Big “Bikes” Remain a Niche Market in Taiwan

Taiwan has opened to large-displacement American “cruiser” motorcycles, though many obstacles remain.

The rumble of a Harley Davidson or an Indian Chief still turns heads in downtown Taipei. Despite an over-abundance of two-wheeled powered vehicles in every street and alley, these American-style “cruiser” motorcycles are still a rarity in Taiwan due to prohibitive import taxes and stringent emissions testing.

In a concession made when joining the World Trade Organization in 2002, Taiwan permitted the import of motorcycles with a displacement in excess of 150cc. However, it only opened the door halfway, as a series of import duties and taxes as well as safety and emissions regulations were put into place and continue to apply. In 2003, the first year in which imports of large engine displacement motorcycles were permitted, the Ministry of Economic Affairs hugely overestimated the demand. It forecast sales of 40,000 such vehicles, while foreign motorcycle brands put the number at 10,000 units and actual sales reached just 1,000.

Despite the eagerness of foreign motorcycle exporters to be early entrants in the Taiwan market a decade ago, such foreign brands as BMW, Triumph, Ducati, Suzuki, Yamaha, and Honda continue to struggle to overcome Taiwan’s prohibitive taxes and regulations. While many companies have scaled back their expectations, Taiwan’s market for large-displacement heavyweight motorcycles continues to be a niche market. According to Yamaha Taiwan, the two top-selling models of large scooters in Taiwan in 2014 were its TMAX 530 with 1,680 units sold and the Suzuki Burgman 650 with 673 units.

Relatively few in Taiwan have so far been partaking of the Big Bike culture common in the United States.
Relatively few in Taiwan have so far been partaking of the Big Bike culture common in the United States.

Comparatively, American motorcycles have benefited from a delayed entrance into the market. U.S. companies specialize in large engine displacement “cruiser” models, and even a subset –designed with side compartments called “baggers”– that are more suited to highway cruising than daily commuting. Harley-Davidson opened its first shop in 2008, and has since expanded to Taichung and Kaohsiung. Its annual sales volume is estimated to be around 1,000 units.

Hyderson Motorcycles, the importer of the two American motorcycle brands Indian and Victory, opened its doors in 2013 offering just three models. According to Sales Manager David Chang, the company sold 180 units in 2014 and is planning to expand to Kaohsiung this year. Chang says Hyderson is already having trouble procuring enough supply of its most popular model, Indian Scout.

Though sales of large-displacement motorcycles are picking up, the volume continues to be a disappointment to many who believe that Taiwan should be a paradise for motorcycle riders, given its many coastal highways and scenic mountain roads. Furthermore, with generations of Taiwanese already accustomed to scooters and motorcycles, it would seem natural for many of them to upgrade to more expensive models. Jeremy Osterman, owner of Luck 13 Bikes, a company specializing in customizing and repairing Harley-Davidsons in Taiwan and the United States, says “demand is definitely there, but the government needs to change some regulations.”

For now, large-displacement motorcycles largely remain a “rich man’s game” or a symbol of wealth and status, even if the motorcycle languishes in a garage. In a market already saturated with expensive cars, one way to impress your neighbors is showing off a big bike.

Naturally, there are also some regular daily riders, such as 42-year old Luo Ren who purchased his first large-displacement motorcycle six years ago, a 2003 Harley-Davidson V-Rod anniversary edition imported from Japan. He’s also owned as Suzuki m109R and is a member of the Cruiser Riders Club. For him, the ability to travel on local highways with these motorcycles cuts down his daily commute. He estimates his hour-long ride to work at just 30 minutes because he is able to take the expressway and bypass the stop-and-go traffic on local streets.

But should a large-sized motorcycle break down on an expressway, it is forbidden under the law for it to be loaded onto a van or tow truck at that site. Rather, it must be pushed to the nearest off-ramp and loaded onto a truck on a local road.

