Tuesday, March 16, 2010

Roketa in Jail? Blame the Chinese Detox

Everyone is fighting for a piece of the market. Let's Blame the Chinese Detox.

This last month several importers got shut down by CARB, General Electra, EPA, NHTSA, and just the poor economy. If these were banks being shut down we would have made the front page of CNN, but since they are scooter importers the only people that care are the industry people. Still, this all relates back to my theory of Chinese Scooter “Detox.”

What can you do as a dealer? First be smart and buy smart. The second part I will get at towards the end, but it mainly says sell on service, quality, and don’t compete with the Big Box mentality in the Powersports Industry. You will go out of business selling cheap, cutting corners, betraying your neighbor. You might make money in the short run like Roketa, but in the end we all meet our maker. Fighting over cents will get your nowhere fast.

Usually about once a day I have some dealer who loves to complain about pricing. I'm not talking about $100, we're talking cents. I always tell them I haven't built a career based on discounting. The problem is the small American dealer or repair shop has been flooded and brainwashed by the mainland Chinese distributors "pushers" as we call them. The truth is these are not legit companies. I've said this in speeches, I've spoken about this to the industry, and it's funny to see the same magazines that take their ads run the news once they fall. These dealers like the importers are addicted to the junk and the great “Detox” of 2009 continues well into 2010.

It is common knowledge that Chinese mainland factories do not make any money on the front-end, it's all in the kickback from the government subsidies to export and bring in more dollars. I saw this when I imported scooters from China ( For the record I have imported scooters from Italy - Malaguti, Taiwan - SYM, and China - QJ ) and in all cases there is some form of help or kickback from the regional players. Still, nobody is as aggressive as the mainland factories where they get ten to fifteen percent back at the end of the year. This only furthers the trade gap, destroys industries in Europe, and shows why we can't build any vehicles in America. Does the average US dealer care? The answer is no, neither does the US consumer. I'm also part of this problem since when I started in the business I only wanted to import Italian made products only to discover everything was being assembled in Italy and produced in Asia. So we import and work with Chinese companies, but I do my research. I meet the management, I talk to the owners, I check EPA Certs. Some companies are in it for the long haul and I've made some good friends. If someone asks me about say "CF MOTO" I can say they are a notch above any US importer since they are factory owned and have parts. They are not anywhere near a Roketa or Tank. The company has US management and US sales staff. This is the first sign you are dealing with serious people.

When you meet with a company at the Dealer Expo and visit their warehouse if you notice every employee from the bookkeeper to the forklift operator is Chinese and getting paid in Yuan something is up. When you visit a company in Houston, San Diego, Miami, and realize they have 10 Chinese employees, none speak English, and only two or three sales guys are Americans guess what “something is up.” That is the mentality that anything goes, this is a big country, let’s violated agreements, dealer contracts, territories, etc…. Doesn’t matter if they promised you repeatedly that they wouldn’t sell to your competition, you might have it in writing several hundred times, the Chinese mainland factories just want the sale. I know this is a stereotype and I know it’s wrong to put everyone in the same category, but its not a stereotype when it’s a non-official government policy which transcends into the business class as a whole. The unofficial policy is maximum profit at the expense of America, the American consumer, and the Powersports Industry. We are cannibalizing ourselves for our next hit and they are more than glad to push it on us. They will sell to your competition under a different name, they will deny they did anything wrong, and if that ATV they sold you results in a wrongful death lawsuit check the papers, they haven’t paid the insurance premiums in months.

So it’s a vicious circle. It goes back to the dealer complaining about the $1 difference on the throttle cable. I will never get the same price as a mainland exporter on a throttle cable, but they will also never give you service. You also have to pay taxes and play on the same playing field. It's unfair if a Chinese Scooter importer hides their parts inside the scooters when importing and doesn't declare them or if they avoid paying $30,000 in EPA certificates. The same rules have to apply to everyone so it's good to finally see NHTSA, EPA, and others cracking down.

The industry is in shambles. A lot of dealers have closed, a lot of distributors are gone, and this might not stop people from making false EPA certs, but at least they know in the USA sooner or later it catches up with you. It's hard for new companies to emerge and invest in new tech like "Vectrix" or new models like a new "Kymco" when we allow companies like Roketa to have free reign and destroy the marketplace selling below manufacturing cost. Dealers have a stake in a healthy industry and buying from other distributors that compete with you or undercut you is the first lesson they fail to see. The second is buying from legit vehicle makers. We support this and then when there is a consumer lawsuit or a lemon law return to your dealership for having sold a Tank, Redcat, or Roketa it's your own fault for having sold an inferior product other than a Kymco, TGB, or something a little better. Like they say "You get what you pay for."

This might be too much for the average repair shop to understand. The guy on the other line just wants to pay $11 for his cable instead of $12, but when he calls Tank scooters, United Motors, or the endless number of distributors that closed next week they won't be there. That's why you have to support the companies that play by the rules. If a price is too good to be true it usually is.

What can you do? Be smart, buy smart. I know you can’t compete with Pep Boys so don’t try to. You will go out of business selling cheap, cutting corners, betraying your neighbor. You might make money in the short run like Roketa, but in the end we all meet our maker.

From Dealer News
Importers of Chinese Motorcycles, ATVs Arrested
By Joe Delmont

Pair Charged With 70 Felonies; Certification Violations

Two top executives at Goldenvale Inc., a diversified California importer of powersports products, have been arrested and charged with illegally importing motorcycles, ATVs and other vehicles from China and selling the units in California without proper state certification.

Goldenvale president and owner Kening N. Ma and vice president Shirley Hyunae Ji were charged in a 70-count criminal complaint that includes conspiracy to commit theft, grand theft, and money laundering.

The pair were arrested last week, according to a published report in the San Bernardinto Sun newspaper.

The powersports products sold under the Roketa brand also include scooters, go-karts and other gas and electric-powered vehicles. The company, which operates facilities in Ontario, Calif., and Dallas, Texas, also imports items ranging from artwork and blankets to toys and cooking utensils. The company imported fewer than 2,000 powersports units last year, according to industry estimates.

The powersports units were sold on-line and through a national dealer network.

Prosecutors said dozens of victims purchased vehicles from Goldenvale that were not certified by the California Air Resources Board (CARB), the newspaper reported. The amount paid by victims ranged from several hundred dollars up to $4,000 for each vehicle, prosecutors said.

The vehicles are illegal to operate in California if they do not have CARB certification.

Ma and Ji are named in a complaint filed in San Bernardino Superior Court. Ma faces one count of conspiracy, 33 counts of grand theft, 30 counts of possessing a false or blank vehicle registration and six counts of money laundering, according to court records.

Ji is named in the counts alleging conspiracy, grand theft and money laundering.

The certificates of origin allow consumers to register their vehicles with the California Department of Motor Vehicles.

In this case, the certificates of origin show a manufacturer name that did not manufacture the vehicles, according to the newspaper. The vehicles also were never certified by CAB, according to the newspaper report.

These arrests culminated a multi-year investigation of illegal activities, according to one CARB official. JD

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