DNC Asiatic to boost motorcycle export

Executive director Hu Ying said the company’s 2016 target was to beef up the export volume of its Demak brand motorcycles to 30 per cent from less than 10 per cent in order to ride on the strong US dollar to the ringgit. The export markets for Demak motorbikes are Sri Lanka, Laos and other Asean countries.

 

“For the Malaysian operations, we target to increase sales by at least 30 per cent this year from 50,000 units in 2015. We have launched four new models since December and these are boosting sales,” she told StarBiz. The new models are in the 110cc, 125cc and 250cc segments.

 

Hu said the implementation of goods & services tax (GST) last April had negatively impacted the sales of new motorcycles, which dropped by about 30 per cent for the whole industry last year.

 

She said although DNC Asiatic recorded lower sale of 20 per cent last year from 2014, Demak motorcycles had increased its market share to 11 per cent from about 9 per cent. “After a difficult 2015, we see a rebound in sales of new motorbikes this year,” she added.

 

DNC manufacturing plants in Selangor and Kuching have a combined production capacity of 120,000 units per annum.

 

Hu said DNC Asiatic would significantly ramp up its capital expenditure (capex) in the next two to three years to fuel the next stage of growth, adding that the group had set aside capex of RM20mil in 2016 to finance a localisation programme for upstream activities as well as research and development (R&D) activities.

 

She said about RM15mil would be invested in machinery and equipment to localise engine chassis fabrication and production of plastic cover parts for Demak’s most popular selling models. The chassis fabrication is currently done in China and Vietnam, and Demak is importing between 50 per cent and 60 per cent of the raw materials/components for the production of its various models.

 

With the localisation, the group would save on cost to mitigate the impact of the strong US dollar which has made imports of raw materials more costly and has squeezed on profit margins,

 

On DNC’s operations in Sri Lanka, Hu said the sales of Demak motorcycles doubled to over 3,000 units last year from 2014 due to a good product mix portfolio.

 

“Demak is the market leader in the 200cc street bike segment there. With an annual production capacity of 50,000 units in Sri Lanka, our 2016 sales target is to reach 10,000 units as there is big potential for us to grow due to improved buyer power of the locals and favourable policies. There are currently 10 Demak models,including scrambler,for the choice of buyers.

 

“We have launched a premium range of three new models and are phasing out the budget 100cc and below models. The premium models are selling well as they give us a good profit margin,” she added. Demak motorbikes are sold at the equivalent of between RM8,000 and RM9,000 each in Sri Lanka which recorded total sales of some 240,000 units last year, compared with some 465,000 new motorcycles registered in Malaysia in 2015. The top-selling brands of motorcycles in Sri Lanka are Indian made.

 

Hu said Demak currently had a nationwide marketing network in Sri Lanka, comprising 120 dealers and 12 mega 4S (showroom, sales, spare part and services) centres.

 

To further drive sales, she said Demak would invest more in branding and marketing network as well as product R&D to come up with new models that meet the preference of Sri Lankans and to enhance customer base.

 

DNC Asiatic entered the Sri Lankan market four years ago and based on projected annual growth, she said by 2018, the contribution from Sri Lanka operation was expected to increase to more than 40 per cent of the group’s total revenue.

 

“Sri Lanka is an ideal regional hub for Demak. We are already looking to and preparing for new markets in Europe, East and South Africa, Asean and South Asian countries for growth in the near future.

 

“Demak has set up an international business team to explore the export market via ETW, which is an Internet platform using cloud technology to promote the company’s products, and website in five languages – English, French, Spanish, Russia and Portugese.

 

“To meet the demand of these new markets, Demak is developing new product range, such as utility motorcycles,” disclosed Hu. A new three wheeler named CitiBiz and four-wheeler tractor called 4Runner are expected make their appearances under Malaysian pavilion to be hosted by Matrade during an international autoshow in Jakarta later this month.

 

According to Hu, CitiBiz with built-in refigeration facilities is a versatile utility motorcycle for small traders to deliver food, like pizza, and to sell groceries. The 4Runner equipped with 20-horse-power diesel engine is ideal for cargo transportation in the plantation, farming and mining industries. Both CitiBiz and 4Runner, which are expected to hit the market in three months,might be offered for around US$5,000. (RM20,310).

 

As a start, Demak plans to produce between 500 and 1,000 units of the CitiBiz and 4Runner for niche markets like Sri Lanka, Thailand and the Philippines.

 

Hu said under a new business plan, Demak would position itself as an integrated manufacturer of motorised products with high-value addition and innovative designs for both the domestic and export markets.

 

She said Demak was working with Hyrax Oil Malaysia as strategic partners to launch its own lubricant series (Demaklub) this month. The lubricant oil is expected to contribute 5 per cent to Demak group revenue this year.