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Feb 22, 2007, 8:12:08 PM2/22/07

http://www.dallasnews.com/sharedcontent/dws/bus/stories/021807dnbuschinabikes.211cdc.html

Dallas is hub for Chinese-made bikes

09:16 AM CST on Sunday, February 18, 2007

By KATHERINE YUNG / The Dallas Morning News
ky...@dallasnews.com

Chinese motorcycle, scooter and all-terrain-vehicle manufacturers looking to
break into the U.S. market have turned Dallas into their American hub.

A dozen distributors have opened sales offices and warehouses around the area
over the last few years. Most employ only a handful of workers, but they're
rapidly adding hundreds of dealers.

May Zhou, a Chinese immigrant who settled in the Dallas area, started one of the
biggest sellers, Sunl Group Inc. in Irving. But the majority are from mainland
China, with several from Taiwan.

ATVs and scooters account for the bulk of these companies' small but growing
revenues.

"My target is to expand sales and get more market share," said Peter Xie, the
executive manager of Dallas-based American Lifan Industry Inc., a subsidiary of
Chongqing Lifan Industry Group, one of China's biggest motorcycle exporters.

Whether these distributors thrive or fail in the fiercely competitive U.S.
market could provide clues as to how Chinese automakers will fare.

That's because motorcycles have traditionally been a steppingstone to the sale
of new cars, as demonstrated by the Japanese companies Honda Motor Co. and
Suzuki Motor Corp.

American Lifan's parent company already manufactures automobiles and plans to
export them to the U.S.

Chinese motorcycles have a poor reputation for quality, but no one is counting
them out. The Japanese companies that dominate the market – Honda, Suzuki,
Yamaha and Kawasaki – overcame quality problems decades ago, winning prestigious
motorcycle races such as the Isle of Man.

"It's very easy to forget how the Japanese entered the U.S. market," said Panos
Kouvelis, a professor of operations and manufacturing management at Washington
University's Olin School of Business. "They were not good quality. We used to
joke about 'Made in Japan.' "

Chinese companies have already seized control of the market for small ATVs from
the Japanese.

And China has become a powerful force in the motorcycle industry, too, producing
and exporting more bikes than any other nation. The world's most populous
country has more than 100 manufacturers.

In the U.S., they're keeping a low profile. Most distributors only advertise
their products in industry publications.

In the classic pattern of immigrants following other immigrants to a foreign
country, the companies trailed each other to Dallas, attracted by the city's
location and low costs.

"This area is in the middle of the U.S., so it's good for shipping," said Bill
Zhu, vice president of Chuanl Motorcycle Co. Inc., which operates a showroom and
warehouse in Dallas staffed by eight employees.

Though imports of motorcycles and parts from China are growing, they totaled
only $330.5 million in 2005, compared with almost $3 billion from Japan. That's
because Chinese manufacturers mostly sell motorcycles with small engines, a
disadvantage in the power-thirsty U.S. market.

Irresistable market

Despite formidable Japanese competition, these companies can't resist the lure
of the U.S.

American consumers snapped up more than a million motorcycles and scooters for
the third year in a row in 2005, according to the Motorcycle Industry Council.

Sales have risen every year since 1993, a performance likely to continue, thanks
to fears of high gas prices.

"As long as you do the right things here, you are going to survive and grow,"
said Michael Yuen, vice president of Kinroad LP, a Carrollton distributor with
300 dealers.

But with so many entrants, some industry players expect to see consolidation in
the years ahead.

"In the next three to five years, there will be a shakeout in this industry just
like there was for the Japanese," said Jeff Boudreaux, Sunl's chief operations
officer, who compared today's competitive environment to "being pecked to death
by ducks."

U.S. regulations

One factor that could limit competition arose last year when new Environmental
Protection Agency rules for imported motorcycles, ATVs and scooters went into
effect. To obtain the EPA certifications, vehicles must undergo costly testing,
which has deterred some Chinese manufacturers from entering the U.S. market.