Luo also notes that although the Legislative Yuan passed amendments in 2012 authorizing the Ministry of Transportation and Communications (MOTC) to allow heavy motorcycles to travel on National Freeways 1 and 3, the proposed change was never put into effect because of opposition from a number of local governments. A public opinion survey conducted by the MOTC also found relatively little public support for opening the Freeways to heavy motorcycles.

Early history

The earliest motorcycles were merely bicycles fitted with an engine. Given Taiwan’s prominence in the bicycle industry, it might be reasonable to expect the island to similarly thrive in the production of motorcycles and scooters. Like bicycle production, motorcycles and scooters are “cluster industries” that rely on a tight network of parts suppliers, since no single company can produce items as divergent as rubber tires and headlights, or leather bike seats and handlebars. The type of SME industry in which Taiwan excels is well-suited to such close cooperation. And given 50 years of government protection, Taiwan’s motorcycle industry had adequate opportunity to flourish, especially the three leading domestic firms of Kymco, Sanyang, and Yamaha, who enjoy near total dominance of the local market.

In Taiwan, heavy motorcycles are subject to heavy import duties and various restrictive regulations.
In Taiwan, heavy motorcycles are subject to heavy import duties and various restrictive regulations.

After World War II, the import of foreign motorcycles was quite common, with many of Taiwan’s educated and entrepreneurial class riding around on imported motorcycles. Though pedicabs ruled the road in those days, motorcycles were a luxury the middle class could afford if an automobile was out of their reach financially. When a foreign exchange shortage in 1952 led

to a temporary ban on the import of motorcycles but not of parts, quick-thinking motorcycle distributors saw a chance to begin local assembly.

The prohibition on motorcycle imports would eventually end in 1959 due to an improved economic situation and complaints about the poor quality of the locally made product. But the Taiwanese motorcycle makers had already gained a foothold in the market, and in the coming years many would continue cooperating with Japanese firms to produce low-cost, small-sized motorcycles.

One Taiwanese maker, Kwang Yang began cooperation with Honda, but split from the Japanese giant in 1963, though it continues to produce parts for Honda. In 1970, Kwang Yang assembled its own complete motor scooter and marketed its Kymco brand for export in 1992. Sanyang did something similar, and Yamaha naturally shares a relationship with its Japanese namesake.

Government regulation had an impact again in 1979 during the oil crisis when the Energy Conservation Act led to the termination of license plate issuances for motorbikes over 150 cc. This move provided the domestic industry with even more market protection from foreign competitors specializing in larger-engine motorcycles ideal for cruising highways and roads.

Today there are 13.75 million registered motorcycles and scooters in Taiwan, one for every 1.56 people, according to the MOTC. The Japan Automobile Manufacturers Association calculates that Taiwan has the highest ownership rate in the world. By comparison, the rate in some neighboring countries is one motorcycle or scooter for every 3.5 people in Malaysia, 4.2 in Thailand, and 5.9 in Vietnam. The cold winters in places like Korea and Japan discourage widespread motorcycle ownership.

Taiwan’s motorcycle manufacturers employ an estimated 10,000 people and exports about half of its annual output of 1.3 million units. The total production value is some NT$85 billion (US$2.7 billion) a year.

But the industry is now facing stagnating domestic demand due to the obvious market saturation and the increased availability of convenient public transportation. According to the MOTC, domestic sales have seen little growth in recent years, with annual sales ranging from 650,000 to 700,000 units.

Tariffs and regulations

For imported large-displacement motorcycles, the biggest obstacle is steep import duties and other taxes, which can bring the retail price of a motorcycle to around 180% of what a customer would pay in the United States. “This Harley-Davidson Sportster sells for around $8,000 in the U.S. but by the time it gets to Taiwan the price is about $20,000 – more than double the price when you include import tax and the testing that needs to take place,” says Osterman of Lucky 13 Bikes.

While the declared import duty is just 17%, this rate is assessed on a motorcycle’s total value, which includes taxes paid in the country or state of origin and also the cost of shipping and insurance. After that, a commodity tax, a business tax, and a trade promotion fee are assessed.

