70 after-sales service companies. Few, if any, of the 67 newcomers marketing Chinese motorcycles on the Indonesian market, have made a similar investment in building up a real sales and service network, let alone local assembly plants.
"Some have started the after-sales network, but covering Indonesia's vast territory is always a very difficult job and will take time, and requires a certain minimum economies of scale that most of the Chinese-based motorcycles do not have," said Gunawan. Honda, which claims about 60 percent of Indonesia's domestic motorcycle sales, produces about 5,300 units a day at its Indonesia assembly plant, or one unit every five seconds.
Chinese brand distributors in Jakarta proved hard to interview. Gunawan predicted that in the long run only two or three of the Chinese newcomers would survive.
Meanwhile, the bad reputation Chinese brands have quickly earned in the past three years for poor quality has hurt their future sales prospects. "It was an easy entry, but they have paid the price," he said.