CHINESE TECHNOLOGY: A LESSON TO DEVELOP BIKE INDUSTRY
AUTO EXPERTS SAY CHINESE BIKE MARKERS ARE MORE LIBERAL IN TECHNOLOGY TRANSFER.
TARIQ AHMED SAEEDI
Jan 17 - 23, 2011
Over the last five-year, Pakistan has proved itself a profitable market for Chinese bike makers as it struggled to challenge domination of Japanese brands in the sector. Though Japanese two-wheelers still hold major market shares, yet Chinese rivals give choices in riding to a lot of price-sensitive Pakistani customers.
Chinese entry into the peculiarly Japanese dominated market of Pakistan gave birth to price competition in favour of end-customer. Price range of Chinese bikes in commensurate with the buying power of majority public allows them to bear spiking costs of living, in particular, travelling. While runaway inflation affects prices of every consumer goods let alone transportation, Chinese bikes in fact provide inflation-hit customers with affordable choice of travelling. Competitive price structure of Chinese motorcycles has challenged the unshared control of Japanese brands in the market, and therefore is causing sales of motorcycles to ratchet up visibly.
According to Pakistan Automotive Manufacturers Association, Chinese bikes witnessed a gigantic surge in their sales during the first five months of current fiscal year. Particularly, sale of Qingqi were recorded at 1,224 units depicting excellent growth of 145 per cent in July-Nov 2010 over the corresponding period last year. This was remarkable growth when compared to sales of other Japanese and Chinese models. Similarly, sale of Hero increased 16 per cent to 17,004 bikes as compared to 14,660 bikes. Sales of Ravi and Habib, however, decreased 11 per cent to 8,438 and 7,213 apiece in July-Nov from 9,441 and 8,127 in the comparable period. Over 62 per cent decline was registered in the sale of Sohrab motorcycle from 3,098 to 1,159. Japanese market leaders Honda and Suzuki continued to grab the significant shares in the sales of motorcycles recording 16 and 21 per cent increase in their sales, respectively. Honda sale stood at 218,714 as compared to 189,176 while Suzuki sold 7,568 bikes during July-Nov as compared to 6,272 in the similar period last year. Yamaha, playing second fiddle to Honda in Pakistani motorcycle market, registered double digit drop in its sale in the first five months. The company sold 45,317 bikes in July-Nov, down 10 per cent over 50,326 in the identical tenure last year.
However, the positive sides are occasionally overshadowed by the uncertainty about long distance local engineering industry has to travel to attain an absolute indigenisation. Chinese bike makers receive monetary, engineering, and marketing supports from their local counterparts in Pakistan to be penetrative. However, they hardly get assistance in precision works locally. Sophisticated parts are imported in the country in the shape of complete knocked-down (CKD) and semi knocked-down (SKD) kits.
Analysts argue that Pakistan has become a trading hub with reference to motorcycle industry as it is heavily relying on readymade Chinese motorcycles while visible technology transfer remains a distant dream. To develop local industry, Pakistan should ponder over the similar restrictions imposed by few Asian nations, they advice. India, Thailand, Malaysia are making entry of Chinese motorcycles into their markets difficult by levying tariff and non-tariff barriers. Chinese bike makers have found the markets unviable because of these restrictions. Trade barriers are originally aimed at to give protection to the local industry, and have been oft-criticised practice of pampering local industry in the face of cutthroat competitions from across the border.
As opposed to this, no doubt Chinese bike makers brought about technological developments in the labour-intensive country like Pakistan by transferring manufacturing technologies or at least gave an awakening push to engineering industry unlike Japanese companies, which restricted production to mere assembling. Auto experts say Chinese happens to be more liberal in technology transfer than Japanese. Chinese arrivals are promoting usages of local contents in Pakistan. Although, the indigenisation process is not visibly fast and confined to non-precision parts, there has appeared a gateway to developing local engineering industry similar to Chinese models.
Pakistan's motorcycle industry is progressing gradually, and unlike past when only three assemblers ruled the market and used to dictate their terms to the policy markers now the market has expanded to more than 50 bike assemblers with cumulative unit sale of over one million annually. Apart from price advantages—clone motorcycles give—economic benefits of growing motor cycle industry include investment flows, creation of jobs in the industry and for vendors, and making of Pakistan as an exporting nation of bikes. The country is exporting two wheelers, which are manufactured with the help of Chinese cloning process, to its neighbouring Afghanistan. China is internationally recognised for its copying prowess. Chinese bikes in Pakistan are replica of Honda 70cc. Local auto vending industry as well as spare parts business are needed to keep pace with the replacement demands. In spite of this, local industry has not acquired the ability to produce vital components of bikes, and is depended for supply of low technology parts alone to Chinese machines.
Engineering Development Board under the ministry of industries and production had discussed with the stakeholder the ways to enhance local contents as well as to promote high technology manufacturing. At present, makers of high technology parts including engine parts, known as tier-1 vendors, are small in numbers while majority of vendors, tier 2 and 3, deal only in plastic, silencer, speedometer, air cleaner, die and mould making, etc. Skilled labours and government policies are two essentials of tier-1 outnumbering tier-2 and 3. Inconsistent government policies restrain the investors from investing in the engineering industry. Localisation will not only earn government handsome foreign exchange, but it also mobilise internal resources. Chinese technology transfer is an opportunity for the local industry to learn, develop itself, and improve process of innovations locally. The technology assimilation will be better for the local engineering industry.