14 Dec 2015
Price and Quality sees Chinese Machinery Making Philippines' Inroads
Chinese-made products are growing in popularity in the Philippines, according to exhibitors at the China Machinery and Electronic Products Exhibition in Manila, largely as a result of keen pricing and rapidly changing quality perceptions.
Chinese-made products are slowly gaining a foothold in the Philippine electronics and automotive market. This is partly because the product quality has improved, but also because Filipino consumers' perceptions of China-made goods has changed for the better, at least according to exhibitors at the recent China Machinery and Electronic Products Exhibition in Manila.
In the power, automotive and electronic appliances industries, Chinese companies are now partnering with local distributors. This ensures a good after-sales services and the proper provision of spare parts, both of which are very important to Filipino consumers. Acknowledging this, Alex Ferrer, a Senior Manager with ETEPower (Philippines), said: "Chinese-made goods are slowly penetrating the local market, and now offering very good quality."
While many Filipinos still think that China-made products are mass-produced, low-quality products, Ferrer believes that this perception is changing, at least in the power industry. He said: "In the past, the Filipinos' understanding was that Chinese-made goods were inferior, largely as a result of bad experiences. More recent experiences, as well as recommendations from other users, have begun to change those perceptions".
While attitudes maybe shifting in the power sector, consumer education remains important. Highlighting this, Ferrer said: "The top-of-the-mind brands are Japanese, American and European, while Chinese-made products need to be introduced to the consumer. You need to articulate the product and for this you need presentation kits and persuasive selling."
Sales have been good over the past three years, and Ferrer expects to do better in the future, with the Philippine economy continuing to improve and more businesses being established, all of them needing power generators for backup energy. He believes the southern Philippines, in particular Davao, presents a real opportunity for generator sets as demand for power frequently outstrips capacity.
Rex Tan, Managing Director of Fujan-base Tide Power System, has been selling power generators to the Philippines for the past 10 years, seeing sales grow at a yearly average of 10%. He said: "Some customers did not like Chinese-made products before, but this has changed. They now accept them. They know from the market that the quality is going up and the workmanship is good, while the price remains competitive." Although American brands are still better-known than their Chinese counterparts, Tan said that they were more costly, with price-conscious consumers now opting for China-made products.
Charlie Lazaro, Managing Director of Manila's Susing Agro Teknika Corp, agrees that pricing is now the key factor in the Philippine market. He said: "When people need something, they go for Chinese products. When they want something – and they have more money for it – they go for brands from other countries."
According to Lazaro, who imports Chinese power generators, his market tends to be individuals, farmers and households with smaller budgets, rather than companies with big money to spend. He said: "Construction and manufacturing companies, for example, go for German- and Japanese-brand equipment, partly because they have strict deadlines to meet and would lose more if the equipment breaks down. The ordinary Filipino farmer, on the other hand, with a smaller budget and less investment, would buy a Chinese-made product."
Over the next five years, Lazaro expects China-made generators to dominate the power industry, as their quality continues to improve. He said: "They keep improving, and China is more aggressive than the Japanese and other foreign companies in terms of coming up with new designs."
As an importer, Lazaro said his biggest challenge was the entry of Chinese companies into the market, something would ease out middlemen like him. He is now also looking into solar panels, believing that renewable energy is the next trend in the Filipino power industry.
He said: "Right now, solar panels are still expensive because there are not so many producers. The cost is high and a return takes a long time. When the market develops, though, prices will go down. In five years' time, Filipinos will be able to take advantage of renewable sources."
The renewables industry in the Philippines would seem to be developing fast, with Steve Zhu, Sales Manager of Beijing's China Machinery Engineering Corporation, reporting growing sales of solar panels. He said: "The perception of Chinese solar panels is positive and the quality of the product is now very good. The price of Japanese, European or American solar panels is definitely higher than Chinese solar panels."
China-branded products are also making inroads in the trucking industry, according to exhibitors from JAC Motors and Qishu Heavy Equipment Corporation.
Sim Rama, Sales Manager of Hefei-headquartered JAC Motors, said: "Chinese trucks are taking a large percentage of the market. This is down to their competitive pricing and their overall improvement in quality. Sooner than we think, they will be on a par with the Japanese."
Japanese trucks currently dominate the Philippine market, according to Jayson Pineda, a Sales Engineer with Philipines-based Qishu. He also points out that even second-hand, Japanese trucks are still priced higher than new Chinese vehicles.
Explaining the current market thinking, he said: "Many Filipinos believe Chinese truck brands are not as sturdy as Japanese ones. I win them over, though, by explaining that our trucks have the same specifications as other brands, while also being new, cheaper and coming with a one-year-warranty. They like that – especially the warranty."
JAC and Qishu both have assembly plants and local partners in the Philippines, ensuring a high level after-sales services. According to both Pineda and Rama, this is highly important when it comes to convincing Filipinos to buy Chinese. Just two year ago, Rama says, even Filipino-Chinese businessmen would turn down his sales proposals. With Filipinos now seeing more Chinese trucks on the road, this perception has changed.
He said: "If there are a lot of Chinese trucks on the road, it means there are spare parts and that is where the battle is. Customers think about wear and tear, so the availability of spare parts – and their price – is hugely important."
The same factors – good after-sales service, the availability of spare parts, and a credible local partner – have been winning over consumers in the electronics industry, according to Marie Antoinette Bernardino from Concepcion Industries, distributors of China's Midea brand. She says that, while some Filipino consumers still baulk when told that Midea is a Chinese-made product, she can win them over by explaining that the price is cheaper and the warranty is better.
She said: "Filipinos want cheaper products, but with good quality. With very high electricity costs, another important factor for Filipino consumers is efficiency and energy saving."
Bernardino said that American-branded appliances are still the most preferred, followed by Japanese brands. Local brands come third, with Chinese brands in fourth place. Sales, though, have been improving since 2013, when Concepcion Industries began to handle the distribution of Midea products, and new models are steadily being introduced.
Focussing on one area where mainland suppliers are taking a lead, Bernardino said: "The one advantage of Chinese brands is that they come out with more models and innovations than any of the local manufacturers."
The China Machinery and Electronic Products Exhibition was held in the SMX Convention Center in Manila. According to the organisers, more 23,000 visitors attended the three-day exhibition.
Geoff de Freitas, Special Correspondent, Manila