Siloed in the NE Asia market (with Indonesia an exception), UCC might well be the biggest bicycle brand you never heard of. Since inception five years ago, Universal Cycle Corporation’s year-on-year growth is modest in the context only a Chinese start-up in a country with 8-10% annual economic growth could truly relate to. So why isn’t UCC on our radar? UCC’s President Richard Lin and National Sales Manager Tony Wu elaborate over a RMB60 coffee*.
Audi’s market share in China’s luxury automobile market is the envy of its other export destinations. Consumer behaviour works differently over here.
Firstly, some background. What is UCC’s origin?
RL: Originally, we are from Taiwan. UCC was founded in 1990 with (Taiwanese trade company) Peakwheel & Co., Ltd. Personally speaking, I used to be a buying office for Giro Bicycle in the US. That’s how I got into the bicycle business.
How was the company structured initially?
RL: We started with Peakwheel and a couple of partners from Taiwan. Today there are 11 companies altogether, and I represent that group – UCC group. We joined with an assembly factory, a trading company, a saddle maker, a frame maker, fork maker (etc) so we organized a group to go to China and I’m in charge.
Given the diversity of the UCC group of companies, what other functions are carried out apart from manufacturing UCC-branded bicycles?
RL: We provide the global bicycle market with Original Equipment Manufacturing (OEM) into countries like USA, Canada, New Zealand, Australia, Japan and South Africa.
Specifically, what brands are you manufacturing for?
RL: We started producing for Avanti Bicycles in 1995. A long time ago! We work with Jamis, Raleigh and also supply REI, which is a US chain store. In Japan, we initially supplied Panasonic and we still supply to Louis Garneau. We work with one or two brands from any given country.
So, you have a whole group of manufacturers independently making parts and you say “well, let’s get together and make a bike, so we can secure the future”?
RL: Yes, that was always the strategy. We are like a family business – we all work together as a group, a family.
Speaking of family, I see a lot of Lins associated with UCC. How many family members are involved?
RL: Two; my brother and my son. My son Marco joined us five years ago after he graduated from University. Gavin studied in Japan for five years – he speaks perfect Japanese – and then one year in the USA, so his English is okay. I think Gavin always wanted to go to Japan. As a bicycle manufacturer, it makes sense. We buy Shimano components, and we’re also selling our bicycles into Japan. To know the language and the culture is pretty important.
Did UCC first start its bicycle production in Taiwan or China?
RL: Originally, we first looked into China to buy bicycles. But we couldn’t find anything that met our standard. That’s when we organized a bunch of people from the Taiwan bicycle industry, so we could be our own manufacture and produce what we wanted. A lot of people went to China for the cheap labor costs. At that time land was cheap, so a lot of people built huge companies and planned to produce volume.
UCC was never tempted to become a dominant market player in China?
RL: People think China equals cheap product. But why do the same thing as everybody else – produce cheap bikes in a mass-merchandise way? Then we are just one of many. We are really focused on a certain level of bicycle for the dealer market. I think UCC’s strategy is good. We don’t focus on volume. We have had steady growth until today.
A Taiwan-based company doesn’t set up in China unless financial advantages exist. What were the motives for establishing UCC in China?
RL: Labour costs in Taiwan were getting high, and there were not enough (factory) workers. Also the (political and trade) relationships between Taiwan and China had improved, so we were allowed to go into China to do business. That’s 20 years ago! We all (referring generally to Taiwan manufacturing companies) went to China looking for cheaper labour.
The income gap between China-based and Taiwan-based labour is closing though. Would you consider bringing production back to Taiwan if parity is achieved?
RL: Some manufacturing, yes. Research and Development maybe. But there are not enough workers. Many companies who went from Taiwan to China will go to South East Asia; Cambodia, Vietnam, Bangladesh. Brands are already moving in that direction. The China government recently announced at least a 15% wage increase every year. In five years, the current average salary will have doubled.
How many factories does UCC have in China?
