Chinese motorcycle maker to start in Brazil

Shineray Motorcycle Co (Shineray) — a Chinese motorbike manufacturer based in the city of Chongqing — has announced plans to begin production of its vehicles in Brazil in March, marking the first time the company has relocated its production efforts outside of China.

Parts coming from China will be assembled locally at Shineray's factory in the Brazilian port city of Recife, which will allow the company to save the time and money spent shipping finished goods from China to Brazil.

Paulo Perez, the chief executive of Shineray in Brazil, told Brazilian press that the factory in the state of Pernambuco, in which the company invested 140 million reals ($58.3 million), would have a production capacity of 150,000 vehicles per year.

Perez added that the factory would initially produce just three models of its 50cc motorcycles and one cargo tricycle.

Chongqing, a major city in central China, is home to a number of Chinese automotive manufacturers including four of the five highest-selling motorcycle brands: Lifan Industry Group Co, Loncin Holdings Ltd, Chongqing Zongshen Power Machinery Co and China Jialing Group — all of which produce over 1 million units a year.

Perez said that Shineray, which has 150 showrooms and 700 points of sale across Brazil, expects to sell upwards of 120,000 units this year as a result of increased activity in Brazil.

According to information from the Brazilian government, the Suape Industrial Port Complex — where the Shineray facility is located — is home to over 100 companies and boasts private business investments totaling close to $18 billion.

However, the move to Brazil could be more of a headache than Shineray planned for, according to Kohei Takahashi — a Tokyo-based analyst who covers the Honda Motor Co for global financial-services firm UBS Securities LLC.

"Sales in Brazil were 30 percent below their peak level," Takahashi said in a Jan 31 research note. "Due to a heavy investment burden and the uncertain demand climate in the emerging markets, profit margin improvements are likely to be limited over the short term."

Takahashi added that "volatile earnings" for motorcycle operations in emerging markets are also a risk to keep in mind.

Despite the fact that Shineray has been able to penetrate the Latin American market, the company still faces an uphill battle in its attempt to grab market share.

Japanese manufacturer Honda first began its motorcycle production in Brazil in 1976, and the Latin American country continues to be one of the vehicle maker's most successful markets.

On Nov 26 Honda's sales subsidiary in Brazil held a ceremony to mark the start of construction on a new plant in Sao Paulo. At the gathering, Honda President and CEO Takanobu Ito stressed Brazil's importance for Honda's bottom line.

"We are building up our local R & D capabilities," Ito said in a Nov 26 press release. "As the world's fourth-largest market, Brazil is one of the most important markets in the world for Honda."

The Asahi Shimbun, a leading Japanese newspaper, reported in September 2012 that the Honda sold 1.63 million motorcycles in Brazil in 2011, an amount totaling just over 80 percent of all new units in the market. Yamaha Motor Co was a distant second with only 10 percent of the market share in 2011.