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Monday November 26, 2012

Market for big bike steps up

LAST Friday, the biking community was rocked by a fatal accident that resulted in the death of 53-year-old Ishak Jaafar.

Ishak, who was on a trip with superbike enthusiasts, died on the spot in the accident which occurred on KM13.6 of the North Klang Valley Expressway near the Subang Jaya exit.

It was reported that the accident happened when a car on the middle lane of the highway suddenly swerved into the fast lane and hit six bikers.

Although this is an isolated incident, one cannot deny that it occurs on Malaysian roads. Yet it does not seem to have affected the growing local demand for big bikes.

Malaysia’s market for big bikes (500cc and above) has seen rapid growth in the past decade with European and and Japanese marques such as Ducati and Aprilia, Kawasaki and Yamaha gaining significant ground in this market.

But is this growth a false dawn?

Significant growth

According to the Deputy International Trade and Industry Minister Datuk Mukhriz Mahathir, the number of registered motorcycles from all categories and engine capacities last year alone reached 5,422,997 units, and the sales of big bikes contributed 5,800 units of which 3,002 units were completely built models from non-Asean markets.

The Naza Group of Companies was responsible for almost 50% of that figure making the privately-owned conglomerate the biggest distributor of fully imported non-Asean big bikes. The company distributes bikes from eight international brands, including names such as Harley Davidson, Ducati, Aprilia and Vespa.

“In 2003, we sold 20 Ducatis. This year alone, we sold 800 Ducatis. That’s how big the market is at the moment. It is growing exponentially,” said Naza Group joint group executive chairman Datuk Wira SM Faisal SM Nasimuddin, adding that the astonishing number could have reached 1,100 units this year if not for the uncertainty clouding the world’s economy.

Based on the significant growth, Naza is already in talks with other motorcycle manufacturers to bring their brands to Malaysia.

“Everything is in the pipeline at the moment, but we are looking to bring in brands that are currently not available in this market,” he revealed.

The Malaysian company is also keen on growing the big-bike segment in emerging markets such as Vietnam and Cambodia.

“We have been exporting our (Naza) bikes to Brunei, South Africa, Iran and Vietnam. Indonesia is also a good prospect for us due to their large population,” said SM Faisal.

Wake up, smell the coffee

Despite clear indication that the big-bike segment is growing, SM Faisal said that local manufacturers are finding it difficult to attract foreign direct investment to build big bikes here.

This is echoed by industry observers Keshy Dhillon and Hezeri Samsuri.

“It’s true that Malaysia has one of the largest motorcycle markets in the region.

“But it also can’t be denied that we are losing a lot of business to our neighbours who are introducing attractive policies to attract manufacturers to set up shop.

“Ducati has set up shop in Thailand and Vespa in Vietnam. This has created thousands of new jobs and is pumping millions into the economies of those countries. Indonesia is the next big thing and a lot of bike and car manufacturers are looking there now,” said Dhillon.

SM Faisal elaborated on Dhillon’s comments by explaining that Malaysia’s tax policies need to be addressed as it is a major disincentive for most brands.

“If a manufacturer sets up shop in Malaysia, they need to pay 10% more in duties compared to having operations in Thailand. Naza is willing to invest and attract the big boys of the motorcycle industry, but we need to examine our policies as well,” said SM Faisal.

Hezeri, editor of TopGear Malaysia, does not mince his words when asked about local motorcycle manufacturers and their lack of progress in moving up the value chain.

“Modenas has products that are designed and produced by themselves. It is easier to come out with your own kapchai or scooters. You just need to design your own cover set (the plastic body), buy an engine design and customise it to your own specifications and tune the suspension to your needs. Just like cars, this is a volume game. Margins are very tight and that is why motorcycle companies need the volume,” explained Hezeri.

He further elaborated: “I strongly believe rather than wasting time, Modenas should go out and find a technical partner. To do that, it needs a carrot to dangle and the carrot needs to come from the Government. I just hope it does not come with protectionist measures because that would be a big step back to the motorcycle industry.”

Strong push needed

Dhillon explained that there is a focus on high-powered motorcycles now and it can’t be denied that the sales figures of such bikes are on the rise.

“The downpayment for such bikes used to be 30%, but now it’s 10%, which explains why sales are rising. Manufacturers like Kawasaki, KTM and Yamaha are assembling entry-level superbikes here as well, and you can get one for a little over RM30,000. Expect this industry to grow, but if we do not take care of these companies and do not introduce schemes to attract more manufacturers, it’s only a matter of time before we lose out,” he said.

According to research company MarketLine, the global motorcycle industry will continue to benefit from rising demand in Asia-Pacific.

Though high-capacity motorcycles and scooters are looked on as more of a luxury purchase in developed markets like the United States, Japan, Germany and Canada, these items are of central importance for transportation in emerging markets like China and India.

Moving forward, industry players will have to compete for market share on the basis of quality and comfort. Demand for components and accessories, along with replacement sales, will continue to fuel market growth.

By dangling the right carrot, Malaysia could attract more major brands to set up their manufacturing plants here.

“I have high hopes that Hong Leong Yamaha can offer Malaysia as a big-bike hub for Yamaha in Asean. Currently, they only have one locally assembled model, the XJ6, but I hear rumours that more models will be assembled in their plant in Sungai Buloh.

“The government should look seriously into this before the opportunity slips away to Thailand,” said Hezeri.

“Thailand offers not only cheaper labour and land, a foreign company also does not require a local partner.

“Thailand also has many parts vendors in the country, which means components need not be imported into the country,” he explained.

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