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Dallas is hub for Chinese-made bikes

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By KATHERINE YUNG / The Dallas Morning News

Chinese motorcycle, scooter and all-terrain-vehicle manufacturers looking to break into the U.S. market have turned Dallas into their American hub.
Sunl Group chairman and chief executive David Shan (left), president May Zhou and chief operations officer Jeff Boudreaux are focusing on the quality of the company's motorcycles and go-carts.

A dozen distributors have opened sales offices and warehouses around the area over the last few years. Most employ only a handful of workers, but they're rapidly adding hundreds of dealers.
May Zhou, a Chinese immigrant who settled in the Dallas area, started one of the biggest sellers, Sunl Group Inc. in Irving. But the majority are from mainland China, with several from Taiwan.
ATVs and scooters account for the bulk of these companies' small but growing revenues.
"My target is to expand sales and get more market share," said Peter Xie, the executive manager of Dallas-based American Lifan Industry Inc., a subsidiary of Chongqing Lifan Industry Group, one of China's biggest motorcycle exporters.
Whether these distributors thrive or fail in the fiercely competitive U.S. market could provide clues as to how Chinese automakers will fare.
That's because motorcycles have traditionally been a steppingstone to the sale of new cars, as demonstrated by the Japanese companies Honda Motor Co. and Suzuki Motor Corp.
American Lifan's parent company already manufactures automobiles and plans to export them to the U.S.
Chinese motorcycles have a poor reputation for quality, but no one is counting them out. The Japanese companies that dominate the market – Honda, Suzuki, Yamaha and Kawasaki – overcame quality problems decades ago, winning prestigious motorcycle races such as the Isle of Man.
"It's very easy to forget how the Japanese entered the U.S. market," said Panos Kouvelis, a professor of operations and manufacturing management at Washington University's Olin School of Business. "They were not good quality. We used to joke about 'Made in Japan.' "
Chinese companies have already seized control of the market for small ATVs from the Japanese.
And China has become a powerful force in the motorcycle industry, too, producing and exporting more bikes than any other nation. The world's most populous country has more than 100 manufacturers.
In the U.S., they're keeping a low profile. Most distributors only advertise their products in industry publications.
In the classic pattern of immigrants following other immigrants to a foreign country, the companies trailed each other to Dallas, attracted by the city's location and low costs.
"This area is in the middle of the U.S., so it's good for shipping," said Bill Zhu, vice president of Chuanl Motorcycle Co. Inc., which operates a showroom and warehouse in Dallas staffed by eight employees.
Though imports of motorcycles and parts from China are growing, they totaled only $330.5 million in 2005, compared with almost $3 billion from Japan. That's because Chinese manufacturers mostly sell motorcycles with small engines, a disadvantage in the power-thirsty U.S. market.

Irresistable market

Despite formidable Japanese competition, these companies can't resist the lure of the U.S.
American consumers snapped up more than a million motorcycles and scooters for the third year in a row in 2005, according to the Motorcycle Industry Council.
Sales have risen every year since 1993, a performance likely to continue, thanks to fears of high gas prices.
"As long as you do the right things here, you are going to survive and grow," said Michael Yuen, vice president of Kinroad LP, a Carrollton distributor with 300 dealers.
But with so many entrants, some industry players expect to see consolidation in the years ahead.
"In the next three to five years, there will be a shakeout in this industry just like there was for the Japanese," said Jeff Boudreaux, Sunl's chief operations officer, who compared today's competitive environment to "being pecked to death by ducks."

U.S. regulations

One factor that could limit competition arose last year when new Environmental Protection Agency rules for imported motorcycles, ATVs and scooters went into effect. To obtain the EPA certifications, vehicles must undergo costly testing, which has deterred some Chinese manufacturers from entering the U.S. market.
Companies that meet the regulations hope to entice American buyers by offering extremely low prices. Some dealers sell Chinese motorcycles for $2,000 or less.
But the cut-rate prices have come at the expense of quality. There are dozens of stories on the Internet from consumers who can't find parts to repair their Chinese motorcycles, which broke down almost as soon as they were driven.

Repairing reputation

Bad experiences with Chinese-made ATVs and scooters have also sullied their reputation. The Better Business Bureau of Metropolitan Dallas has received more than 180 complaints against Best Price ATVs, an online distributor in Farmers Branch that has also done business under the names Freedom Scooters and BMX Imports.
The complaints ranged from delivery of damaged merchandise to difficulties getting refunds. Best Price did not return telephone calls seeking comment.
Another distributor, Dinli LP, which once operated out of Dallas, is appealing a $3 million verdict against it. A Philadelphia jury found the Taiwanese company liable for the death of a 31-year-old man who broke one of his legs when his Dinli ATV overturned after the right handle grip slipped off the handlebar. He died from a pulmonary embolism caused by his leg injury.
Quality concerns have become so serious that some dealers refuse to sell Chinese-made products.
"They are substandard," said Leslie Porterfield, owner of High Five Cycles, one of the largest dealers of used motorcycles, scooters, ATVs and dirt bikes in Dallas. "There's no way to fix them."
Others are willing to take the risks.
"A lot of it is junk, but you can pick out the companies that back their bikes up," said Hank Hankamer, who owns the Scooter Shop Inc. in Dallas.
He started selling American Lifan scooters, dirt bikes and motorcycles two months ago and hasn't run into any problems getting spare parts. He tells buyers who shy away from anything made in China to go online to find out more about the Lifan brand.
"They have been in China for a long time," he said.

Building the brand

Some major Chinese distributors are trying to improve their quality and service, eager to build valuable brand names.
American Lifan sells motorcycles only through dealers that have a repair facility with at least one mechanic, Mr. Xie said.
Rival Qlink LP gives two-year warranties on its street bikes.
"We really want to change people's image about Chinese products," said Johnny Tai, sales manager for the Taiwanese distributor based in Grapevine. "Americans like inexpensive products, but they don't want junk."
And at Sunl, executives want to ensure that customers never run into problems ordering spare parts. They have stocked the company's enormous warehouse in Irving with enough ignition switches, throttles and other parts to fill several aisles.
The 5-year-old company, named after the word sunlight, is also reducing the size of its dealer group to include only those that can offer high levels of customer service.
With these efforts, the Chinese may eventually close the quality gap with the Japanese. Some experts say the Chinese will grab significant market share because of their lower prices.
"You have to look five and 10 years down the road," said the Olin School's Mr. Kouvelis. "It's a global market."
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I think made in China motorcycle is cheaper and better than made in japan.
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