CFMoto News

TO CHINA AND BACK (Part 1)

WWW.GORIDINGTV.COM

SPRING 2011

There is little doubt about what the answer will be when you ask most Canadians their opinion on the quality of products made in China. Narrow that down to opinions on all-terrain vehicles and the answers about poor quality get more punctuated. Without question, ATVs and UTVs need to be built with quality parts, assembled to high standards and tested to high durability tolerances. The “Made in China” reputation definitely doesn’t exude these qualifications. Challenging this position is Canada Motor Importation Inc. (CMI) a company located in Quebec that holds the Canadian distribution rights to the CFMOTO brand of power sport products. CMI wanted to dispel the myth that all products being manufactured in China are poor quality so they invited GO RIDING to visit the CFMOTO factory with our cameras to see first-hand how the vehicles are manufactured, but also how they are tested as part of RnD and durability quality assurance. Not one to turn down an 18 hour flight, GO RIDING was off to China.

For more than a decade, China has been the global leader in buying and using the world’s natural resources to feed its thousands of manufacturing facilities. Be it toys, clothing, tools, electronics or even books, if it can be mass manufactured at a cheaper cost, someone has employed a factory in China to do so. Sadly, our society has become a throw away one which increases the demand for ‘stuff’. How many times do we hear it’s cheaper to buy a new one than it is to fix it? Needless to say, this consumption and waste mindset, born in North America, is what is at the basis of China’s manufacturing boom. Equally important, not only do the 1.32 billion people who make up China’s population  fill the significant work force needs of the facilities, they are also the consumers buying the products being made domestically. Quality of life and personal financial status has been changing rapidly for populations living in the cities. These cities have seen a demand for urban lifestyle products rapidly increase. As an example, there were 94.83 million new subscribers to mobile phones in 2010. In total Chinese mobile subscribers has now reached 842.044 million. Further, in January, 2011, China produced almost 1.8 million and sold a total of 1.9 million automobiles – that is in a one month period! As we learned, it is this demand for bigger ticket, higher quality products that is changing the way manufacturing is done in many factories. Demands for durability and quality assurance are more and more forcing companies to change their ways from high volume output at the expense of product quality, to a quality based approach.

Having visited many North American manufacturing plants, the question for us was, how would the CFMOTO facility measure up? The Zhejiang CFMOTO Power Co. Ltd. is situated in Hangzhou, about a 1.5 hour drive from Shanghai. Not known to us was the fact that CFMOTO, for over 20 years, has been developing high-end products and is a leader in the industry of power sports products in China. It has a staff of approximately 1,000 and specializes in the R&D, manufacturing and marketing of liquid-cooled engines ranging from 125cc to 800cc, motorcycles, scooters, ATVs and UTVs. In 2009, CFMOTO was named “National High and New Technology Enterprise”. Their massive factory in Hangzhou has an annual production capacity to produce 800,000 liquid-cooled engines and 600,000 vehicles. Needless to say, with this incredible output, there were no employees with their feet up on the assembly lines. The factory was quite modern with automation lines leading the progress as each vehicle moved up and down the corridors for assembly. Like most factories, it was organized chaos. Having been tainted with ideas of what to expect, we were pleasantly surprised to see that there was an attention to detail that seemed inherent within the front line workers. This gave the perception that these people cared about the end product and wanted it to be recognized as a quality vehicle. From welding shops to the powder coating to the nuts and bolts assembly, efficiency was always tops. Get it done, but get it done right was an underlying theme to the work ethic.

To better understand the manufacturing and marketing realities of CFMOTO and CMI, we sat down with their representatives and went through a very interesting Q & A session. This provided some intriguing answers and perspectives to the challenges these companies face while trying to bring a Chinese-built product into a difficult and OE dominated market in North America.

CMI:  Poor Chinese competition is. The no name distributors who only buy Chinese product as shipped from China to be delivered as is to the market. Recently several have closed their doors, so we have to show we are serious in this game.

CFMOTO:  It’s really a highly competitive market in terms of the worldwide ATV market. There are so many manufacturers like the Japanese big 4, the North American manufacturers, the Taiwanese and the companies from China. So in terms of CFMOTO, we think that our biggest challenge is our brand name in comparison with old manufacturers. CFMOTO is still quite a young company so it is important for us is to get our brand name much more established and popularize it in the global market.

