DALLAS SEEMS TO BE a strange neighborhood for the invasion of small Chinese-made powersports toys. But you don't have to look far to find one; in fact, it's not unusual to find two in the same small industrial park.
During a recent weeklong trip to Dallas, I visited more than a dozen companies, all of them looking anxiously at the U.S. market. Their operations ranged from factory-owned subsidiaries; to tiny importer-and-distributor operations with scrappy warehouses; to a huge operation, building its business after the pattern of major international automakers.
Most of these companies will change their operations drastically over the next two years as they struggle to penetrate this market. Two or three will improve their systems, procedures and processes, and will be on the way to becoming legitimate suppliers of scooters, ATVs and motorcycles, backed by solid warranties and served by extensive U.S. inventories of readily available parts. Several will be gone and will be replaced by eager newcomers.
The shakeout will be accelerated with the upcoming implementation of the Consumer Product Safety Commission's Modernization Act (H.R. 4040). This law requires all ATVs sold in the U.S. to meet specific safety standards. This step will increase production and quality control costs for foreign manufacturers, and will cause many of them to drop out of the U.S. market.
Dallas economic development people are pushing hard to build the community of new Asian companies doing business in the city, and has committed extensive resources and staff to the project. Eugene Shen, Asian coordinator with the office of Economic Development, told me that the department is creating an industrial park to make it easier for foreign companies to do business in Dallas.
The park is being developed with the BNSF railroad, which owns 300 acres of land for the project, called the International Inland Port of Dallas (IIPOD). A foreign manufacturer would, conceivably, be able to ship its products by containerload to Long Beach, Calif., and then have the containers loaded directly on BNSF cars without waiting to clear customs. The containers would go directly to Dallas and clear customs quickly there, with no waiting for days in Long Beach, notes Shen. The direct handling cuts shipping costs.
BUT WAIT, THERE'S MORE
But why, aside from the city's recruitment push, would a Chinese company set up its U.S. business in Dallas? Try these items on for size: No individual income tax. No corporate income tax. A free trade zone if products are shipped out of Texas. Easy access to Interstate 35, which heads directly north through the center of the United States to Canada, and south to Mexico.
And there's a major environmental testing lab in Fort Worth that tests machines for EPA emissions. TET Emissions, run by Bill Rucker, the founder of American IronHorse Motorcycle Co., is a full-service, EPA-approved emissions testing laboratory.
Here are three of the biggest operations you'll find here:
- SunL Group has the largest and most impressive facility, a two-story, 250,000 sq. ft. office and warehouse complex. The company told me it maintains an inventory of 11,500 parts (650,000 individual items) worth more than $1 million.
- American Lifan Industry Inc. is a subsidiary of ChongQing Lifan Industry Group. Lifan is one of the largest motorcycle manufacturers in China and one of its biggest motorcycle exporters.
- Keeway America LLC is the U.S. operating unit of Qianjiang Group of China (often called simply QJ.) It runs similar Keeway-branded subsidiaries across Europe and in South America and West Asia. Keeway is a direct subsidiary of QJ and operates in a way similar to that of the Japanese OEMs. It doesn't have many machines here because units are shipped directly from Long Beach to warehouses in California, Florida and New Jersey. It has a 10,000 sq. ft. parts warehouse here that produces a 90 percent fill rate on 4,400 part numbers. QJ owns Benelli Motorcycle, the Italian maker of slick and powerful machines.
If you're considering taking on a Chinese brand, you'll find a trip to Dallas worth your while. You have to do your due diligence on these companies anyway, and this is an easy way to get the job done. In a few days, you can visit your top six prospects, see their facilities and meet their management. You'll be surprised by the comparisons that pop out, and you'll be able to drill down to your two finalists fairly quickly.
Joe Delmont can be reached at firstname.lastname@example.org or 952-893-6876.