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From selling engine to marketing system and service, Zongshen Power builds up the global compact power base

16th May, 2010

China Stage III emission standard of motorcycle is coming into effect formally on 1st July of next year. It is not a good news in deed for the motorcycle manufacturers that are being annoyed by the market downturn due to financial crisis.
However, in Chongqing, the largest motorcycle manufacturer in China, Zongshen Power (001696) is looking eagerly forward to the day.
It is not just because the presence of new “Threshold” will relieve current situation of the industry such as disordering competition and excessive production capacity to some extent. To the listed company, China Stage III standard has been determined by the Company to be the key point in business transformation and switchover of identification—from manufacturer of compact power product to supplier of system and service, the way they will walk.
Looking for “Blue Sea”, Zongshen is considering changing.
In the global financial crisis which has lasted nearly two years, like automotive industry, motorcycle industry is one of the most seriously affected industries. Most manufacturers nose-dived, and could not defend themselves against the downturn in overseas market and increasing competition in domestic market.
As one of the leading companies in the industry, Zongshen Power realizes soberly that the root cause of the sorry plight is industrial inertia staying on “vehicle producing and selling” level for decades, and corresponding homogeneity completion like “an army of ten thousand horses trying cross a single log bridge”, instead of recession of market demand due to financial crisis.
Keeping arduous struggle is not as good as looking for another way. But where is the Blue Sea that Zongshen Power is looking for?
“We should promote not only the engines, but also power systems and solutions!” This is the way designed by Zuo Zongshen to break through the plight. Financial crisis and China Stage III standard to be implemented soon strengthen and expedite the schedule to put the thinking into practice.
Switchover of Chinese standard is a Heaven-sent chance.
Zongshen Power devotes itself to power research and lean production more than decade. It is said that the users of Zongshen motorcycles are more than 20 million, ranking No.1 on the market for consecutive years.
Zuo Zongshen believed that China Stage III standard to be implemented next year brings forward severe test to technical innovation and conformity control measures in the industry, which is just the advantage of Zongshen Power, i.e. “We've got one while others got none; Ours is better while they got one.”
Zongshen has accumulated solid power in field of compact power system by introducing proven technology from Europe and USA in recent years. At the beginning of this year, they have developed successfully three solutions aiming at China Stage III standard, namely, finely tuned carburetor, electronic-controlled carburetor and electronic injection system, which are all approved by competent authorities.
According to the completely new orientation of Zongshen Power defined by Zuo Zongshen, the R&D team of Zongshen Power also prepared a set of systematic solution integrating power performance, economical efficiency, reliability and ability meeting new emission standard on the basis of China Stage III solution. To put it in Zuo Zongshen’s words, it is a perfect combination of in- and out-engine purification to realize truly emission pollutant control of motorcycles.
Integrating value chain to multiply value
Upgraded emission standard will not be satisfied by just changing components and parts. Complicated adaption for mission of complete vehicle, decreased power performance of complete vehicle, difficult control on production conformity of components and parts are the barriers that motorcycle engine makers have to face. As one of leading companies in the small power industry in China, the power train system that Zongshen Power is preparing to promote is just made for such purpose. This is a power system and technical integration service, in which the engine is the core and principal part while seven other main emission systems are auxiliary, equipped with complete measures of integrated power test, core part test, conformity test and control to meet China Stage III emission standard. It looks still like selling engine and peripherals, but from the view point of engine maker, the purchase and supply chain is shortened quietly.
“Firstly, integrate supply chain to shorten it and put production close to customer to increase efficiency, flexibility and response speed of the chain. Secondly, put the last assembly/ configuration link in supply chain as close to end user as possible. Achieve individual customization and flexible configuration on the basis of modularization. Organize suppliers by centering customers and produce products according to each customer’s requirement and condition. Thirdly, measure cost in term of whole supply chain instead of pure purchase price, considering purchase cost, manufacture cost, transportation cost, and the expense of response speed due to long distance transportation. Fourthly, low cost should not only be kept, but also be bound with product and service to form true competitive advantage.” As to the fully new business mode, Zuo Zongshen speaks with fervor and assurance.
He expresses that Zongshen Power is selling engine now, but they will sell small-scale compact power train. In the future, Zongshen Power will become the largest base of small-scale compact power train in the world.
“While we are producing product precisely and thoroughly, we must keep higher view above manufacture.” He said. Zongshen in the future will have two roles: one is professional manufacturer, excellent production promoter, and another is the consolidator of value chain and integrator of resource.
(Originated in Chongqing Daily on 30th November, 2009)

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