Race begins for motorcycle dealers

Each week salespeople from at least two different motorcycle manufacturers approach Ko Tun Zaw Win to see if his three Mandalay shops will act as resellers for their brands, he said.

He turns away most, but the other dealers are not being so picky. Two years ago only a handful of brands were available locally. Today the market is more diverse: Ko Tun Zaw Win said Chinese-made motorcycle brands alone may number more than 200.
All that choice, though, may not add up to much of a choice at all.

For a few thousand dollars, Ko Tun Zaw Win said, any entrepreneur can cut a deal with a Chinese factory to have a few motorcycles made and then import them into Myanmar under their own brand name.

“Some of the companies don’t even exist in China,” he added.

It is no surprise that entrepreneurs are so keen on the Mandalay motorbike market. As of late 2013, about 3.3 million motorbikes were registered in Myanmar, according to Road Transport Administration Department statistics provided by Ipsos Business Consulting.

In spite of a continuing ban on motorcycle use in Yangon that is more than double figure for 2008, when 1.6 million were registered. And many more motorcycles on the roads are thought to be unregistered, especially in rural areas.

In Mandalay Region, where nearly a third of the nation’s registered motorcycles put down their kickstands – and where Chinese brands make up more than 90 percent of what is available – the fragmented state of the sales market shows supply is still far from meeting demand.

It is the lure of an emerging market that draws so many manufacturers here, according to Colin Kinghorn, head of the Mekong subregion and Indonesia for Ipsos Consulting.

“Myanmar is going to be top priority,” Mr Kinghorn said, “as it is an untapped market.”

This is especially true for Japanese brands, he said. Japanese motorcycles can easily cost twice the price of similar vehicles from China, India or Thai brands, but they are perceived as being of a higher quality. Mr Kinghorn suggests that growing affluence among consumers in the coming years coupled with local manufacturing of Japanese brands will likely lead to a shift in the market.

“There’s going to be lots more pressure on Chinese brands,” he said.

Suzuki, Honda and Yamaha Thailand are all thought to be looking at producing motorcycles in the country.

In Mandalay the expansion of Japanese brands will come from people like Ko Nay Lin Oo, head of Swift Investment and Trading Group, an importer and distributor of Suzuki motorcycles.

His focus is two years down the road, he says, when he foresees rising domestic incomes, commensurate with GDP growth, leading to a shift toward Japanese machines.
Acknowledging his motorcycles are more expensive than Chinese brands, he says the main selling points for the Suzuki brand are Japanese standards of quality, use of showrooms, genuine spare parts and after-sales service.

“I think in a few years the market habit will change to a branded market,” he said.

For now, however, shop owner Ko Tun Zaw Win says price remains the big concern. Resellers are racing to undercut each other, and with retailers unwilling to slow down either, competition is heating up for lower-end models. As a result, once-robust profit margins have declined significantly.
Ko Tun Zaw Win is looking to pass the competition on the outside. He plans to move away from Chinese-made 110cc and 125cc models that currently predominate in Mandalay and focus on niche Chinese “sports” bikes instead.

They’re more expensive, but they also offer a higher profit margin per bike. While the cheapest 110cc motorcycles sell for about K420,000 new, Ko Tun Zaw Win’s best selling sports model fetches K5.8 million.

Others, however, are still fighting for market share at the lower end. Some manufacturers are even thought to resort to unscrupulous marketing, slapping a 125cc sticker on lower-market 110cc models and trusting customers would not be able to tell the difference.

Ko Tun Zaw Win said vendors generally have no way to prove deceit. But he added that forming a motorcycle sellers association could allow vendors to push for government action at the borders to ensure imported bikes meet the standards their manufacturers claim.

An association could also provide a forum for importers to order in larger lots from the manufacturer. That would transfer market power to the Myanmar vendors and alleviate some of the pressures of having so many smaller shops in competition with one another.

Daw Thin Thin Ngwe, manager at Mandalay’s HiBoBo motorcycle shop, says her business draws much of its trade from agents who purchase from her in bulk and sell in Myanmar’s rural towns and villages.

Her husband lives in Muse in Shan State on the border with China, where he scours the market for motorcycles for import.

While the unstable kyat exchange rate leads to frequent prices fluctuating, offering a range of motorcycle brands to consumers is a key business strategy for HiBoBo. “I’m not worried about the future, because we have so many types of motorbikes to sell,” she said.

Other retailers are working to differentiate themselves from the crowd in other ways. “It’s important to try to offer new things,” says Ma Tin Tin Hla, an employee at a Jianshan brand showroom on 62nd Street.

The 125cc models are the shop’s best sellers, despite retailing for K530,000 compared to the K410,000 that 110cc models go for, she said. Hoping to continue the trend toward larger-engine bikes, the showroom now offers 150cc motorcycles as well, though at K1.2 million a piece they are a little pricey for many .
While it seems Mandalay’s motorcycle business itself has plenty of room to grow, practical considerations may limit just how big the actual engines driving the sales are likely to get.

Ko Tun Zaw Win said while he would like to see even larger machines on the roads, he reckons 300cc might just about be the limit given the state of Mandalay’s roadways.

“Could you imagine a 600cc machine doing a U-turn on this road?” he asked, gesturing to the heavily trafficked 62nd Street, one of the city’s main arteries. “I can’t.”

Source: Myanmar Times

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