Demak shuts down: What could have happened to this promising Malaysian motorcycle builder?

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  • Demak motorcycles was a promising bike maker that specialised in building cheap bikes with Chinese sourced parts. 
  • It has been in operation since 2002 with a factory in Kuching, Sarawak, and later another factory began operations in Banting, Selangor.
  • It also had a factory in Sri Lanka. 
  • Demak even had the most favourable commission rates for its dealers. 
  • So what could have happened to this promising Malaysian bike maker? 
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It has been exactly a year since Demak invited us to witness the launch of their new motorcycle models including some commercial vehicles at their new factory in Banting.

A year ago, everything seemed nice and rosy for the company with a few hundred people attending the event, which was officiated by the then Deputy Prime Minister Datuk Zahid Hamidi. Read about that here.

But exactly a year later and the company’s fortunes seem to have gone south.

Photos circulated around the WhatsApp chat application, showing red paint tossed onto the official signboard at the entrance to the factory. Red paint is no big deal, but in Malaysian terms, that usually means that a person or company is in some sort of a problem. Usually a financial problem but we’re not making any speculations here.

Now a lot has been written about what has happened at Demak but it has all been speculative as is this article. But we will never really know unless an insider speaks up or a tell all official report is put out.

But of course, in the name of journalism, we made a few phone calls, spoke to some former employees, and even visited the factory in Banting and also the service centre in Batu Caves to see for ourselves. And yes, sadly Demak, the maker of affordable bikes for the people who need it most is indeed shutting down. The notice below was also posted outside of the service centre in Batu Caves.

So what happened? There’s some rumours flying around, but rumours until confirmed will remain rumours. But be careful about what you choose to believe, our friends at Mekanika have confirmed that rumours such as a law suit from Boon Siew Honda, financial loses, and even political interference is all untrue. You can read their report here.

But after speaking to a few former employees of the company, it seems that Demak simply could not sustain their business operations any longer.

Demak has always played on the price factor of their bikes, some of their models can be bought for as cheap as a little over RM3,000. But the only way to sustain a business model that plays the price game is to push for volume, economies of scale they call it. And though Demak used to export some of their products to countries like Sri Lanka, they simply could not sell as many bikes as was needed to make the business model work.

In fact, it is said that Demak even offers among the highest commission rates to its dealers. It is a fact that motorcycle manufacturers and distributors in Malaysia have always been under the mercy of the dealers. The dealers have an association boasting over 5,000 members, and if the association says it will not support a particular brand, a motorcycle maker will simply go the way of the dinosaur.

So when you sell your product for cheap and even pay the dealer good commission to sell your product, what then is left for you? Very little obviously. And that is supposedly what happened to Demak.

Apparently the company has been loosing money on the bikes it sold. And when the company tried to renegotiate the commission structure, the all powerful dealer’s association simply said NO!

The factory in Banting is huge, 260,000sq ft to be exact. It is the ultra modern facility that Demak invested in after realising that the only way they could probably make ends meet is to increase their production volume. The factory was able to produce up to 200,000 bikes a year. This was their second factory, the first one was in Kuching, Sarawak.

But even so, reports indicate that that Demak only managed sales figures of about 3500 – 4500 a month, or about 54,000 bikes a year.

It is said that the company then tried to turn its fortunes around by investing in the distribution of the famed Italian bike maker MV Agusta. But even that didn’t go very well, and the distribution of MV Agusta is now in a limbo as the parent company seems to have folded. But we will reserve speculating on that until we have more information.

Then there is another Demak factory in Sri Lanka, but due to local regulations which require parts to be shipped from China to Malaysia and then to Sri Lanka, thus increasing costs, the operations there too seemed to have gone south.

It is not entire clear what has happened to Demak and we will bring you more if there is any new developments. For now, it is a sad end to a company that had huge potential. Credit is due where it is deserved and we applaud their bravery to operate relentlessly even when the odds were stacked against them. During our recent visit we noticed hundreds of bikes lined up in the compound of the factory, we do wonder what would end up of them.