Rising fuel costs lead to motorcycle boom in PH

BAGUIO CITY, Philippines—Notorious for their part in the rise of highway accidents, motorcycles these days are getting better business—and a glowing reputation—because the rising cost of fuel has convinced Filipinos that these would save them time and money.

Ager Kiocho, vice president of Blaze Motortech Corp., says this is an industry that will likely sell four million motorcycles by the end of the year because of an 11-percent surge in demand—that meant the sale of a million more units than what were earlier projected.

His company is a dealer and importer of motorcycles.

According to Kiocho, the industry predicts that 2011 will be followed by the sale of 1.2 million units more by 2012 and 1.4 million units by 2013, thanks in part to the economies of scale.

An employee taking mass transportation from Marikina City to Makati City spends over P3,000 a month on bus, jeepney and tricycle rides, but he would spend no more than P1,000 traveling to work each month on his motorcycle, he says.

“That’s P1,000 spent on fuel and lubricants,” he says.

Kiocho pitched the value of motorcycles at the 13th national convention here of the Philippine Finance Association Inc., a group composed of credit lenders and risk management experts.

Motorcycle accidents in the provinces have drawn concern from authorities and may discourage investors, even though highway accidents mostly involve buses and private vehicles, he says.

Kiocho also says the traditional credit agencies rarely served a CD market (lower middle-class to low-income groups), which primarily buy motorcycles with sidecars for tricycle service in the provinces.

These clients have a combined monthly family income of P20,000, and have “insufficient credit infrastructure” so dealers always end up subsidizing their purchases through lay-away plans, he says.

But dealerships that offer credit financing helped the industry sell 200,000 units for the first time in 1997, Kiocho says.

He says the same mode of transaction was at the forefront when the market started to shift to a new client base.

In the early 2000s, tricycles dominated industry sales with a 72-percent share in the market, while motorcycles with no sidecars represented only 28 percent.

By 2008, amid a global recession, motorcycle sales represented 78 percent of the market, with tricycle sale trailing behind with a 22-percent share.

In 2008, over 50 percent of the 5 million vehicles registered were motorcycles, and the figures grew, making motorcycle sales “the fastest growing industry in the automotive sector,” he says.

Rising fuel cost, the upbeat political atmosphere generated by a new administration and a population that has reached over 93 million this year helped create this industry boom, he says.

Japanese brands Honda, Kawasaki and Suzuki dominate the Philippine market, but motorcycles carrying Chinese brands have started to penetrate, Kiocho says.

The industry’s first-quarter report this year showed a 25-percent increase in sales, he says. “China has been one of the biggest gainers,” he adds.

Dealers have noted the boom and have started expanding their services to include supplies and repairs because four million units sold this year mean customers “would need 16 million liters of lubricants” and would require “16 million repair visits to local mechanics,” he says.

The downstream services alone represent a 30-percent profit windfall, he says.

Motorcycle sales have been high in other Asian countries.

Kiocho says based on the latest industry data, Indonesia leads with an 11:1 ratio, or 22 million motorcycles sold to a population of 244 million potential customers.

Other countries have saturated their markets. Thailand’s 62 million population utilizes 20 million motorcycles (a 3:1 ratio).

Asian suppliers have been eyeing the Philippines as a potential market because the customer-to-motorcycle ratio for the country’s 93 million people is 26:1, Kiocho says.