Chinese ATV maker seeks overseas acquisitions

A Taotao Group's all terrain vehicle is pictured.

WENZHOU - China's biggest all terrain vehicle (ATV) producer, Taotao Group Co Ltd, is searching for overseas acquisitions to promote sales in the West.

Chairman Terry Cao said in an exclusive interview that acquisitions were expected to help enrich the private company's product variety and upgrade technology management. The company was targeting acquisitions of US firms in the same industry, but he would give no other details.

Taotao had maintained 20 percent annual growth in the value of exports since 2006 when its first subsidiary was established in Los Angeles.

"Before 2006, we depended too much on local distributors who held a huge part of the profit," said Cao, adding the company also absorbed the bad debts.

The manufacturer has already established nine wholly owned subsidiaries in the US, Canada and Russia. "More than 100 staff abroad are directly in charge of sale and after-sales service in local markets," he said.

In 2013, the value of exports climbed to $85 million, while the profit margin has remained around 30 percent for the last seven years.

The United States is Taotao's first big foreign market, accounting for 70 percent of its export volume. Taotao holds 70 percent of China's total ATV exports to the US.

Last year, it sold 120,000 ATVs and motorcycles in the US, where it has 30 percent of the market. It keeps the Taotao brand on 70 percent of products and limits the OEM rate to 30 percent.

The company had anticipated a potential challenge with its limited product structure and brand promotion.

"Our products are still limited to low emission vehicles under 250cc with prices from $300 to $700, half as cheap as Honda products," Cao said, "and our customers still are not a majority of American ATV and motorcycle users."

They also had little loyalty to Taotao products.

So on one hand, the company constantly researched and developed high-end products, and on the other, it searched for acquisitions.

Independent R&D was necessary for Chinese enterprises, but Cao argued the process was too slow.