Fri, Mar 10, 2006 - Page 12 News List

New thinking revives bike firms

COMPETITION Taiwan's bike makers faced a bleak future when Chinese firms began offering cheaper products, but moving into the own-brand business has changed all that

By Jason Tan  /  STAFF REPORTER

Workers at a Giant Inc bicycle plant assemble bikes in this photo from December last year. Following a strategy to internationalize its manufacturing, Giant has set up production lines in Kunshan, Shanghai and Chengdu in China, in Holland and in Taiwan. Of the 80,000 bikes produced annually in its Taiwanese factories, which focus mostly on high-end products, 90 percent are exported.

PHOTO: TSENG HUI-WEN, TAIPEI TIMES

About five years ago, a cloud of pessimism hovered over the local bicycle industry, with every manufacturer and component supplier feeling pain from the increase of manufacturing in China.

Lower production costs and larger volumes across the Taiwan Strait raised the threat that China would replace Taiwan as the new "Bicycle Kingdom."

"At that time, we couldn't compete with our Chinese counterparts at all. The future was bleak," King Liu (劉金標), chairman of Giant Inc (巨大機械), said on Wednesday.

Liu was speaking on the sidelines of the 10th International Bicycle Design Competition, held in conjunction with the 2006 Taipei International Cycle Show.

Giant, along with Merida Industry Co (美利達), decided to put their business rivalry aside and joined forces with component suppliers to brainstorm for a solution. This led to the establishment of a consortium called the "A-Team" in 2003.

The A-Team -- comprising 21 member companies, including Cheng Shin Rubber Industry Co (正新橡膠) and Lee Chi Enterprise Co (利奇) -- aims to bring bicycle component suppliers and makers together to develop brandname products that offer higher added value.

With help from automobile manufacturer Kuozui Motors Ltd (國瑞汽車), the A-Team used automobile production methods to facilitate the manufacture of bicycles.

"We had to give up on products that offered lower economies of scale, and instead dedicated energy to the development, marketing and channel management of products with more added value," Liu said.

Back in the saddle

This bold move helped put the industry back into a leading position, as statistics from the Taiwan Bicycle Exporters' Association (台灣區自行車公會) show.

Taiwanese firms exported a total of 4.6 million bicycles last year, a significant drop from the 7.53 million sold overseas in 2000.

However, the export value last year hit US$918 million, jumping from US$821 million five years ago.

The strong result is attributed to higher selling prices, which averaged US$199.63 per unit last year, compared with only US$109.02 in 2000.

In contrast, statistics from the China Bicycle Association (中國自行車協會) indicate that bicycle production across the Strait reached 53.57 million units last year, up nearly 40 percent from 32.86 million in 2000. Average unit prices stood at US$32.65 last year.

Merida, the global No. 17 bicycle brand, is a case in point.

Even with stable shipments of around 500,000 units for the last two years, revenues increased by 17 percent last year from the previous year, and 23 percent in 2004, thanks to higher selling prices.

The firm moved into the brandname business in 1987, in an effort to step away from contract manufacturing.

"We knew that without a superior brand image and proper channel management, we wouldn't be able to sell our products at a higher price and boost revenues," said William Jeng (鄭文祥), a senior marketing executive at Merida.

The company's move into the brand-name business only began to bear fruit in 2001, by which time it had extended its foothold into more than 30 countries and began to report higher sales growth.

"Building up our own brand has meant traveling a long, winding road, and over the past few years we have seen a lot of other companies drop out half way," he said.

However, this should not discourage component suppliers and contract manufacturers from establishing branded business, as this will create more value for them over the long run, he said.

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