Taiwan, the manufacturing hub of motorcycle and bike. When people talk about motorcycles, they will definitely mention Taiwan. There are reasons behind the successful motorcycle businesses such as, KYMCO, Sanyang, and YAMAHA.
why is Taiwan famous for motorcycle parts, same as cycling?
Like bicycle production, motorcycles and scooters are “cluster industries” that rely on a tight network of parts suppliers, since no single company can produce items as divergent as rubber tires and headlights, or leather seats and handlebars. The type of SME industry in which Taiwan excels is well-suited to such close cooperation. And given 50 years of government protection, Taiwan’s motorcycle industry had adequate opportunity to flourish, especially the three leading domestic firms of KYMCO, Sanyang, and YAMAHA, who enjoy near total dominance of the local market. (Taiwan business topics). Back in 1960s, Taiwan started as a motorcycle manufacturing partner with Japan, KYMCO, Sanyang and YAMAHA originally manufactured for HONDA, after nearly 2 decades of cooperation, with the assistance of Taiwanese government, Taiwan finally owned its motorcycle brand names, the industry began to develop from there.
How big is the motorcycle market?
Asia-Pacific was the largest region in the global motorcycle and bicycle market, accounting for 41% of the market in 2019. North America was the second largest region accounting for 20% of the global motorcycle and bicycle market. Africa was the smallest region in the global motorcycle and bicycle market. (Businesswire)
The global motorcycle and bicycle market is expected to decline from $78.4 billion in 2019 to $77.3 billion in 2020 at a compound annual growth rate (CAGR) of -1.5%. The decline is mainly due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it. The market is then expected to recover and grow at a CAGR of 9% from 2021 and reach $97.4 billion in 2023. (Research and markets)
Motorcycle parts export from Taiwan
With total production of NT $ 122 billion (US $ 4.35 billion) in 2019 and NT $ 132.4 billion (US $ 4.72 billion) in 2020, exports of Taiwanese spare parts and components are steadily increasing. In fact, Taiwan’s motorcycle industry has grown at an average annual rate of 5.2% since 2012. (Taipei times)
In recent years, Taiwan’s motorcycle and parts have mainly been exported to the Netherlands. The data shows that Taiwan’s exports of motorcycle and parts to the Netherlands in 2020 reached US$480 million, up 29.8 percent from a year earlier, while its exports to the United States were about US$400 million, up 20.7 percent year-on-year.(Focus Taiwan)
We have recently completed a project in motorcycle parts sourcing from Taiwan, our client has assigned to source a model of motorcycle absorber from a Taiwanese brand. For motorcycle absorber, Taiwan has many good brands, such as Fastace, RPM, RACINGBROS, MSP. This time, our client had difficulties approaching them to procure the absorber and discussing the possibility of distributorship. To understand this inquiry, we tried to get a clue about the background of the increasing motorcycle parts demand within countries that consume big volumes of two-wheels. The top countries are India, Indonesia, Philippines, Vietnam, Thailand. During the pandemic, those countries suffered the fall in sales by 14% in 2020, the industry lost over 9 million units, due to the fall of few top countries: India(-5 millions), Indonesia (-2.9 millions), Philippines (-0.7 million), Vietnam (-0.5 millions).
Recently, the demand of motorcycle and motorcycle parts has surged due to the lack of supply in the local market and the incremental demands of personal transportation. Having our own bikes/motorcycles/cars have become significantly important during the pandemic and in the post pandemic. Our client has foreseen the opportunity and request our assistance for exclusive distributorship right in APAC region from a Taiwanese motorcycle parts company.
What were the difficulties in the negotiation?
- Exclusive distributorship right in APAC region– having the right to sell in the whole APAC region is a lot to ask from the manufacturer’s perspective. Considering the risk and ROI from the manufacturer, generally, they would not like to put all their eggs in one basket. Having all of their sale channels in the region controlled by one distributor can limit the growth of the brand and killed the sales if the distributor does not do well enough.
- Yearly sales figure- manufacturer proposed yearly sales figure to us in order to match client’s requirement- own the exclusive distributorship right in APAC region. Though, our client was willing to invest reasonable sales contribution in order to obtain the exclusive right, the proposed number was not agreed in the first place.
What have we done?
In this project, it took us some time to finally find the mutual benefits for our client and the supplier. We successfully lowered the yearly sales figure proposed by the supplier and closed the first deal with the client to cover 1/3 of the yearly sales figure. The two parties have agreed to the two conditions- exclusive distributorship right and modified yearly sales figure. With the first order in hand, the supplier has more confidence to support our client in terms of sales and market resources; with the supplier’s protection, our client is able to dominance the markets and is more certain to go forward.
It always takes time to understand and find the point where clients and suppliers are willing to say yes, it could be time-consuming. As long as clients are sure about the market opportunity and are patient to go through the negotiation process, we will always try our best to achieve the target.
Where are the opportunities? The emerging market-Electrical motorcycles
An analysis of related products by the MOEA shows that gas-powered motorcycles and scooters were the main products in the industry, followed by spare parts, e-bikes and e-scooters.
The e-scooter market grew at an average annual rate of 59 percent from 2012 to 2019, reaching a high of NT$12.2 billion in 2019, but dropped by 45.3 percent year-on-year to NT$6.7 billion in 2020 following falling international oil prices and reduced government subsidies to motorists for purchases.
We can see that although gas-powered motorcycles still takes big market share in the industry, especially in Southeast Asia countries. But the environmental awareness has started to have an impact on the industry. With many countries banning the gasoline-powered motorcycles sales, we know that the emerging market for e-motorcycle is going to be the main stream in the next generation.
We look forward to seeing more Taiwanese suppliers shining in the emerging market in the near future.
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