labels: two wheelers, honda motor company, hero honda, automotive research association of india , automotive, bajaj auto
Chinese bikemaker finalises entry plans news
Mohini Bhatnagar
22 January 2004

The domestic two-wheeler industry's self-confidence is far stronger today than what it was just three years ago, when the news of the entry of Chinese two-wheelers into the country had triggered off alarm bells.

The same companies have become so confident now that when China's Chongqing Lifan Industry Group announced its plans, last week, of setting up a facility in Gurgaon, near New Delhi, there was not even a murmur of concern from any of the domestic manufacturers.

Barely three years ago, the situation was far different. In 2001, when the Indian markets were being opened to foreign competition, two-wheeler companies fought tooth and nail for protection (which they managed through tariff barriers). Those were the (now-forgotten) days of the fears of Chinese manufacturers swamping the Indian markets with their mass-produced, cheap goods which would force Indian manufacturers into extinction..

Ultimately, the dreaded Chinese invasion never took place - the Chinese were unable to set up viable retail networks while Indian manufacturers had learnt to become price competitive. Since then, domestic two-wheeler manufacturers have re-configured their manufacturing practices, developed low-cost, high quality suppliers and begun to compete globally. The dozen Chinese manufacturers who had appointed dealers to put their vehicles on Indian roads in 2001, finally dropped out of the Indian markets

Another reason why the Chinese couldn't succeed was their inability to meet emission control requirements. If they imported catalytic converters and modified parts to meet emission norms, they would have added substantially to their costs in the intensely competitive two-wheeler industry and lost their competitive advantage.

Meanwhile, Indian manufacturers became even more price competitive. With prices ranging from Rs 27,000 to Rs 31,000 for entry-level models from Bajaj Auto Ltd and Hero Honda, the Chinese lost their price advantage and were unable to create any competition. With most domestic manufacturers having aggressively adopted Japanese total quality management and lean manufacturing practices, they were able to reduce their costs and selling prices by 20 per cent.

Having conquered their fears of a Chinese invasion by improving their manufacturing systems, the confidence of Indian manufacturers is now at an all time high.

However, the entry of Lifan Industry Group, a hugely diversified Rs 22, 000 crore conglomerate is a different matter. Lifan has deep pockets to ride over rough periods. The Chinese company has indicated that it is looking for Indian minority partners who will hold less than 50 percent equity.

Analysts say Lifan's entry indicates that the Chinese are getting serious about the Indian market after having become global players capable of giving even companies like Japan's Honda Motors a run for its money.

Lifan has established its operations in 28 countries including the UK and the US. If it can comply with the auto emission norms of those countries, it can do so in India as well. Moreover, Lifan's track record in its new markets is impressive. For instance, in Indonesia it has succeeded in capturing almost 20 per cent of the market from Honda Motor's wholly-owned subsidiary within a year.

Initially Lifan plans to import motorcycles into India - it has a large range of motorcycles, scooterettes and automatic scooters. According to officials of Lifan Industry Group the company has obtained a clearance from the Automotive Research Association of India to launch its vehicles, for which it is appointing dealers.

The company will assemble completely knocked down kits at its plant and plans to sell up to 60,000 units in the first year with the first motorcycle planned to be on the roads by June this year. Even more ambitious are its plans of launching a new motorcycle in India every six months. Its assembly plant at Haryana has a capacity to produce 10,000 units a month.

In an indication that the company is not positioning itself on cheaper price positioning is its announcement that it will launch its new project with a 150cc bike priced at Rs 40,000 followed by a 250cc bike at Rs 50,000 and a 300cc bike to be priced in the range of Rs 60,000-70,000.

Lifan is also finalising pans to unveil 250cc four-wheeler all-terrain vehicles and three-wheelers in a gradual manner over the next three years. The company manufactures 28 lakh motorcycles every year, of which it exports 18 lakh to 70 countries including the US, the UK, Japan and Iran. It is a young company - it started in 1992 with just nine employees. Today it is ranked no.1 in China on the indices of engine production, marketing, export earnings, patents and integrated production and no. 2 on the index of total strength.

In China, Lifan was the first company to develop the V-twin 250 engine as well as the first company that developed motorcycle electric ejection technology and has independent intellectual property rights for this.

Clearly Indian two wheeler manufacturers would do well not to take the new Chinese entrant lightly.

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Chinese bikemaker finalises entry plans