Companies that meet the regulations hope to entice American buyers by offering
extremely low prices. Some dealers sell Chinese motorcycles for $2,000 or less.

But the cut-rate prices have come at the expense of quality. There are dozens of
stories on the Internet from consumers who can't find parts to repair their
Chinese motorcycles, which broke down almost as soon as they were driven.

Repairing reputation

Bad experiences with Chinese-made ATVs and scooters have also sullied their
reputation. The Better Business Bureau of Metropolitan Dallas has received more
than 180 complaints against Best Price ATVs, an online distributor in Farmers
Branch that has also done business under the names Freedom Scooters and BMX
Imports.

The complaints ranged from delivery of damaged merchandise to difficulties
getting refunds. Best Price did not return telephone calls seeking comment.

Another distributor, Dinli LP, which once operated out of Dallas, is appealing a
$3 million verdict against it. A Philadelphia jury found the Taiwanese company
liable for the death of a 31-year-old man who broke one of his legs when his
Dinli ATV overturned after the right handle grip slipped off the handlebar. He
died from a pulmonary embolism caused by his leg injury.

Quality concerns have become so serious that some dealers refuse to sell
Chinese-made products.

"They are substandard," said Leslie Porterfield, owner of High Five Cycles, one
of the largest dealers of used motorcycles, scooters, ATVs and dirt bikes in
Dallas. "There's no way to fix them."

Others are willing to take the risks.

"A lot of it is junk, but you can pick out the companies that back their bikes
up," said Hank Hankamer, who owns the Scooter Shop Inc. in Dallas.

He started selling American Lifan scooters, dirt bikes and motorcycles two
months ago and hasn't run into any problems getting spare parts. He tells buyers
who shy away from anything made in China to go online to find out more about the
Lifan brand.

"They have been in China for a long time," he said.

Building the brand

Some major Chinese distributors are trying to improve their quality and service,
eager to build valuable brand names.

American Lifan sells motorcycles only through dealers that have a repair
facility with at least one mechanic, Mr. Xie said.

Rival Qlink LP gives two-year warranties on its street bikes.

"We really want to change people's image about Chinese products," said Johnny
Tai, sales manager for the Taiwanese distributor based in Grapevine. "Americans
like inexpensive products, but they don't want junk."

And at Sunl, executives want to ensure that customers never run into problems
ordering spare parts. They have stocked the company's enormous warehouse in
Irving with enough ignition switches, throttles and other parts to fill several
aisles.

The 5-year-old company, named after the word sunlight, is also reducing the size
of its dealer group to include only those that can offer high levels of customer
service.

With these efforts, the Chinese may eventually close the quality gap with the
Japanese. Some experts say the Chinese will grab significant market share
because of their lower prices.

"You have to look five and 10 years down the road," said the Olin School's Mr.
Kouvelis. "It's a global market."
NEW WHEELS IN TOWN

Here are some of the distributors of Chinese-made motorcycles, scooters and
all-terrain vehicles that have opened their headquarters in the Dallas area in
recent years:

A&A Scooters Inc.
1-888-686-6868
www.aascootersinc.com

Adly Moto LLC
972-870-1572
www.usa.adlymoto.com

American Lifan Industry Inc., 972-698-7778, www.americanlifan.com

Chuanl Motorcycle Co. Inc.
214-553-8321
www.longboamerica.com

CPI USA
972-580-8100
www.cpi-usa.com

Fushin USA
214-420-7600
www.fushinusa.com

Galaxy PowerSports LLC
972-243-8668
www.jclusa.com

Goldenvale Inc.
214-239-9292
www.roketa.com

Keeway America LLC
1-888-553-3929
www.keewaymotor.com

Kinroad LP
469-461-8886
www.kinroadusa.com

Qlink LP
817-310-3338
www.qlinkmotor.com

Sunl Group Inc.
972-243-4555
www.sunl.com