Speaking at the Taiwan International Motorcycle Industry Show (Motorcycle Taiwan) 2007 industry seminar, Taiwan Golden Bee (TGB) president George Lin urged producers of powered two-wheeler (PTW) and parts in Taiwan and Europe to join forces to face the Japanese "big four."



During the seminar, on the topic of "Global Opportunities for Taiwan Motorcycle Industry," Lin observed that European companies have strong technical capabilities and excellent products in the motorcycle sector. "But they lack matched global marketing and good cost-control capability, and most of them are limited to the European market. Taiwan companies have globally-competitive manufacturing capability and a long-term and well-established central-satellite system, but lack world-class R&D capability and marketing," Lin said, speaking from four decades of experience in the domestic motorcycle industry. "If Taiwan and European companies can team up, they would be strong enough to challenge the major Japanese players," he concluded.

TGB is Taiwan`s first and largest maker of continuous variable transmission (CVT) systems and parts, as well as a leading motorcycle manufacturer using big-bore engines. The engines were developed by the company in cooperation with Morini Franco of Italy, providing a successful example of Lin`s vision for closer cooperation between Taiwan and Europe in the PTW sector.

In many major PTW and all-terrain vehicle (ATV) markets TGB has become the top Taiwanese exporter. It also supplies key parts to Taiwan Vespa, which locally produces the Italian scooter brand and was a long-term No. 1 in terms of sales volume over 20 years ago.

As Lin said frequently at major occasions, "No place else is positioned like Taiwan to develop the motorcycle line. Taiwan has all the right conditions to develop this segment, including a well-established central-satellite plant system, good R&D capability, and a mature industrial infrastructure. Our manufacturers are highly competitive and they can make the most of the small-volume, large-variety business model. Our motorcycle makers should take aim at their Japanese rivals and not get mired in segments of the industry that can easily be occupied by price-cutting rivals in emerging countries, especially China."

Japan, A Good Example

"Japan offers a good example for us," Lin said, "motorcycle makers there stayed competitive despite increasing production costs by taking the lead in the upper-end and larger-displacement segment with unmatched design, development, and cost-control capabilities, and with the introduction of high-end, high-quality products that rivals in Europe and the United States were not producing."



In the early years, however, according to Lin, "many European PTW makers, including Vespa, laughed at Japanese counterparts saying they couldn`t compete. Now Yamaha, Honda, Suzuki, and Kawasaki have become case studies in how to succeed in the PTW market."

"For Taiwan, the lesson of Japan`s success is in the process rather than the results," Lin stressed.

Lin laments the decision of many Taiwanese PTW producers to shift production to China over the past 10 to 15 years. He says this has led to a high similarity between Taiwan- and China-made products and widespread copying of Taiwan-developed products by price-cutting Chinese copycats. "However, competing on `cheapness` is not a winning strategy. There is always someone who can undercut you."

European Values

According to Lin, European companies have the world`s strongest capability to add value to their PTW products. Even in the high-end market, there is much potential to develop value-added products. But like Ferrari and Mercedes-Benz in the car sector, their market niches are totally different from those of lower-end products.

"I have been telling friends around the world that Japan`s `big four` may be the world`s leading brands, but many of their products draw on concepts and know-how from European innovators. Another key factor in the success of Japanese brands` is the marketing. So, I firmly believe that closer cooperation between Taiwan companies and European partners would be highly fruitful. Customers would get the best-quality products at a reasonable price, and companies in Taiwan and Europe would achieve a win-win outcome."

"In the past, the vast majority of foreign companies with cooperation ties with Taiwan `only sold their fish to Taiwan but did not teach their partners how to fish,` so to speak. But the global market has changed. Partnerships now mean stronger competitiveness and mutual compensation. I have been long anticipating a new situation joining the innovation of Europe and the strong manufacturing capabilities of Taiwan."

Global S.W.O.T Analysis

In analyzing the current status of the international motorcycle market, Lin told the audience that Japan is without doubt the world`s leading manufacturer and marketer, with brands such as Honda, Yamaha, Kawasaki, and Suzuki that have dominated world markets for years with their unparalleled R&D, manufacturing, infrastructure, quality, market information, global marketing, and brand-imaging.



Europe, he said, has lost global competitiveness because manufacturers there have focused on such factors as technical advancement and high-performance products for the regional rather than global market. This has resulted in small-scale production, high costs, and weakened competitiveness.