While import taxes can be passed on to the consumer, a bigger hurdle is the passage of stringent safety and environmental checks. Each imported motorcycle must pass tests conducted by the Automotive Testing and Research Center (ARTC) and then the Vehicle Safety Certification Center (VSCC). This process can be long and drawn out, with the average imported motorcycle taking two to six months for passage. Some larger importers have been able to arrange for automatic passage for all subsequent vehicles of a given model after the first unit has been certified, but more often than not, each individual motorcycle must be tested.

The tests range from engine noise to emissions of hydrocarbons and nitrogen oxide. Taiwan has largely followed the European Union’s sixth-stage standards, which mean that only electronic fuel-injected (EFI) motorcycles are allowed, with older carburetor models having no chance of passage. Although motorcycle enthusiast Luo Ren says he understands the government’s concern with protecting the environment of a small island with limited resources, he notes that the regulations prevent a number of popular motorcycle models from being imported into Taiwan.

Luo and Osterman reserve their main criticism for the lengthy testing process carried out by ARTC and VSSC. While part of the problem is that believes that the ARTC facility is understaffed, Luo says, while another issue is general indifference to owners of such motorcycles. For example, should a motorcycle fail passage in one category, it automatically goes to the back of the line. Osterman believes the ARTC should be able to process a vehicle within a month’s time, including providing opportunities to re-check or undergo repeat inspection of areas in which a motorcycle has failed. Lengthy delays in testing can hurt dealers and motorcycle importers, potentially leading to lost orders. Multiple attempts at passing emissions can be expensive. If a vehicle passes on the first attempt, total ARTC and VSCC fees are estimated at around NT$100,000, though if multiple attempts are needed, the charge can easily rise to NT$200,000.

To ensure that motorcycles can go through the process as quickly as possible, Osterman has employed a third-party inspection group to undertake preliminary tests. Only those vehicles passing the preliminary test will be sent to ARTC. However, the emissions standards are so exacting that atmospheric conditions at each of the two different ARTC centers (Hsinchu and Changhua) must be taken into effect and replicated at the third-party testing center.

Should a vehicle pass ARTC and VSCC inspection, it can qualify for a license and won’t need to be retested for another five years. After that it will need to be tested annually, and after 10 years it needs to pass inspection twice a year.

Another aspect of the stringent testing is that no modifications are allowed for large-displacement motorcycles. While that may not be a problem for the sport cycle market, it is a big

issue for American “cruisers,” which are seen as a symbol of individuality and uniqueness. The saying that “no two Harleys are the same” is very much true, as the vast majority of owners of American cruiser motorcycles change the exhaust system even before the bike leaves the dealership.

Osterman says the percentage of exhaust modification in the United States is nearly 100%, whereas in Taiwan it is around 70%. The reason many change the exhaust system is to give their motorcycle a louder, more distinctive sound or “bark.” Many motorcycle riders believe a louder sound from the exhaust system improves safety by allowing automobile drivers to know they are in the vicinity. Changing the exhaust and the air filter system also allows the engine to operate more efficiently, opening it up and allowing the engine to experience peak performance.

Other modifications include changing the handle bars to make the motorcycle a chopper, as well as adding customized mirrors and removing fenders or “bobbing” the motorcycle. In fact, the array of Harley-Davidson aftermarket parts is staggering, and annually is compiled into a Harley-Davidson parts bible.

Under Taiwan law, none of these modifications is permitted. Therefore, when motorcycles go for annual inspection, they need to be returned to their original state as specified on documents submitted to ARTC and VSCC, and more importantly must match a series of photographs taken by these testing organizations.

Given the high price of large-displacement motorcycles and the restrictions on modifications and other cumbersome regulations, the industry largely remains a niche market serving a hardcore group of dedicated motorcycle riders. Many changes would have to take place before this market segment becomes mainstream.