Lifan takes aim at American market
Updated: 2013-05-30 11:48
By Hu Haiyan (China Daily)
Chongqing Lifan Group, one of the largest domestic motorcycle and automobile producers, plans to enter the US market within five years through merger and acquisition activity.
"I want Lifan to be the best automobile and motorcycle company in the world," said Yin Minshan, president of the group. "To achieve this, it is important for us to increase our presence in global markets, especially the US market, one of the most important and developed auto markets there is."
He said that Lifan hasn't entered the US market yet because it has been following a strategy of first growing international business in underdeveloped countries and regions.
Lifan works with more than 140 dealers in more than 160 countries and regions including Latin America, Southeast Asia and Africa. The group has set up five overseas factories in Thailand, Turkey, Ethiopia, Uruguay and Vietnam, with plans to open an auto plant in Russia this year.
As Lifan Group has established a strong foothold in the underdeveloped regions, Yin said, it's now time to enter the developed markets.
Jia Xinguang, an independent auto analyst in Beijing, said that it's difficult for Chinese car companies to break into developed countries because the auto industries there tend to be developed and mature. "But," Jia added, "emerging markets such as Russia offer many opportunities for Chinese automakers, because customers there are not addicted to Western brands."
Yin said he is optimistic about prospects in the US, which called wide open and market-oriented in the motorcycle and automobile industry. "With the development of a new energy automobile business in the US, there are increasing opportunities for Chinese automobile manufacturers," said Yin. "Now we are contacting US dealers to find suitable opportunities to enter the new energy market there."
He said the M&A approach is also an effective method for Lifan to tap the US market further, and the possible targets could be companies that produce complementary components for automobiles.
"There are so many strong small- and medium-sized automobile manufacturers in the US," Yin said, "which are not only helpful for us in developing our auto business, they could also be M&A targets." Yin added that Lifan employees are already in the US looking for M&A opportunities and he is planning to visit the US himself soon.
Yin noted that the close relationship between the two nations offers great opportunities for Chinese companies to develop businesses in the US. The current sound development of the Latin American market also can help Lifan tap into the US market further, said Yin.
Lifan's biggest challenge in its US expansion will be to enhance its R&D strength, Yin said. "Since the US market has a higher standard in terms of security and manufacturing, it is very important for the group to develop its own core technologies," said Yin.
Lifan owns more than 6,482 patents and spends about 5 percent of its revenue on R&D.
The company has also set up R&D centers in Chongqing and Brazil, making it the first private automobile company to have a national R&D center in Brazil.
"We are also looking at the possibility of having another R&D center, probably in Europe, by 2015," Yin said.
"Although we started our business with motorcycles, we realized that making cars is more profitable, with automobile costs typically more than 15 times that of a motorcycle. We want to transform ourselves into a large automobile manufacturer, more along the lines of Honda of Japan and BMW of Germany," Yin said.
Last year, sales from Lifan's auto side accounted for about 53 percent of sales. The company expects that by 2020, revenue from the automobile sector will be close to 80 percent of revenue, with the rest from motorcycles, according to Yin.
Lifan group had revenue of about 20 billion yuan in 2012. The group's listed unit Lifan Industry (Group) Co Ltd reported revenue of 8.7 billion yuan, a year-on-year increase of 0.56 percent.
"Our private companies never lack courage," said Yin. "Although it's more difficult to tap the US market compared with underdeveloped regions, we will seek every opportunity to enter that market to become a real global company."
(China Daily USA 05/30/2013 page2)