ARTC Urges Taiwanese PTW Makers to Meet Global Trends

Taiwan-made PTWs are better but unpopular due to higher prices in emerging markets

Currently and unsurprisingly eight of the world's top-10, by number of vehicles, powered two-wheeler (PTW) markets are in Asia, with the strongest demand growth concentrated in developing nations as China, Southeast Asia, Africa and Latin America, according to a recent report by the Automotive Research & Testing Center (ARTC) in Taiwan.

The world's PTW markets with the highest number of vehicles include China, India, Vietnam, Brazil, Thailand, the Philippines, the U.S., Pakistan and Taiwan.

Europe
The global recession in 2009 in the wake of the global meltdown in 2008 shook sales of new PTWs in Europe, with such impact still lingering in 2010 in major markets as Italy, France, Spain, Germany and the U.K., despite most national governments' provision of purchase incentives. And the sovereign debt woes are still undermining the euro zone, especially in Spain and Greece, with sales of new PTWs in the region not expected to recover any time soon.

U.S.A.
The American economy reeled from the sub-prime mortgage-led financial meltdown in 2008 and 2009, derailing sales of new PTWs in 2009 by a decline of about 30%. But influence of the American PTW market has gradually weakened in the past few years, with some of the clout taken over by Brazil, where sales of new PTWs has boomed in recent year, and is expected to continue in the world top-five market.

Asia
With still huge swaths of population still living on modest income and needing affordable transport as PTWs, Asia is the world's mecca for motorbikes of all kinds, with China undoubtedly being the most important, a trend continuing to be driven by its above-average economic growth in the foreseeable future. China's production of new PTWs is about 27 million units.

India and Indonesia, the world's second- and third-largest PTW market, as well as Vietnam, Thailand, the Philippines, plus China, are expected to absorb about 90% of global new-PTW shipments, and the rate is expected to further rise alongside rapid economic growths in Association of Southeast Asian Nations (ASEAN).

Taiwan
One of the fixtures in the Taiwan landscape is the PTW, which has served as mass transport for decades to make the local PTW market very mature. According to statistics compiled by the Ministry of Transportation and Communications (MOTC), every 1.56 people on the island own one PTW in 2010, or per-capita PTW ownership of about 0.64. However with a relatively small local market shared by about three major makers, PTW makers on the island focus on exports to offset gradually falling domestic sales. In 2010, according to ARTC, some 47.2% of Taiwan-made PTWs were exported, mainly to Southeast Asia (about 45%) and Europe (44%).

Industry Characteristics
Due to structural complexity of PTWs, ARTC says the industry features invariable characteristics, including service requirements, relatively high pollution, intensive adoption in emerging nations, technical intensity, mass production etc. Using production modes similar to those of the automobile industry, most PTW manufacturers rely on parts suppliers to cut cost.

Another characteristic of the PTW market is that in industrially advanced nations, PTWs are mainly for sport and recreation, in other words a non-essential item, so PTW makers often focus on development, innovation of newer, better performing products by applying new technologies to attract buyers. But in contrast and most major PTW markets as the developing nations, PTWs are still the only affordable motorized transport for the masses.

With such polar difference in the development of the PTW market, ARTC says, such industry will not fade into the sunset but rather grow vigorously, with makers always trying to build better vehicles with higher durability, fuel efficiency, load capacity and other functions, without mentioning the harsh reality that millions in Asia and South America likely won't join their upper-middle class neighbors soon to become car owners, or that gridlock in many major cities favor PTWs for easier commuting and parking.

Despite a mature market, Taiwan is globally famous for its development and manufacturing of motor scooters, typically smaller than 150cc, rather than motorcycles, which, according to ARTC, presents pros and cons for the island.

The ARTC says that many conditions affect the development of a nation's PTW market and industry, including governmental regulations, gross domestic product (GDP), traffic infrastructure (road quality), with the capital- and technically-intensive thresholds keeping out new players. Also PTWs in industrially advanced nations such as BMWs with shaft-drive and Harleys with V-twins feature precision quality and proprietary know-how that are beyond easy copycatting by lower-tier makers, which is not true of lower-end PTWs that are relatively duplicated by intellectual-property-insensitive makers in developing nations. After all, it's likely not mere coincidence that most scooters made in Taiwan are similar in wheel and over dimensions as the iconic Vespa.

Market Position
Most makers of motor scooters in Taiwan are in the mid-upper segment of their niche without equaling the major brands as BMW, Yamaha, Honda and Harley Davidson, despite such inappropriate comparison, but exceed those made or copied by competitors in China, India, Thailand, Indonesia, Brazil, Colombia, Slovenia, Turkey etc.; while the players in Taiwan vie to develop products with similar quality and technical sophistication as counterparts in Italy, Spain, Germany, Japan and the U.S.

Taiwan's major PTW makers, especially Kwang Yang Motor Co., Ltd. (KYMCO brand) and Sanyang Industry Co., Ltd. (SYM), own strong global competitiveness in mid- to higher-end scooters, due to economy-of-scale achieved by being leading PTW brands in Taiwan, tapping such capacities to sell products in the global market and have been wining increasing share in major PTW markets in Europe. However, Taiwan-made PTWs, despite boasting much better quality and being more durable than same-class models produced by low-cost nations, are still not so popular due to higher prices.

The ARTC forecasts that some 71.5 million new PTWs will be sold in 2013 globally, urging PTW makers in Taiwan to meet global trends as more environmental-friendliness and fuel-efficiency, as well as pay attention to national policies that decide subsidy programs for eco-friendly products.

Driven by increasing global consensus to protect the sustainability of our planet, the ARTC says, PTWs will be developed in two major directions: electronic fuel-injection (EFI) and electric propulsion, the latter of which is held back by technological bottleneck and high manufacturing cost of lithium-ion batteries, which will nevertheless not stop e-scooters from becoming a necessary transport in the future globally.