by Don Procter
Down and Dirty in the Powersport Industry
The fledgling market for Chinese powersport products in Canada has grown like wildfire in the last few years. But while many of the products are dirt cheap, not all are well made and support networks can be poor to non-existent.
Stephen Bieda, founder and president of the Canadian Powersports Dealers’ Association (CPSDA), says the problem is that many non-traditional powersport products from China and Taiwan unfairly “circumvent the legislative process” to sell mini-dirt bikes (sub 250cc) and ATVs in Canada. “Our members have to go through years of approvals to become a dealer with certified technicians and qualified sales people.” CPSDA members are authorized dealerships that sell new and pre-owned motorcycles, ATVs, PWCs and snowmobiles.
Part of the problem is that the federal government doesn’t have the resources to consistently and effectively ensure compliance with the import requirements, says Neil Vanderkooi, of Visionary Motorsports Ltd. The guidelines are in place and there appears to be more of a focus on enforcing the rules however, the task can be overwhelming. Ocean ports across Canada are strained with the recent influx of product coming into the country. For example, from 2001 to 2005 the annual container count coming into the Vancouver port increased by over 54%. Also, some Canada customs agents, for instance, don’t understand all of the Transport Canada requirements on imported powersport products and that can let some product slip in under the radar, which works against those importers working hard to ensure all safety issues are met and exceeded.
Bieda says all powersport dealers, including those selling snowmobiles and watercraft, should be licensed and approved by government. Right now even in the traditional powersports arena, technicians and sales people don’t require licenses. That is a mistake because safety is a big issue with off-road vehicles. “I’ve seen 50 cc gas-powered dirt bikes sold out of novelty stores in strip malls along side blow-up dolls and stag party gifts. These sellers don’t know anything about them. It’s putting the consumer in jeopardy and the industry in jeopardy.”
The bright side to the new market of non-traditional sellers is that there is an explosion of first-time powersport buyers, some of whom will go on to buy better-quality equipment, says Vanderkooi. Big box retailers such as Canadian Tire offer a 90 cc ATV for children for about $1,300-$1,400 compared to a Yamaha 80 cc model for more than $3,200. “Assuming the support and the service is there and the quality is reasonable, it brings a lot more people into the market.”
But the support isn’t always there. Some big box ATVs only provide a 1-800 phone number to a US distributor for support. Don McKellar, owner of Alberta-based Go 4 It Sales Ltd., distributor of E-Ton ATVs and scooters in Canada, has a big problem with big box retailers selling powersport products. “They circumvent the retail dealer and the distributor to bring containers of product into the country. To them, if they make a few hundred dollars per machine that might be great. It’s kind of that used-car sales mentality-no service, no support, no expertise.”
What’s more, some non-traditional Chinese powersport products are “clearly non-compliant” with Transport Canada regulations and emissions standards of Environment Canada, explains McKellar. The problem in part is that ANSI safety regulations are voluntary. While traditional OEMs and manufacturers like E-Ton play by the rules, others don’t. Safety tests done by The American Specialty Vehicle Institute on the products made by four non-traditional Chinese manufacturers found “huge safety deficiencies”with the brands sold at some big box retailers.
Reputable manufacturers provide features such as brake lights, horns, adjustable CDI boxes for speed control, throttle set screws, remote kill switches, spare parts and warranty support. E-Ton is one of them, says McKellar. Reputable powersport dealers then provide retail customers with safety products, advice as well as after sales service and training.“These are the features that should be promoted. Parents that are knowledgeable will buy these products; others, new to the market will base their buying decisions only on price. When the experience is disappointing, these new customers will likely exit the industry with a bad taste in their mouth and purchase their child a Playstation or BMX bicycle, and the powersports industry will have lost another potential customer for life.”
E-Ton products are made in Taiwan, a nation which has built a solid reputation over the years for well-built, reliable powersport products. In fact, many small ATVs and most scooters made by major OEMs have manufacturing plants in Taiwan, points out McKellar.
Midwest Motorsports Canada Ltd. has been providing full 6 month parts and labour warranties and a Canadian parts supply since their incorporation in 2003. Despite the onslaught of Chinese imports, they have seen their business growing steadily. “Although at some point in the future, the industry may level itself out, I believe we are in uncharted waters. This is a whole different ball game than the Japanese invasion in the “sixties,” says Nathan Perry, President of Midwest Motorsports Canada Ltd. “The Internet, globalization, technology and the shear size of the Chinese work force definitely puts a different spin on things this time around.” Perry believes this is only the beginning and that chain stores will be carrying larger and larger cc and 4 wheel drive ATV’s in the near future, not to mention more fly-by-night importers making brief appearances in the market. “These challenges force businesses to work hard to be the best at what they do in order to survive. We feel that if the buyer wants the cheapest price on the block and doesn’t care about service, parts and warranty, then they wouldn’t have been our customer anyway.”
