Chinese bikemaker finalises entry plans

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.