JAPANESE BIKES TAKING OVER THE CHINESE BIKES

SYED FAZL-E-HAIDER
July 02 - July 08, 2007

China is giving tough competition to Japanese bike makers in Pakistan. Out of 53 units assembling two wheelers in the south Asian country, 50 Chinese units are competing with 3 Japanese assemblers units. Owing to the rising competition with their Chinese counterparts, the Japanese bike makers have slashed prices of various models for improving their sales volume, which have been on the decline for the last one year.

The Japanese makers of Honda, Yamaha and Suzuki motorcycles are reportedly losing their sales to Chinese bikes, which have started improving their quality. By offering bikes at very competitive rates, the Chinese have captured market in Karachi, which is the country's financial, industrial and commercial hub. The sale share of Chinese bikes in Karachi has been more than 80 percent. The price cut by Honda in its 70cc category will definitely put a pressure on Chinese bike makers, whose prices have been ranging between Rs34,000-39,000. If an average price of Rs36,000 of a Chinese bike is taken then the price gap between Honda and Chinese 70cc bikes, which used to be Rs32,500 in May 2003, has shrunk to only Rs14,000.

A few years back, Japan was dominating the motor bike market in Pakistan. Market people link the cut Japanese bike makers to the entry of Chinese bikes which created a healthy competition, thus proving beneficial for the end-users to select the bikes as per their pockets and savings. Japanese bikes are still more popular in rural and urban areas of the country but if the Chinese bike makers also reduce prices, they are likely to capture more markets in the country and prove a hard competitor to Japan in motorcycle manufacturing. In last four years, the Japanese bike-manufacturers have been making downward adjustments in their prices.

Though imposition of one per cent surcharge on all imports in the new Pakistan budget is likely to increase the prices, yet Japanese bike makers have reduced prices to improve the sales for the new fiscal year. The market leader Atlas Honda has reduced price of the CD-70 to Rs49,990 from Rs54,000, while CG-125 is now priced at Rs69,990 as compared with Rs71,000. CG-125 Delux model and CD-100 are now being offered at Rs75,990 and Rs59,990 as compared with Rs76,900 and Rs64,000 earlier. Honda CD-70 was priced at Rs68,500 till May 18, 2003 and currently it is available at Rs49,900 showing a decrease of Rs18,510.

Dawood Yamaha Limited (DYL) has also announced price reductions this month. Yamaha YB-100 Royale's price has been reduced to Rs55,500 from Rs58,500, while the price of YB-100 Junoon four-stroke bike has been slashed to Rs62,800 from Rs63,300. The price of Yamaha YD-100 four-stroke has been decreased to Rs59,800 from Rs61,300. The circular issued by DYL did not mention the reason for the price cut.

The makers of Suzuki motorcycles have yet to announce any price reduction but the company has shown an improvement in its sales compared with two other Japanese producers. Suzuki sold 24,755 units in July-May 2006-07 as compared to July-June 2005-06 sales of 17,183 units. According to Pakistan Automotive Manufacturers Association (PAMA), Honda had sold 360,110 units in 2005-06 but the July-May 2006-07 figures reveal sale of 301,763 units and it may reach 330,000 by end of the current fiscal. Similarly, Yamaha's sales during July-May 2006-07 stood at 52,303 as compared to July-June 2005-06 sales up to 74,293 units.

The Japanese bike-makers had begun slashing the prices of their products in September 2004 to attract more buyers. The move was aimed at improving market share and customer base at a place overjoyed over entry of the Chinese bikes, both local and imported. Following a cut of Rs2,000 in the CG-125 and Rs4,000 in the CD-70 prices by the Atlas Honda Limited in 2004, the Dawood Yamaha Limited (DYL) too joined the league by announcing a reduction of Rs2,000-3,300. The Suzuki Motorcycle Pakistan Limited (SMPL) also declared a similar cut.

Last year, a complaint was lodged by one of the leading Japanese bike assemblers, Atlas Honda Limited, with the Customs Valuation department alleging that the motorcycle parts are being imported from China by the commercial importers and the bike assemblers on 'under-invoiced' value. Atlas Honda Limited had also submitted a list of specific items wherein the under invoicing is rampant, which is hurting the local manufacturers of these components.

According to annual report of Atlas Honda Limited for the year 2006, the company had suggested valuation of 26 major parts to the Customs Valuation Department. As per report, the valuation advice for 15 parts was issued and working on remaining 11 parts was in the process. The already issued advice was partly implemented on different customs posts. Under-invoicing had emerged as a core issue for the organized industry, causing unfair competition and loss of revenues to the national exchequer in billions of rupees. The report had also mentioned about a raid on 10 units in the unorganized sector which had unearthed a huge tax evasion scam. Over Rs1 billion penalties had been assessed. According to the report, tax evasion was the main cause of price difference between Japanese bike and Chinese bike.

The valuation department had conducted a detailed investigation on the complaint lodged by Atlas Honda that motorcycle parts of Chinese origin were being under-invoiced. After the inquiries, the directorate has issued the list of 15 parts to its relevant collectorates about 70cc motorcycle auto parts of Chinese origin and issued orders for implementation of the value at the time of assessment of the goods.

The Association of Pakistan Motorcycle Assemblers (APMA) of Chinese bike makers termed the allegation of Atlas Honda as false saying that it will discourage the new comers in the bike assembling because of wrong evaluation of motorcycle parts by the Customs. The Chinese bike makers were selling 70cc bikes at Rs34,500-38,000 as compared to Rs54,000 by a Japanese bike maker. About two years back, the Japanese bike was available at Rs68,000 and it was the competition that forced the maker to reduce the rate. Due to intense competition, Atlas Honda had to reduce its 70cc bike prices to Rs54,000 from Rs68,000.

The Chinese bike makers are the key players in the rapid growth of the local bike industry as they are offering bikes at Rs34,500 as compared to Japanese make at Rs54,000. The total bike production in Pakistan has increased by 12.30 per cent to 681,752 units during July-April 2006-07 as compared with 607,084 in the same period of last fiscal year. There were 500,000 motorcycle cycles produced in 2004. By the year 2005, there were 22 motorcycle manufacturing plants in Pakistan, which have increased to 53 now. In the same year, there were 19 plants producing Chinese motorcycles, which have presently reached to 50. The strong point of the Chinese bike assemblers has been the difference of Rs 20,000 to Rs 25,000 as compared to Japanese bike makers coupled with attractive colors, extra features and galore of designs. The bikes are now running side-by-side today with the Japanese counterparts on the roads in Pakistan. Even the imported Chinese bikes are also racing neck to neck with Japanese bikes.