GR: In North America, products made in China have a “poor quality” stigma associated with them – how do you combat that issue?

CMI:  For dealers, we are giving better after sales services by not only having lots of spare parts in Quebec, but by also offering a warranty claim program and parts supply system. We are educating our dealers and end users that CFMOTO is an OEM Chinese company who makes 100% of their engines and vehicles. These vehicles are not pieces and parts picked everywhere. It remains a challenge and it is the main reason we need somebody like you (GO RIDING) to show the market that CFMOTO is not only another Chinese supplier, they are a real manufacturer.

CFMOTO:  What you said is true especially at the very beginning when the Chinese companies were introducing power sports product into the market. Due to the very poor quality consciousness of these companies, we all got a bad name for that. However, things are improving now, especially in recent years. The whole industrial level of technologies has been improved. For instance, in high speed railway technology, China is in the leading position in the whole world. So as far as CFMOTO is concerned, we are taking advantage of the update to the whole industrial level. Companies now have better consciousness of the quality if they want to compete in a global market. We’re sure we can improve our quality as this was the same issue with the Japanese with their product at the very beginning.

GR: Most people are very surprised to hear that many parts found on main North American and Japanese brands are made in China. What does that do for your quality image with the competition?

CMI:  It shows that Chinese does not always means poor quality. Other suppliers also used them. It can only help us to justify our quality. 20-30 years ago we were saying the same for products coming from Japan. Today it is the highest quality. It is said in many business magazines that the Chinese will take half the time it took for the Japanese to be considered high quality. CFMOTO is a right partner. We need only a bit patience.

GR: It’s a long way away but what is the process for manufacturing in China? How do you oversee things and ensure quality assurance?

CMI: We are visiting the plan every 3-4 months to check the production and modifications we requested. The Chinese need to be told what to do. We don’t ever take only what they offer as we guide them to our specifications. CFMOTO has an open mind and welcomes our expertise.

GR: What is the biggest challenge in manufacturing here in China?

CMI:  Quality control, shipping delays and communications.

CFMOTO:  The biggest challenge for us is that when we are sourcing some parts from other suppliers, the whole industrial quality level sometimes is different than ours. We have to extend our quality control to the supplier chain. Things are getting better because last year the annual production of cars in China exceeded 10 million units. This helps to improve the whole industrial level of the supplier.

GR: What is the process for getting the vehicles into Canada – logistic challenges as well as the Transport Canada regulations and certifications – what is involved?

CMI:  Transport Canada regulations are very strict. In Canada you have to present all the testing data to the government before being able to sell. We also need to comply with emissions, which is very costly in special labs.

CFMOTO:  Since CFMOTO is an export company, we have a technical department called the Technology Management Department. It is responsible for getting all the information regarding the regulations from different countries including any updated news from these countries. In doing the design import we have already considered these regulations and requirements into the production and the product so we can ensure that this newly developed product will conform with relevant laws and regulations.

GR: People say that many products made in China are “knock-offs or copycats” from other products. How do you respond to this?

CMI:  Chinese manufacturing is similar to what the Japanese did 30 years ago. They buy one unit, copy and improved the product. CFMOTO:  There is a saying that – translation is like this, “when you are standing on the shoulders of a giant you can look further” but that is not an excuse and we do admit that some of the Chinese manufacturers take a 100% copy of other products. I can assure you that at CFMOTO we are different because innovation or being innovative is one of the principles of CF MOTO. It is important for us to take the good concepts of other good products and then merge them into the development of our own products. CFMOTO is strongly against copying or any infringement of other intellectual properties. CFMOTO is always and will innovative. CFMOTO is now producing better and more reliable products. They are quite confident that we will be, in not too long of a time, closer to being one of the bigger brands of this power sports industry.

This concludes part one of our Q & A with CMI and CFMOTO but there is much more to be told on the CFMOTO Chinese manufacturing story. We invite you to read the next issue of

GO RIDING where we will unveil more on the business, RnD, cost control and ultimately, the benefits to the consumer.