China's huge market for electric vehicles.
More and more electric scooters are plying the streets of large and medium-sized cities, like Beijing, Shanghai and Chengdu. In the past, they were denied registration by Beijing's transport authorities because they were considered an illegal means of transport.
Change in the numbers suggests that the debate on whether or not electric scooters should be allowed on public roads has been resolved, while environmental issues open the market.
China's electric scooter industry has shown new momentum since 2003. As a convenient and environmentally-friendly means of transport, they have quickly grabbed the attention of consumers, replacing cars that are relatively expensive - and push-bikes which are not suitable for longer distances.
In fact, electric scooters have become big sellers across China, with some 16 million scooters sold in 2005. There are now 25 million of these scooters nation-wide. Industry sources expect after a number of years at least 350 million of China's 450 million push-bike owners will switch to electric scooters and the total market value, including sale of second-hand vehicles, parts and accessories, repair services and upstream supply chains, could be some Rmb1.3 billion (HK$1.2 billion).
The replacement rate of electric scooters for push-bikes is currently 3% on average, and as high as 18% in some larger cities.
The industry predicts good prospects for China's four major electric scooter centres. Beijing currently has 10.5 million scooters with a market value of Rmb31 billion (HK$30 billion). Then there is Tianjin with 9.7 million scooters valued at Rmb26 billion (HK$25 billion), while Shanghai has 9.2 million units valued at Rmb23 billion (HK$22 billion). Chengdu has 7.5 million scooters with a market value of Rmb17.3 billion (HK$17.1 billion).
A sunrise motor industry
According to industry sources, China is experiencing a period of rapid change where it comes to transport modes. A multi-tier consumption pattern has created demand for different means of transport.
From the perspective of consumption, while high-income earners in large- and medium-sized cities will mainly go for motor cars, there is a pressing demand from a much bigger community which wants to upgrade from push-bikes.
Electric scooters provide an efficient and inexpensive personal means of transport with low per-use cost. They are seen as a sunrise industry with good market prospects.
Most push-bike riders will switch to electric scooters.
Women are major consumers
On the other hand, the popularity of electric scooters also has its practical reasons. Energy conservation is no doubt a guiding principle for China's future economic development.
The runaway growth of petrol-driven motorcycles in Chinese cities has resulted in serious environmental pollution and many large- and medium-sized cities are starting to ban their use.
Given China's shortage of crude oil reserves, which are non-renewable, oil prices are bound to rise. The chain effect is that the operating costs of public buses and taxis will increase and transport expenses will go up.
For big cities like Beijing, the acceleration of the urbanisation process takes industrial areas further and further away from residential areas. This makes it very inconvenient for commuters.
According to some experts, it is still physically tolerable to peddle for five kilometres to go to work. Beyond this distance, it is too exhausting. So, the future trend is to substitute push-bikes with electric scooters.
Xishan's electric scooter industry catches up
Wuxi, Tianjin, Guangdong and Chongqing are the four major production bases for electric scooters in China. A report on the electric scooter industry in Xishan district, Wuxi, is now available.
According to the report, the core of Xishan's electric scooter industry is in Anzhen, where there are numerous production centres.
Trade in electric scooters
The streets are lined with huge advertisements, while trading is brisk. All brands and models of electric scooters are available, with price tags ranging from Rmb1,500 to Rmb2,500 (HK$1,485 to HK$2,475). According to dealers, vehicles within this price range sell the best, with buyers from all parts of the country.
Xishan's electric scooter industry started at the end of the last century. Most factories were previously engaged in the production of motorcycles, and despite their late start, the ban on motorcycles in cities, together with rising oil prices provided these industry players with increasing business opportunities.
Sales have been steadily on the rise since then. There are now 186 electric scooter plants in the district. Their total output last year was two million vehicles, about a quarter of the national total and 70% of Jiangsu's total.
Output in Xishan is expected to reach 3.5 million units in 2006, with the total value of the industry amounting to Rmb10 billion (HK$9.9 billion), or 12% of Xishan's total industrial output value.
China held its first exhibition of light electric vehicles in Wuxi from the 8th to the 10th October this year. Some 120 enterprises, including China's top 10 producers, took part in this exhibition.
Electric scooter enterprises were motorcycle producers
Zhang Hongxin, deputy chief of the Xishan industrial district, explained that there are two major reasons for the rapid development of Xishan's electric scooter industry within a few years. In Zhang's opinion, the prime reason is the timely transformation of the motorcycle industry.
In the past, Xishan's "Jetta" motorcycles were famous nationwide. When sales of motorcycles declined, enterprises began developing electric scooters, quickly grabbing market share by relying on existing channels and brand reputation.
Another reason for the sales jump for scooters is a vibrant business environment. The district and town governments have increased their support for electric vehicle production by offering preferential land rent and attractive tax options. Besides fostering existing enterprises, officials have also attracted market leaders in production such as Beijing Xinri and Done's to come to the area and invest.
The arrival of Beijing Xinri two years ago triggered a new round of competition. Major companies such as Zhongxing, Sinski, Chituma, Laibaochi, Guowei and Done's are investing in new factories as well as bringing in new technologies and equipment.
Others are setting up equity and contractual joint ventures for the development of supporting industrial chains.
Hong Kong investment in R&D welcomed
Xishan was given approval to build the only electric vehicle production and export base in Jiangsu. According to Zhang Hongxin, some foreign companies have already set up electric vehicle production facilities in Xishan, but none of them are from Hong Kong.
Zhang welcomes companies from Hong Kong, a trade platform with sophisticated financial and human resources, to invest in Xishan and take part in the research and development of new electric vehicles for export.
Xu Jie, secretary of the Xishan district party committee, spoke of two advantages in investing in Xishan's electric vehicle industry.
The first is a low investment risk. A large industry cluster produces market demand, which means investors will easily find business opportunities. This will encourage them to re-invest and extend their industrial chain, so reducing their investment risk.
The second advantage is low development costs. Investors will be able to effectively reduce their transaction, production, information and construction costs operating within an industry cluster and secure good returns with a relatively small investment.
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