Motorcycle Production Revving Up in China : Manufacturing: The nation passed Japan as the world’s biggest maker. Greater demand is seen.

China has overtaken Japan as the world’s biggest maker of motorcycles--but the market is dominated by models developed by three Japanese manufacturers.

Chinese production lines turned out a record 3.37 million cycles in 1993, while Japanese factories built 3.197 million. The gap is expected to widen this year with demand strong in China but weak in Japan.

“We expect sales here to grow 15% a year until the end of the century,” said Kazukimi Kojima, representative of Honda Motor Co. in Beijing. “There is no market like this in the world.”

Kojima said Honda has first place in China, with a 37% share of the market held by firms with which it has technical cooperation agreements or joint venture agreements, followed by Yamaha at 26% and Suzuki with 24%.

Chinese output has soared from fewer than 50,000 machines in 1980 to 1.34 million in 1991 and 2.05 million in 1992, according to official figures.

Honda was the first Japanese maker to arrive when it signed a technical cooperation agreement in January, 1982. Its rivals followed and now Honda, Yamaha and Suzuki have a total of 18 plants here using their capital or technology. Kawasaki has no plants in China.

The top two factories are appropriately in Chongqing in southwest China, a city so hilly that it is not suitable for the hardy bicycle, of which China has 400 million.

One is a joint venture with Honda and the other with Yamaha, reminiscent of the five-year Honda-Yamaha war in Japan, where motorcycle output peaked at 7.41 million in 1981.

The main markets in China are in cities in the south and on the coast, where residents use motorcycles to go to work, and in villages where the cycles are used to carry goods as well as people.

Guangdong has 860,000 privately owned motorcycles, the most of any province. But nationwide, fewer than eight people per 1,000 own motorcycles, compared to a world average of 30.

“We have entered the golden age of China’s motorcycles, in the footsteps of Japan, Taiwan and elsewhere in their period of economic takeoff,” the Economic Daily wrote.

“There is no market in the world that can compare with China. If we do not develop production rapidly, large-scale imports and smuggling are inevitable.”

Experience shows that sales of motorcycles begin when per-capita income reaches $300 a year and soar when it reaches $1,000. That is the income level in Guangzhou, where most households have bought most of the appliances they want.

Rich Chinese still prefer imported models. With an import duty of 150%, they cost more than $1,150, against $805 to $1,030 for the popular 70cc model produced by Jialing, Honda’s partner in Chongqing.

In 1993, Japan legally exported 460,633 motorcycles to China, up from 297,260 in 1992. Many are also smuggled in to escape the duty.

Demand is limited by government directive.

Concerned about worsening traffic chaos, many cities limit the use of motorcycles, with Beijing among the most strict. Other cities issue only a certain number of licenses per month.

Another limiting factor is the price of fuel, likely to rise sharply as China moves to discourage consumption because domestic output cannot keep pace with demand.

For Japanese such as Honda’s Kojima, this explosive growth in output carries a somber message.

“In the 1950s, we Japanese were the students and the U.S. the teacher,” he said. “Now we are the teacher and the Chinese the students. How are we to avoid the decline of the U.S. and Europe? We must work even harder to develop new technology and new products.

“If China reaches the standard of Japan, we have no future.”