"Most of the European motorcycle brands have long and legendary histories, established brand images, and rich experience in product development," Lin went on, "but in terms of quality, production, cost control, and sales and marketing they have fallen behind their Taiwanese counterparts."

The TGB president explained that Taiwan`s motorcycle industry began booming about 40 years ago as it introduced technology from abroad (form Japan first, then Italy). A long period of stable growth in the domestic market, along with protective measures imposed by the government, provided a good environment for the development of complete-vehicle makers and their supply chains.

A number of challenges, however, remain to be overcome if Taiwan`s motorcycle and motorcycle parts makers are to play a more important part on the global stage. The first is a mature market for PTWs, which has led to a decline in annual sales from a peak of about one million units in 1995 to between 700,000 and 750,000 units today.

In addition, some of the island`s second-tier PTW manufacturers (including makers of ATVs, buggies, karts, and other powersports vehicles) are still in the learning phase and are not yet fully prepared to complete globally with high quality Japanese and European brands and low-priced products from China.

Another challenge, according to Lin, is that most makers of complete vehicles and parts in Taiwan are very good at manufacturing but, compared with major global brands, are inferior at product development, market surveying, marketing, after-sales services, and image promotion.

Another weakness of local PTW makers is that in the past, most of them have focused on the domestic market and were constrained by their foreign technical partners in exploring exports. This situation has changed in recent years, fortunately, and local manufacturers have been rolling out a stream of self-developed big-bore engines.

In mainland China, PTW sales began growing rapidly in the 1990s and the huge demand there (it is now the world`s largest market) has drawn in many producers, which now have a strong cost advantage.

Lin said that the motorcycle industry and market in China are marked by free-for-all competition among makers and sellers of copied, low-quality, low-cost products with no after-sales services. "Several years ago," he explained, "international buyers were very much attracted to China`s low-price motorcycles and parts. But now users of these `Made in China` products have been scared off by their poor quality and durability." The result is that most of the importers of Chinese PTWs, especially in third-world countries, have closed down because of quality and service problems.

India, by contrast, is a relatively good environment for making and selling motorcycle products, and the huge Indian market has attracted numerous international brands to set up production there.

Southeast Asia also has high potential, with the Association of Southeast Asian Nations (ASEAN) region expected to become the world`s second-largest motorcycle market, after China. That market, though, has long been dominated by the top-four Japanese brands.

Questions and Answers

"If we make a deeper analysis, the following questions and answers emerge," Lin said.



"First, if European PTW makers want to take on the Japanese now, it is not practical in today`s conditions. Second, if European want to take the advantage of the Chinese companies` low cost, they will find that is unpractical too because the disadvantages will be much bigger than the advantages," Lin pointed out. "And third, if European PTW makers work with Taiwanese partners, the mutual-compensation will be good enough to find a suitable market segment (medium-to-high-end products) and expand sales to achieve scale of economy and generate higher profits."

"I deeply believe this is the way ahead," Lin reiterated. "I have discussed these ideas repeatedly with key industry players in Europe, but unfortunately the management teams of different European PTW brands are reshuffled frequently due to unprofitable operations."

Strategies for Development
Lin also stresses that several effective strategies could help Taiwan`s companies in the motorcycle line to develop and take advantage of the lucrative market opportunities when the time is ripe.

"First of all," he says, "finding suitable foreign partners and setting up strategic alliances with them would be a good way to integrate and activate Taiwan`s resources. These partners would include companies with established global marketing capabilities, product development strengths, sales channels, and well-known brand names."

Local manufacturers should also develop new engines more aggressively, he went on. This is the key factor in Taiwan`s development of the powersports industry, "which includes the production of motorcycles, scooters, ATVs, go-karts, snowmobiles, watercraft (especially outboard engines), and agricultural and gardening machinery. This is a path that Honda followed."

Furthermore, the industry should promote the "Via Taiwan" concept under which Taiwan will play the role of a bridge between the West and Asia, linking global buyers, markets and producers with the motorcycle industry in Asia (especially Taiwan, mainland China, and Southeast Asia), including producers, developers, and designers.

The "Via Taiwan" mechanism, Lin said, will link producers to markets, buyers to producers, designers and developers to producers, and central plants to satellite plants. "That," the president underscored, "is what Taiwan does best."

If these things are done, Lin concluded, Taiwan`s motorcycle industry will penetrate the global market like a flock of arrows, paving a way to the bull`s-eye for parts suppliers and satellite plants as well.
(by Quincy Liang)