China: Land of Opportunity?

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IF YOU WANT TO ADD NEW REVENUES this year, I hope you attended February's Dealer Expo in Indianapolis, because creating additional revenue streams was a hot topic of discussion.

I led a discussion that covered trends and opportunities involving Chinese companies. Several participants talked about ways they are making money from Chinese powersports equipment.

Gary Sargent Sr., owner of Sargents Motor Sports in Portland, Ore., sells a number of brands manufactured in Asia, including KYMCO, United Motors, Vento and Schwinn scooters. He sold about 700 units last year, and generated revenues of about $2 million.

But the interesting thing is that Sargent made about half of his net profit by servicing Chinese equipment, much of which had been purchased by consumers off of the Internet or from big-box retailers. When problems developed, Sargent says, none of the major OEM dealers in town wanted to service the machines. So he jumped in.

Sargent's service department covers about one-third of his 10,000 sq. ft dealership, and includes five service bays. Sargent says he's invested north of $50,000 in parts inventory alone. He plans to open a second store this year as soon as he can find an available facility.

Sargent began carrying new Asian brands in 2003 and had such success that he dropped the wholesale car business he was running and converted his operation entirely to selling and servicing the Asian brands. Since he had several brands and a string of Asian contacts, Sargent was able to locate parts to service the mostly Chinese machines. "Many of the parts really are interchangeable," he points out.

The bottom line is that at least one guy has figured out a way to make money in the Chinese segment of the North American powersports market, one that others are taking great pains to avoid.

When I mentioned during the discussion that some Chinese manufacturers have targeted Africa as a legitimate market for inexpensive, small-displacement bikes and scooters because the market is similar to China's domestic market, at least one participant perked up his ears. He's a dealer in the East who asked me not to tip his hand. But he's from Africa, and he's going to take a look at how he might make money working with the Chinese on their African projects.

KNOWING WHAT TO SAY AND HOW TO SAY IT

What I found in talking with many of the new Asian manufacturers is that they are looking for ways to improve their distribution systems in this market. At Indy, they were trying to sell products — of course — but they also were trying to sign up distributors as part of a grand program of expansion into the U.S. market. Unfortunately, many did not understand the importance (and difficulty) of establishing their own distribution channel. And many couldn't tell their story — one, for example, couldn't even tell me how many facilities it operated in the U.S.

Giant Wheels is a unit of Giant Global Group, one of the world's largest bicycle manufacturers. Giant was at Dealer Expo showing its new, lightweight motorcycle rims. The company introduced its combination aluminum/carbon fiber wheels for both motocross and supermoto bikes. The wheels are 30 percent lighter and 25 percent stronger than comparable products, says a Giant representative. The U.S. distributor is TAW Vehicle Concepts out of Golden, Colo., which reportedly will introduce the product in North America and Europe later this year.

Giant presented a first-class appearance at the expo. Its marketing materials looked good, they were informative and read well. There were plenty of people in the booth, many of whom spoke excellent English. Better yet, they knew what they wanted to say and knew how to say it.

Dongben. It's the third time at the expo for Chongqing Dongben Industry Co., a powersports machine manufacturer. The company says it produces its own 350cc engine and expects to have a 650cc power plant in production next year. Its primary goal at the show was to find an importer/distributor that could manage its channel in North America. Its marketing materials were colorful, but the text was anything but professional (i.e., they need a better translator).

Bashan. This company has been selling ATVs in the U.S. since 2005 through distributors such as Tank Sports and Goldenvale. Most of its customers are in the western United States, and it's looking for distributors in the East and Midwest. Last year, Bashan sold 10,000 units in the U.S., according to company representatives. The company produces a 400cc ATV and plans to introduce a 500cc ATV this summer. It'll retail for about $5,000.

There's lots more information on the new Asian companies elsewhere in this issue of Dealernews. Take a look. Perhaps you can make money with some of them.

Joe Delmont can be reached at jdelmont@dealernews.com or 952-893-6876.