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.
PHOTO: TSENG HUI-WEN, TAIPEI TIMES
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 (
The A-Team -- comprising 21 member companies, including Cheng Shin Rubber Industry Co (
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 (
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.
Giant, which is now the world's No. 7 bicycle brand, was a pioneer in the industry, moving into own-brand sales in 1981.
The company faced a crisis that year when one of its main foreign clients suddenly pulled its orders, forcing Giant to transform itself at a time when "made in Taiwan" was associated with low-quality products.
Giant's strategy
Putting all your eggs into the "manufacturing" basket will not create a sustainable business, Liu said.
"Other than manufacturing, we now put great emphasis on all-round management, which applies to our brand, product design and marketing to our supply chain. This has allowed us to stand out from those who focus only on manufacturing or marketing," he said.
An industry watcher said that there are still hurdles to overcome if Taiwanese vendors intend to maintain their lead.
"Instead of focusing on refining mechanical details, they may want to look for more innovation in their product designs. It doesn't matter if these are premature concepts," said Han Goes, a managing consultant from the Netherlands.
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