Local assemblers unhappy about Chinese motorcycles

Local assemblers unhappy about Chinese motorcycles

By Tantri Yuliandini

JAKARTA (JP): The influx of Chinese motorcycles has caused
waves in the country's motorbike market, threatening the
domination of Japanese brands, especially in the lower end of the
market.

Since the government eased regulations on the importation of
completely built up motorcycles in late 1999, at least 57 brands
of Chinese motorcycles have entered the market, many of them
coming in last year.

Last year alone saw the importation of 173,834 motorcycles,
according to data from the Ministry of Industry and Trade, a
major number of them from Chinese producers.

Motorcycles with brand names such as Jialing, Jiincheng,
Beijing and Sanex have become commonplace on the streets of
Jakarta, as well as other parts of the country. They also compete
with Japanese brands in TV advertisements, recruiting well-known
figures to endorse their products.

Muliadi Harahap, branch manager of PT Indojaya Utama which
distributes Beijing motorcycles, said that the main draw of
Chinese motorcycles was the low price compared to locally
assembled Japanese brands.

"It's really back to the problem of economics. Honda
motorcycles have become too high in price to afford," he told The
Jakarta Post over the weekend, explaining that a Honda Supra
costs about Rp 11.8 million (US$1,242) compared to the highest
price for a Chinese version of a similar model of about Rp 8.5
million ($895).

The lower prices are the main force behind the success of
Chinese motorcycles acquiring more than 30 percent of the
motorcycle market in Indonesia, Muliadi said.

It has also triggered allegations of dumping practices from
local assemblers of Japanese motorcycles.

Indonesian Motorcycle Industry Association (AISI) chairman
Ridwan Gunawan said that the eagerness of Chinese producers to
export their products had prompted them to sell at a lower price.

He said that production capacity in China was more than 20
million units a year but its own market only reached about 11
million motorcycles, making Chinese producers pursue an
aggressive export strategy to sell the excess capacity.

AISI groups agents and assemblers of popular Japanese brands
such as Honda, Yamaha, Suzuki and Kawasaki as well as Italy's
Piaggio Vespa. The association recorded domestic sales of 858,190
motorcycles and exports of 115,278 motorcycles.

According to a survey conducted by AISI, Chinese-make four-
stroke cub motorcycles with 100 cc engine capacity should cost
about US$520 to $560, which would become higher when factory
location and transportation costs were taken into account, Ridwan
said.

"However, it is a fact that some manufacturers have offered
cub models for as low as $450," he said, adding that since the
price offered was lower than the domestic price in China, it
could be considered as leaning toward dumping practices.

The association filed a petition in August last year for the
Indonesian Anti-Dumping Committee (KADI) to further investigate
the allegations. Investigations are still under way.

Nevertheless, Ridwan said it was plausible for Chinese
motorcycles to be marketed at a cheaper price.

He said that Chinese motorcycles used local materials for the
components, some of which were not up to international standards,
and that the quality of Chinese motorcycles was not as high as
Japanese counterparts.

Low labor costs in China also played a part in keeping prices
down, Ridwan said.

Muliadi acknowledged that presently Chinese motorcycles were
of inferior quality to Japanese brands, adding that in quality
Honda was still ahead.

Among the many grievances of Japanese motorcycle producers are
the alleged infringements of their patents by Chinese producers.

"They could very well accuse (Chinese motorcycles of)
infringements because of the fierce competition between (Japanese
and Chinese) brands," Muliadi said, citing allegations that
Chinese motorcycles infringed a patent on a Japanese automatic
clutch system.

But he denied that Beijing motorcycles infringed the clutch
patent, saying that the clutch system Beijing uses is similar but
larger in size.

"If the system is the same and the size is the same, then they
(Japanese motorcycle producers) could have a case of
infringement," Muliadi said.

Recently, the producers of Honda motorcycle and distributor PT
Astra Honda Motor reportedly found seven patent infringement
cases on its decompression device, out of the nine Chinese
motorcycles investigated in Indonesia.

Honda has demanded that Chinese motorcycle importers stop
imports and dismantle the device from existing stock.

Ridwan foresees that in the future only a few of the 57
Chinese brands will survive, especially with the ASEAN Free Trade
Area (AFTA) being implemented in 2002.

Muliadi agreed, saying that he expected only about 10 percent
of the current brands to survive AFTA.

"The ones who survive will be those that have far-reaching
vision and immediately invest in production facilities, such as
factories and assembling plants in Indonesia," he said.