Traditional Chinese Motorcycle Makers Struggle to Go Electric

China Visual

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By Rao Xiangyu and Shaw Wan 

Beijing, October 31 (TMTPOST) -- As China has been emphasizing green development since 2011, sales of new energy vehicles have been soaring. During the first seven months of this year, their sales volume surpassed three million units, up by 120 percent year over year.

Motorcycle makers have also been riding the wave. Zhejiang Cfmoto Power Co.,ltd. (SH603129), a Chinese vehicle producer established in 1989, committed to an intelligent and electric future in September. The company planned to launch four electric motorcycle models next year, taking up around 50 percent of its product lines.

“As green development becomes a mainstream theme around the world, for the motorcycle market, going electric is an important trend,” said a manager with BMW motorcycles business.

Electric motorcycles, a Blue Ocean

According to the national standard Safety Technical Specification for Electric Bicycle, electric motorcycles are the ones with a speed higher than 50 kilometers per hour. Those below that standard are classified as electric mopeds and electric bikes.

Compared with gas-powered motorcycles, electric ones are greener and less noisy. Their speed and driving performance are also improved, due to the increased torque brought by electric motors. For motorbike beginners, they are easier to operate, because they are like automatic cars, rather than manual cars. By going electric, motorcycles embrace more possibilities for intelligent applications, such as digital keys or autonomous driving.

Motorcycles have become a multi-billion-dollar market globally. Its value reached $124 billion in 2019, as business data provider Statista showed. The annual sales volume witnessed a new all-time high of 53 millionunits. Although the sector was hit by the Covid-19 pandemic, its market scale remained over 100 billion U.S. dollars in 2020 and 2021, with a sales volume of over 44 million units.

As for the Chinese market, the sales volume of last year was 20 million units. Among them, electric motorcycles took up 20 percent. According to CIRN, an industrial research organization, that proportion will rise to 30 percent in 2027, with an annual increase of 15 percent.

However, traditional Chinese motorcycle makers are late to the party. The top electric motorcycle seller of last year was Yadea Group Holdings Ltd. (1585.HK), a Chinese manufacturer focusing on electric bicycles and scooters. Electric motorcycles only accounted for less than 10 percent of the companies’ sales of electric two-wheeled vehicles. Apart from Yadea, 80 percent of the other top 10 sellers were electric bike makers.

Mid-to-high end electric motorcycles remain an unexplored market in China.

Path dependence

Although electric motorcycles are a trending market, path dependence stops most traditional Chinese manufacturers from transitioning. Apart from Cfmoto Power, other companies haven’t announced their plans to go all-electric.

“Traditional manufacturers that are making profits off their original product lines are reluctant to invest in transitions,” a person familiar with China’s motorcycle industry told TMTPost.

For them, mid-to-high end electric motorcycles are an unchartered territory. For example, high-performance electric motorcycles need to carry a high-voltage platform of 400 volts, which no one in the motorcycle industry has any experience.

Some adventurers did carry out pilot programs. In 2018, Loncin Motorcycle launched its first electric motorcycle in joint efforts with Surron. However, their products were not competitive against traditional gas-powered ones, as they had a higher price but a lower performance.

High Battery Costs

Another concern is the high cost of production. “The supply chain of electric bicycles is very mature, but that’s not the case for electric motorcycles. Enterprises need to carry out independent research and development from scratch. And it takes a long time for the supply chain to get fully ready,” said Lai Minjie, CEO of Zhejiang Cfmoto Power Co.,ltd.

For motorcycles with the same performance, the price of electric ones can be two to three times as much as that of the gasoline devices. To lower the cost, it could take up to five years, Lai told TMTPost.

The rising costs of batteries are the key reason to high production costs. Since 2021, the price of major raw materials for batteries has soared. For example, the price of lithium has increased tenfold in more than a year from 50,000 yuan ($6,844) per ton in early 2021 to the current 500,000 yuan ($68,438) per ton.

“In 2020, the cost of one kilowatt hour (kw/h) lithium battery was about 600 yuan ($82). It has increased to 1,000 yuan ($137). In the first half of this year alone, the price of batteries has grown by 60 percent,” said Li Yan, CEO of China"s electric scooter maker Niu Technologies.

