Cycle News

FEATURE VISITING CFMOTO'S FACTORY P86 increase the quality of their prod- ucts in an attempt to recover their declining market share of global exports. So while Chinese manu- facturers' export sales grew by 2.6 percent in 2013 to just under 10 million units – around 40 per- cent of total Chinese motorcycle production, which actually de- creased by 3.12 percent against 2012 to just over 23 million units, thanks to a drop in home market sales due to the ongoing ban on gasoline-engined two-wheelers in key Chinese cities - their aver- age unit price was still an ultra- low $532.92, and they're losing market share. So for instance in one key mar- ket, Vietnam, the world's fourth largest, China's market share has been slashed to 20 percent, while in the third largest, Indo- nesia, it's shrunk even lower, to less than three percent. This has mainly been brought about by two key factors - the strategic in- vestment in developing markets of Japanese manufacturers – in some cases, at the expense of developing new models for West- ern, more mature, markets - and the increasing quality of rival In- dian-made motorcycles, both of these affecting China's overseas market share by offering superior >>The Boss Fifty-year old Lai Guogui is CFMo- to's founder, president and principal shareholder. The chance to interview him in his office in the firm's Hangzhou factory gave a first-hand insight into where his company came from, and where it's going. When did CFMoto begin manu- facturing motorcycles, and why did you choose this product, rather than – say – cars, or boats, or sew- ing machines? I founded this company when I was 24 years old, in 1989. At that time there were not so many motorcycle manufac- turers in China, so I saw a good poten- tial as our country became increasingly mobilized. To begin with we made components for other manufacturers' machines, with many constant innova- tions, which got good response from the public. In 1996 we began making our own overheard camshaft 125cc en- gine that we supplied to other manufac- turers. But we encountered problems with several suppliers who did not meet our high quality control standards. So we made our own liquid-cooled 125cc engine, the first in China, which was accepted by scooter manufacturers very quickly. But they did not like to pay the higher price of manufacture of a liquid-cooled engine, so in 2000 we decided to establish our own opera- tion, manufacturing complete motor- cycles and scooters. We bought a state-owned company, and that way we got the permission from the govern- ment to enter motorcycle production. Later, we made CFMoto's first ATV in 2005, and after that side-by-side utility vehicles powered by the same V-twin engines. Why did you begin manufactur- ing 650cc twin-cylinder motor- cycles, when the vast majority of Chinese motorcycles are 250cc or smaller in capacity? We understood from early on that the way we can succeed is to offer products which are well made, to a high standard of quality, at a fair price, and offer something extra in their specification. So we decided to de- velop these motorcycles that are large capacity models in China, but are middleweight size in developed export markets like Europe and Australia. Speaking of quality, we pay close at- tention to this on the production line, and our workers operate a strict zero defects policy. We pay higher wages than anyone else in Hangzhou in a comparable industry, to make sure we get the best people. And we spend 7 percent of our total annual sales revenue on R&D, employing over 200 engineers who pay close respect to intellectual property. In fact, we ap- plied for 75 patents in 2010, 80 more in 2011, and 92 in 2012. How many motorcycles did CFMoto manufacture and sell last year? Let me answer that by saying that in 2007, before the global downturn, we made 20,000 motorcycles and scoot- ers, and 13,000 ATV models. In 2013, we made 15,000 powered two-wheel- ers, and 32,000 four-wheel ATVs. So we were initially badly affected by the economic downturn, but we have now recovered, and are growing strongly – CFMoto registered a 40 percent growth year-on-year in 2011, 55 percent in 2012, and 70 percent in 2013. I and my brother had three businesses – CFMoto powersports, a real estate company in Chongqing, and a company making freight train components. This train company was very profitable, so we sold this to raise capital to invest more strongly in the powersports business, and we have also recently branched out into a new leisure industry, boats. With the benefit of that investment in new models, and now that our agreement with KTM to manufacture their motorcycles here in our factory for sale throughout China is up and running, we are already seeing a con- tinuation of that strong growth for the future. By 2017 we envisage selling 50,000 ATVs annually, 20,000 utility vehicles with side-by-side seating, and 50,000 CFMoto motorcycles, of

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