Two-wheel turning point
Motorcycle market remains healthy in Asia but demand patterns are changing as more drivers can also afford four-wheeled vehicles. By Tanyatorn Tongwaranan
published : 10 Nov 2014 at 06:00
newspaper section: Asia focus
For millions of people in the developing world, the purchase of a motorcycle is the first concrete sign that they are moving up the economic ladder. The rapid pace of development in Asia has been especially good for the motorcycle industry for the past three decades or so, but challenges are starting to emerge.
While demand for motor vehicles in many developed nations is flat or falling, Asia's appetite for owning motor vehicles, be they two- or four-wheeled, continues to rise unabated. However, while one would expect motorcycles to still be the vehicles of choice for the masses, demand has not been as strong as expected, and is even declining in some countries. In some countries the market for two-wheelers is saturated, or people who own motorcycles can now afford cars.
"Motorcycles are one of the most affordable forms of motorised transport and for most of the world's population, they are the most common type of motor vehicle," Mike King, the director of the research firm Companies and Markets, writes in the Global Motorcycle Market report.
He noted that there are about 200 million motorcycles in use worldwide, or about 33 per 1,000 people. However, this pales in comparison with cars, which number 590 million, or about 91 per 1,000 people.
Motorcycle industry experts say the perception that it is still on a growth path is somewhat misleading, despite forecasts for a cumulative average growth rate (CAGR) until 2017 of around 4.9% to $93.7 billion.
Globally the motorcycle market is characterised by a high degree of fragmentation. There was little growth from 2006-10, but the market is expected to expand at a yearly rate of 6% between 2010 and 2015, to reach almost $85 billion.
"Demand gains for motorcycles will also be supported by higher petroleum costs due to the superior fuel efficiency these machines provide, compared to light vehicles," Mr King noted.
Furthermore, he noted, a rebound from the 2007-09 recession in developed countries will lead to higher product sales, particularly of medium-sized and heavy motorcycles, as economic conditions become more favourable and consumers begin to purchase expensive recreational items again.
Amid the rising affluence across Asia, meanwhile, manufacturers continue to benefit from high demand for two-wheeled vehicles. A total of 53.1 million motorcycles were produced in Asia Pacific in 2013. Production volumes grew by an average of 4.1% a year from 2009-13 and the pace is expected to pick up to 8.6% a year from 2013-18.
"Although we do experience the occasional plateau in demand, the market is growing steadily. Consumer preferences are diversifying and we are seeing changes such as an increasing focus on sports models," Kenji Otsuki, manager of corporate communication at Yamaha Motor in Japan told Asia Focus recently.
Asia now accounts for 78.2% of world's demand for motorcycles, according to a report by Yamaha, the world's second-largest producer of motorcycles after Honda. Mr Otsuki sees several factors influencing the high demand.
"Asia is currently experiencing a period of rapid growth," he said. "When GDP per capita exceeds $1,000, the uptake of motorcycles will accelerate. Asia is also a market where the state of traffic infrastructure maintenance means that the convenience of two-wheelers really comes into its own."
However, demand is far from even across the region, notes Satoshi Uchida, the president of Thai Suzuki Motor Co Ltd. Some markets have reached saturation because nearly everyone who can afford a motorcycle now has one. And now that many of these same people can afford cars, they won't be buying another two-wheeler.
"Demand in the Philippines and Indonesia is still growing but in Vietnam, Malaysia and Thailand it is starting to shrink," he said. Three years ago, he said, demand for motorcycles in Vietnam reached 3 million but the figure has since dropped to between 2.5 million and 2.6 million.
"It is oversupplied," he said, "Vietnam has 90 million people while Thailand has 68 million but motorcycle sales in Thailand are only about 2 million. In Vietnam, some people own two or three motorcycles; it's too much."
Masayuki Igarashi, director of the motorcycle business division of Asian Honda Motor Co Ltd, agreed that the market size of Thailand and Vietnam was already huge. "Frankly speaking, it's very difficult to expand more. Every three people in Vietnam have one motorcycle," he said.
"In Thailand, around 50% of motorcycle customers already own automobiles. I have to say that gradually, Thai customers will shift to automobiles."
The challenge now is to find new emerging markets, says Yuichiro Ishii, business and product planning manager for the motorcycle business division of Asian Honda Motor Co Ltd. "In Myanmar, the total market is approximately 1 million, but our market share is very low."
One difficulty in Myanmar is regulation, despite the passage of a new foreign investment law in 2013. Some carmakers are setting up assembly plants in the country, and motorcycle manufacturing is also possible through a joint venture with a Myanmar partner. However, parts suppliers and other supporting industries remain scarce.
"Now we are exporting to Myanmar from Vietnam and Thailand but it is totally impossible to build a factory in Myanmar," said Honda's Mr Igarashi. "We don't have any plans for a factory in Myanmar at this moment because there is no advantage for completely knocked-down (CKD)."
CKD refers to the practice of sending parts to an assembly plant in a target country, as opposed to importing completely built units (CBU).
Thailand, where Honda enjoys a 70% share of motorcycle sales, is one of the company's most successful markets worldwide. In Indonesia it has a 60% share, in India 25%, and in Pakistan the market growth has been very rapid, according to Mr Ishii.
Mr Igarashi also notes different preferences for motorcycle sizes in various countries. Malaysia has a small market for big motorcycles, while in Thailand the demand for big bikes is starting to grow although the market is still very small. In India, wealthier people prefer big motorcycles and in Indonesia, most customers demand medium-sized motorcycles.
Mr Uchida of Suzuki added that despite the growing demand for motorcycles in the Philippines, the market size was still relatively small, despite the country's population of almost 100 million. "In the Philippines, it's less than one million, only about 800,000 to 900,000, while in Indonesia, it is eight million and this number is still growing.
"In Malaysia, the demand is dropping because people are shifting from motorcycles to automobiles," he said, adding that in Thailand a similar transition was also happening.
Within five to 10 years, one can expect quite a large market for bigger-engine motorcycles, according to Mr Uchida. "In Japan, 40-50 years ago, the main model was 100-185cc, now they have shifted to bikes over 500cc. Within 10-15 years, the Thailand market could also become a big-bike market."
In China, he says, demand for motorcycles is dropping because the Chinese government no longer allows gasoline-engine bikes in some big cities. "Only electric motorcycles are allowed because of the pollution issue and the future trend for motorcycles is environmentally friendly engines."
Thailand's Charoen Pokphand Group, which is well known for producing Tiger brand motorcycles in China, is moving away from the business because of Beijing's new rules.
The ban on gasoline-powered bikes in cities has caused a lot of controversy in China. Officially, the government has said it wants to alleviate traffic congestion and pollution and reduce accidents, adding for good measure that it believes motorcycles are the main vehicles used for criminal activities.
"Once I heard that reason, I told everyone who is thinking of producing motorcycles that they can dream on, and in fact they should stop thinking about it altogether," Thanakorn Seriburi, the chairman of the automotive division at CP Group, said during a recent interview.
He noted that motorbike sales in China have dropped to 8 million a year from 20 million a few years earlier.
Recognising the changing trends, many manufacturers are developing new models that consume less fuel while emitting less CO2, as well as electric models, which still need further refinement as the prototypes are very expensive.