Li explained with a Niu electric motorcycle that has a range of up to 75 kilometers on a single charge and a highest speed of 100 kilometers per hour. Such vehicle needs to carry a battery of 3.7 kw/h, which costs nearly 4,000 yuan ($548). To increase the range by 25 kilometers, the battery cost would climb to 5,000 yuan ($684). “The engine of a low-end gas-powered motorcycle with the same speed range costs 2,500 yuan ($342),” Li added. An electric motorcycle’s power system, including an engine and a battery, costs 6,000 yuan, which is over twice the cost of gasoline motorcycles. Such price differential makes electric motorcycles a money-burning hobby, instead of a transportation tool.

The increasing prices of major raw materials for batteries were driven by the expanding penetration rate of electric vehicles (EVs). In 2021, sales of China"s EVs reached 3.5 million units, up by 160 percent year over year. Such growth continued in the first seven months of this year to a penetration rate of 22.1 percent. As the country’s transition to EVs is underway,  the supply of raw materials for batteries struggled to meet such demand. Thus, costs for batteries for both electric cars and electric motorcycles were still on the rise.

Li believed that as time passes, the inflated battery value would drop, enabling electric motorcycles to beaffordable for commute. “The turning point is the growth of electric motorcycles’ penetration rate,” Li said.

“However, it might not come true in a foreseeable future,” Li added.

Domestic Start-ups

When the traditional manufacturers were struggling with transition, start-ups without too much burden of the past started to enter the market of electric motorcycles.

“We believe that going electric is the future of motorcycle industry,” said Liu Ping, COO of  motorcycle maker Horwin. Liu also believed that the rise in battery costs was short-term fluctuation that would not affect the long-term trend of this industry. And the electric two-wheelers would penetrate the market faster than the four-wheelers.

Horwin used to sell electric motorcycles in the European market. As a top three seller, the company had an annual revenue of over 100 million yuan ($14 million). It entered the domestic market by launching the first integratedintelligent chassis platform in the motorcycle industry in July 2022. Such an integrated platform would be able to change the basic vehicle frame of electric motorcycles. Compared with other electric motorcycles, the number of components of Horwin products will be reduced by at least one third, according to Howin CEO Zhou Wei.

Apart from Horwin, other start-ups like Sharkgulf and NEON are also developing their own product lines. The former, which owns a smart e-motorcycle brand Blueshark, has completed an 8-digit Series A funding led by Maison Capital.

International Competitors

Unlike traditional Chinese motorcycle manufacturers who lagged behind in going all-electric, overseas companies jumped on the bandwagon years ago. “BMW Motorcycles launched a concept vehicle BMW E-Scooter in 2011, marking our journey into developing electric vehicles,” BMW told TMTPost. The company released their newest version of electric scooter BMW CE 04 this year. It plans to deliver a new version every 18 to 24 months.

Last April, Honda Motor, the world’s largest motorbike manufacturer, announced it would phase out production of gas-powered vehicles with a plan to go all-electric by 2040. The sales of electric motorcycles will be increased to one million units by 2026, from the current less than 200,000 units, according to the plan. “Once the annual sales volume reached one million, the average costs would start to decline. Thus, the economies of scalewould occur. Honda will expand sales in India, China and other Southeastern Asian countries simultaneously,” said Yoshishige Nomura, Managing Executive Officer in charge of two-wheelers at Honda Motor Co. Ltd.

Another Japanese manufacturer had similar plans. Yamaha Motor Company sought to increase its share of electric models to 90 percent in 2050. “The environmental protection regulations of motorcycles in various countries are getting stricter year by year. As the cost of complying with regulations is high, the transition to electric motorcycles is imperative,” said Masayasu Maeda, Director of Planning and Investigation at Fourin Automotive Consulting Company.

In India, another major market for motorcycles, the government has introduced policies to support electric vehicle industry. Hero Electric, India"s leading electric bike company, is building its second domestic factory to increase its annual production capacity to one million units in the next three years.

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