Modularization in the Chinese Motorcycles Industry

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Case Details:

Case Code : BSTR165
Case Length : 19 Pages
Period : 1995-2005
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : China
Industry : Motorcycles

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"It is often observed that the Chinese companies have 'the capability to modify product architectures through parts copying and remodelling. 'In particular, what has been happening in the Chinese motorcycle industry which has become the world largest (13 million per year) can be regarded as a typical example of the 'modification of architecture.'"¹

- Chunli Lee, Takahiro Fujimoto and Jin Chen in 2002.

"It is paradoxical to observe that after a long span of about two decades of development, even though the top companies have the capacity of one million units and the collective production volume has overtaken Japan to become the No. 1 in the world, the Chinese enterprises still keep on imitating the models from foreign companies…"²

- Dongsheng Ge and Takahiro Fujimoto in 2004.

World's Largest Motorcycle Manufacturer

Since the early 1990s, the Chinese motorcycle industry has seen a rapid expansion. In the 1990s, China's motorcycles production grew at an average annual rate of 46 per cent. The annual production showed a sharp increase from less than 50,000 units in 1980 to 10 million in 1997 (Refer Exhibit I for growth in Chinese motorcycle population between 1983 and 1995).

By 2003, China's motorcycle production was around 14 million, roughly half the world's total motorcycles production (Refer Exhibit II for leading motorcycle manufacturers in the world).

Most Chinese motorcycles were offered at low prices and mainly targeted the low-end market segment. Their popularity was not restricted to just domestic markets.

They were in demand in the overseas markets of developing countries in Southeast Asia, South Asia, Africa and developed countries in the Middle East. In fiscal 2002, motorcycle exports by China were about 3.43 million units ($650 mn), which increased to almost nine million motorcycles ($1.45 bn) in fiscal 2004.

More than 150 motorcycle manufacturing companies operated in China. The five leading Chinese motorcycles manufacturers, Qingqi, Jialing, Zhejiang, Jincheng and Xindazhou had captured 43.7 per cent share in the domestic market (Refer Exhibit III for leading motorcycle manufacturers in China).

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1] Chunli Lee, Takahiro Fujimoto and Jin Chen, "Trends of Open Product Architecture and Internationalisation of Private Companies in the Chinese Automobile Industry,"www.imvp.mit.edu, 2002.

2] Dongsheng Ge & Takahiro Fujimoto, "Quasi-open Product Architecture and Technological Lock-in: An Exploratory Study on the Chinese Motorcycle Industry,"www.gbrc.jp, April 2004.