It is by now well established that the majority of the professional peloton’s bikes come from factories in Taiwan as do most of the carbon road bikes on European shop floors. So why is China not getting its slice of the pie?
In 2014, 63% of global annual bicycle production (estimated to be 130 million units, including e-bikes) took place in China. If the bicycle industry were a pond, China would be the biggest fish in it.
Recent data from the China Bicycle Association (which gets additional information from the China National Light Industry Council and China Customs statistics), shows 2014 domestic production was 83.05 million units (of which electric bikes accounted for 35.51 million), representing a small (1.3%) increase from the previous year. 74.7% of all national bicycle production came from 433 “above-scale enterprises” which have annual revenues in excess of CNY20m (USD3m). Combined revenue for those enterprises exceeded CNY63Bn (USD9.8Bn), but profit margins were a lean 4.5%.
Naturally, not all bicycles produced in China stay in China. More than half the 62.653 million bicycles shipped off the mainland ended up in US, Japan and Indonesia; China’s three biggest export markets.
Representing 0.5% of all exports (by units), road bikes could almost be a rounding error in the data. In reality though, 299’000 road bikes are not immaterial. After all, if every UCI-registered professional road cyclist had three racing bikes, that would still only add up to roughly 10’000 bikes.
Despite that, Chinese-made road bikes are invisible on shop floors in European markets, let alone the roads of France or the cobbles of Belgium. Why?
There are two major reasons. Perhaps unsurprisingly, one is a reflection of what’s in the carton.
Let’s first consider the fact that a US- or EU-branded aluminium-framed road bike spec’d with a mix of 105 and Tiagra components will probably have an export price not less than USD400, regardless of whether it is produced in Taiwan, China or South East Asia.
Compare this to the average unit price of Chinese-made road bikes exported in 2014: USD170. Admittedly, this is a decrease of 44% from the previous year’s average unit price of USD305, but that still wouldn’t change the fact the average road bike exported out of China would only trouble the current 6.8kg UCI weight limit if it were doubled.
Giant Bicycles’ OCR 2600, which retails for USD400
The second issue is the European anti-dumping tax applied to Chinese-made bikes.
First applied in 1993, the protectionist tariff was a response to the huge volumes of cheap Chinese-made bikes flooding European markets. This threatened the livelihood of European bicycle producers, so a 30.6% anti-dumping duty was enforced by the European Commission, in addition to the usual sales and import taxes. The levy was renewed in 2005, but at the much higher rate of 48.5%. Controversially, when the European Commission decided to renew the anti-dumping duties for an additional five years in 2013, three Chinese companies were exempted: Oyama Bicycles and Ideal Bike had the duties waived altogether, while Zhejiang Baoguilai Vehicle Co. Ltd had its duty reduced to 19.2%.
Though this permitted some OEM brands (such as Fuji, an Advanced Sports International brand made by Ideal) to circumvent the significant tax, larger brands with Chinese production facilities such as Giant and Merida were left to wait it out until the next review in 2018.
The combination of manufacturing competencies (or focus on a given segment) and prohibitive levies means another decade could pass before European consumers can easily access a WorldTour quality Chinese-made and assembled road bike off the shelf.
Of course, framesets are a different animal, as they are just part of an overall assembly. To illustrate this, a look at the last 15 editions of Le Tour (below) shows the brand origin of bikes being used by the peloton. European and North American brands dominate, even though it’s common knowledge that many of the frames are manufactured in Taiwan or China. Merida and Giant proudly fly the complete-bike flag for Taiwan, but it remains to be seen whether a Chinese brand will establish a mainland presence in this elite bunch anytime soon.
China are serving the lower end of the market in big quantities however are not reliable and experienced enough in higher end bike production. I see two factors:
• Lack of experience in this segment – the knowledge is in Taiwan who have become innovators and leaders
• Not satisfying the expectations of the buying market (brands / consumers)
For the latter, the traditional manufacturing approach in China has been to produce as fast as possible for the lowest cost which is at the cost of quality. Instead the approach should be to increase the prices and spend more on R&D, Quality Assurance and attention to detail.
For change, it requires a change in mindset by Chinese manufacturers in this industry and also some serious lobbying to attract brands away from Taiwanese production.
I would argue there is considerable high-end frame manufacturing expertise in China; mostly in Fujian and Guangdong provinces. It is common for such facilities to be owned by Taiwanese companies.
While there may still be some mainland factories operating in a profit-at-all-costs way that negatively impacts quality, this is by no means the rule.
With the exception of 2014, the average unit price of Chinese-made bicycles has been trending up. Wage growth is one contributing factor, as is the trend towards producing higher-quality bikes.
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