Sunday, May 5, 2013

Two-wheel dealing

Two-wheel dealing

Lifan Group’s president principle Mingshan is thought to be an enormous fan of Japanese whole Honda, that fifty years agone grew from a humble motorbike producer into a serious auto manufacturer.
Similar to his model, principle established alittle motorbike manufactory with two hundred,000 yuan ($32,000) in city in 1992, and swollen it into a self-made non-public enterprise, additionally manufacturing cars and engines.
And in 2001, Lifan began commercialism to Japan, the primary time a Chinese motorbike company had “returned serve” to the country whose motorcycles had flooded the Chinese and each different market.
But Lifan, which implies “powerful sails”, is catching up, currently shipping motorcycles to quite a hundred countries, and spreading to new territories.
Zhu Xiaoman, vice-president of Lifan’s international business section, says the African market has big greatly in recent years.
“Africa is just like the Chinese market twenty years agone — with nice potential,” Zhu says. “We cannot underestimate the market’s momentum.”
In 2012, revenue from the company’s motorbike exports fell fifteen p.c year on year to $230 million, however its deliveries in continent rose by fourteen p.c to eighty,000 units.
Among the African countries, Federal Republic of Nigeria is that the most strategic one for Lifan, the corporate says.
“It could be a typical African market: the bestsellers ar medium to low-end models, and also the competition (mostly from Chinese manufacturers) is fierce during this section.”
By finding out the traits of this market, Lifan will apply the information to different markets on the continent, its statement adds.
Lifan has not established any factory in continent, it simply exports components for assembly by native dealers. during this method it avoids the high tariff obligatory on final product.
Many firms adopt constant strategy.
“Only once the market is ready to sell five,000 units or a lot of once a year ought to an organization think about building a subsidiary there,” says Zhu Xiangyang from CFMoto, a medium-sized manufacturer specializing in large-engine models. “Overseas offices ought to ne'er be opened in haste, because it is tough to survive during this new atmosphere. It’s constant reason why solely few Chinese brands have designed plants in mature markets like Europe or the North American country.”
Lifan motorcycles ar priced at around $500 within the African market, appreciate the price of a second-hand European or Japanese create.
However, despite its success, Lifan is suffering with others from the foremost prolonged economic downswing in history.
Since the money crisis unfold across the planet in 2008, the once-steady overseas markets have fluctuated. Figures from the China Association of Automobile Manufacturers’ motorbike section show export volume declined by seventeen p.c year on year to eight.94 million units in 2012, and also the industry’s total revenue unerect by five p.c to 109.4 billion yuan (January to November).
Strategy shift
January accustomed be the busiest month for motorbike makers and plenty of stocked with up to greet the expected demand, however the market reaction tested unsatisfying.
Sales were additionally hit by the cancellation of a Chinese government grant set up that had operated over the past four years. Previously, rural residents in China might get a grant of 650 yuan to shop for a bike. The regular value of a bike ranges from three,000 to 8,000 yuan.
As a result, Lifan has modified strategy by finance a lot of on analysis and development. the corporate currently claims that ninety p.c of its product ar originally developed, instead of copies of foreign brands. It additionally includes a team dedicated to developing large-engine vehicles, a feature of high-end models.
“These product ar principally sold  to South America, the center East, jap Europe and a few Chinese cities, wherever the buying power is higher,” says Lifan’s Zhu Xiaoman.
Materials utilized in all its motorbikes ar tested to square temperatures from -40 C to fifty C to address extreme climate variations in countries like Egypt and Russia.
But the sales volume of high-end product remains tiny. whereas total production volume reaches 1,000,000, vehicles with engine size higher than 250cc solely account for concerning one p.c.
Most models then ar cheap, targeting the developing markets and with low margins. The Chinese government grants a fifteen p.c tax rebate for motorbike exporters and plenty of firms bank heavily on this cash.
Lifan doesn’t expect to vary from a volume producer to a high-end manufacturer long, however is bit by bit increasing that method.
“The ancient medium to low-end product ar created in an exceedingly massive volume, therefore it's not realistic to induce eliminate them long,” Zhu says. “In the long run, we'll keep eyes on each the low-end and high-end, however we'll place a lot of resources into the high-end.”
In doing therefore, it's shaped partnerships with numerous European makers to enhance the operate and style of its models.
“These tries have already paid off,” Zhu says. “And our product have gotten a lot of showy, more urban, and after all, abundant cooler.”
Zhu admits Chinese motor brands won't be ready to properly contend with foreign brands for a few time however, however they're creating sensible progress. The 250cc machine accustomed be a void for Chinese makers, however currently many firms ar manufacturing tight models.
Lifan has no timetable or sales target however for manufacturing high-end sports product. because the domestic and overseas markets stay sluggish and show no signs of a fast recovery, Zhu predicts a brand new spherical of changes is on the horizon.
“Mergers and acquisitions can happen oftentimes among the business, however we’re assured we’ve already got a substantial market share,” he says.


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