Dhanin Chearavanont (19): Motorbikes in China and the value of thinking differently
One day in the early 1980s, shortly after our company had moved into the Chinese market, my cousin approached me with a proposal: "How about we export Chinese motorcycles?"
Around that time, there was a motorbike known as the Xingfu (happiness) in Shanghai. China was suffering from a dearth of foreign currency, and the country desperately wanted to promote exports as a way to raise it.
Charoen Pokphand Group held a meeting in Hong Kong and discussed the possibility of forming a partnership with the bike's maker, a company affiliated with the city of Shanghai.
It was obvious that the Xingfu was still copying European technology from the 1940s and 1950s. "Should we export them as antiques?" one of the officers participating in the meeting asked scornfully. "They're slow, and there's no way we could sell them as motorbikes," another said.
Then I spoke up: "If they accept CP as the exclusive sales agent for their bikes globally, then we should cut a deal." Everyone was dumbfounded. I continued: "But our buyers should be within China and pay for the bikes in foreign currency. Let's ask the manufacturer if they will accept these conditions."
I'm sure what I said puzzled everyone, but I had my reasons.
Old bike, new approach
In the early 1980s, when China was undertaking sweeping reforms and opening up its economy, automobiles were still a rarity, and the most common way of getting around was by bicycle. Around this time, many overseas Chinese began returning to their hometowns, and they typically brought their foreign motorcycles with them.
Given the narrow roads, motorbikes were the most convenient way of getting around, and people would load just about anything on them -- vegetables, fruit, shrimp, hogs, people. Motorbikes were even used for shipping goods between Swatow (Shantou) and Guangzhou, two cities in Guangdong Province. The Xingfu was indeed practically an antique, but it got people and things from one place to another. In China in those days, that was enough.
To obtain foreign currency despite selling the bikes in China, I narrowed our sales focus to overseas Chinese and their relatives living in the country. We set up an arrangement under which those purchasing a motorbike would transfer their payment, in a foreign currency, to an account in Hong Kong and receive their Xingfu on the mainland. This arrangement saved overseas Chinese the hassle of bringing their own motorcycles with them when they returned to the country. Moreover, Chinese people who had not lived abroad could also get their hands on a motorbike without any trouble if they had a Chinese acquaintance overseas.
We ran advertisements for the Xingfu in Chinese newspapers. Just like that, we sold 20,000 motorbikes, and the Shanghai manufacturer obtained foreign currency.
Before long, Shanghai officials approached us and asked if we would be interested in setting up a joint venture with the city to manufacture motorcycles. We were, and that is how Shanghai Ek Chor Motorcycle was born.
If we were going to build our own motorbikes, I knew we needed better technology -- we couldn't keep clinging to the outdated Xingfu forever. Then, as now, motorcycles meant Honda. The Honda CG125 was popular in emerging nations such as Thailand, so I went to visit the company in Japan to discuss the opportunities in Shanghai.
I was accompanied by Shanghai officials, and during our talks with Honda, the Japanese company expressed an interest in taking a stake in the joint venture. I explained that doing so would be difficult and entail considerable risk, and we ultimately decided to sign a technology licensing agreement. Production began in 1985, and Shanghai Ek Chor's Honda motorcycles were an instant hit.
When it comes to business, it doesn't pay to have the same ideas as everyone else. Nobody thought the Xingfu would sell, but with the right approach, it did. This experience opened the door for CP to pursue new businesses, namely motorcycles and automobiles.
Dhanin Chearavanont is chairman of the Charoen Pokphand Group.