Dallas-based Galaxy Powersports LLC, imports non-traditional Chinese ATVs and dirt bikes under the name JCL to the US market. It has plans to expand into Canada. Galaxy’s president Leo Su differentiates his company from many other non-traditional suppliers by aiming to sell only to licensed stores. He provides warranties of up to six months on major parts, “just like Honda, Yamaha, etc.”
Su says one of the reasons that non-traditional powersport manufacturers have a bad name in the US is because the government doesn’t enforce regulations such as EPA standards. “Some people play cheating games and sell products with low quality components. They have no license, no commitment and don’t provide service or parts. They treat powersport like a commodity item.”
Su has big plans for Galaxy, a company that is only a few months old. One of his objectives is to sell the JCL line through major OEM dealerships, although to date his approaches have been rejected. “They (OEM dealers) got burned before by non-traditional products so they don’t like taking chances.”
Su thinks that the image of the non-traditional market as one of poor quality and bad service will change as the industry thins itself out. Many off-shore makers are starting to build better products and those which don’t measure up, simply won’t survive long, he says. His prime objective is “affordable toys” (small ATVs and dirt bikes) for the middle class. While his JCL line doesn’t have all the features of name-brand products, it costs 50-60 percent less than traditional OEM ATVs.
Key to boosting the credibility of an offshore name is landing a deal with a major OEM, says Vanderkooi. For instance, Visionary has secured an arrangement with many OEM dealerships to sell its Chinese-made 250 cc Jianshe ATV. It is priced at $3,799 and is supported by full Canadian parts warehousing, and a 6 month limited warranty. The ATV is outselling the OEM’s own bike, which costs about $2,000 more, but the dealership’s rationale for selling Jianshe is that it draws customers that would otherwise go to a big box store where a similar-sized ATV sells for about $3,400.
While the powersport industry is flush with no-name, low-quality products coming out of China, observers suggest that the industry will clean itself up. “We’ve seen probably 30-40-percent of the importers drop out of the market in the last little while,” explains Vanderkooi. “Customers are getting a lot smarter and won’t readily buy a product that is not supported (with a labor and parts warranty as well as accessible, real service).” Visionary and other reputable companies offer manufacturer warranties which are similar to the six-month parts and labor warranties offered by name-brand manufacturers.
Bieda says the CPSDA has been lobbying the Ontario Motor Vehicle Industry Council (OMVIC), the government regulatory body for street vehicles, to set up legislation for dealers and distributors of powersport products that is similar to on-road requirements. Bieda, owner of Niagara-based Bieda Powersports, an authorized dealer of Suzuki off-road vehicles and BRP (Bombardier Recreational Products), points out that the term “authorized” only means there is a dealer agreement; it doesn’t mean a company is licensed. “In many opinions, mine included, it is a very poor agreement that has all the rights slanted towards the manufacturer.”
He adds that while OEM products are approved by the Consumer Protection Safety Council, many non-traditional offshore products don’t go through Council. “There have been cases where guys have set up shop for a few weeks selling mini-ATVs and Christmas trees and then they are gone.”
The Motor Dealer Council of BC licenses all the dealers and sales people of on-road vehicles. Earl Manning, director of licensing for the Council, says one of the reasons the Council is concerned about non-traditional products is that they can be modified for street use. Because a license is not required for selling ATVs the Council cannot help consumers who call to complain about a bad experience with one purchased at an unlicensed operation. “We’re trying to figure out how big a problem it is and how it can be dealt with.” In essence, the back-yard dealer is part of a brand-new industry that government regulations haven’t caught up to.
The Canadian All-Terrain Vehicle Distributors Council has voluntary standards which it recommends its membership follows. Tim Stover, manager of shows and member services for the Council, says it is beyond the Council’s purview to dictate rules to its members. “We encourage all our members to maintain some sort of responsibility regarding the message they send out with their vehicles.” He believes non-traditional manufacturers that don’t provide a good product, a dealership network and good service will be weeded out over time.
While the demand for low-priced powersports products in Canada is expected to remain high, the non-traditional market is in its adolescence and critics describe it as anything but stable. Manufacturers will come and go, and while industry observers expect that China will continue to play a major role in the game to manufacture inexpensive powersport products, until the industry matures it remains to be seen which of those manufacturers will stay afloat and how well they will adapt to the traditional Canadian marketplace.
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