TW: There are three in total. We set up two new factories last year; one in Guangzhou, the other in Wuxi
Back to the company history. When did the focus change from being an OEM to actually producing UCC-branded bicycles?
RL: Five years ago, we knew there was market potential for China. At that time I didn’t have any confidence, because I only had a name as a factory. Nobody knew UCC as a bike brand, so how could we sell it?
If their logo gives any insight, UCC plans to spread around the globe one major section at a time.
What gave you the confidence to push ahead?
RL: Tony Wu (long-time industry peer and owner of UCC’s China distributor, Rapid Trading) told me now was the time and the people at Shimano encouraged me. They could see the future potential. So I said, “okay let’s go into China with our own brand”.
Does UCC have a stake in Rapid Trading?
RL: That’s owned by Tony Wu. We have worked with Tony for five years since selling UCC bicycles in China.
How was the first year?
RL: It was tough. Tony managed a lot of racing in Beijing. People started to know UCC because we held a lot of bicycle races in China. But we had no bicycles to sell. At that time, I was 100% export.
How many bikes did you sell in that first year?
RL: Three or four thousand (units) in the first year – almost nothing! Now our product is more organized after five years. Tony is doing a good job. We concentrate on the marketing, and he knows the market needs. Also we are lucky the opportunity is there, so the last couple of years we really did a lot of promotion and we are getting well known in the market.
According to your website, UCC produced 450,000 bicycles last year. What’s the production split between UCC and the other brands it produces?
TW: 50,000 of those units are UCC bicycles, and more than 100,000 are Raleigh.
So what is the annual sales target of UCC bicycles in China by 2016?
RL: We are targeting 250,000 units per year by then.
Tell me about UCC’s product range. What categories are you focused on?
RL: Mountain bike is still a major market. We do believe the road bike category is growing but people who know about road cycling – those watching the Tour de France – demand known brands. The road bicycle market is coming, but not yet for us.
Mountainbikes make up 60% of UCC’s production – I’m expecting to see a row of road bikes at 2012 Tour of Beijing…
Where is the best-selling price band for UCC and how does that compare with Giant?
The cheapest Giant is RMB300 (EUR35). The cheapest UCC retails for RMB1,600 (EUR185). Our most expensive road bike retails for RMB15,000 (EUR1,725). We would sell several hundred of these road bikes a year. We also do a mountain bike priced at CNY40,000 (EUR4,600).
*Disclosure: Tony and Richard paid for my over-priced, but serviceable, hotel-lobby-issue doppio espresso.
Continued in tomorrow’s post: ‘UCC bicycles | the Avanti Bicycles connection‘
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I’m very curious if, over the course of time, there will come to be a detrimental consumer position based on the bottom-barrel pricing philosophy that seems to be implied in the interview, certainly not as a focal point of fault of UCC, but perhaps the overall manufacturing climate.. With so many pro-level improvements moving into the consumer market, at what point will it simply not be possible to profitably make a decent bicycle if differing economic factors allow someone somewhere to work even more cheaply? Not that a final reduced quality is the point to which it affects the people building the frames and the supply chain that feeds into the raw materials for this? How much more competitive can an industry become without cutting corners in terms of labor rights and environmental protections, neither of which are cheap but both of which are essential?
It’s an interesting question.
As you say, there’s an assumption that in order to keep decreasing the price of consumer products in a given category, there must be an increase in social and/or environmental hazard.
Instinctively, I assume most consumers will push back against manufacturers who they perceive are intentionally pursuing market share by exploiting society and the environment.
However, it’s often not so clear-cut with bicycles, which come with some potentially unique offsets.
For example, is it morally acceptable for a bicycle factory to pollute the environment to produce a product which can potentially lower the overall burden on the environment? Would at least some of those bicycle factories potentially be carbon neutral if we analysed both sides of that equation?
On the question of labor rights, should we accept that some factory workers should toil away for low pay in unpleasant (but not inherently unsafe) working conditions, if it means a larger % of a population elsewhere can afford to buy a bicycle, thus attaining a greater level of freedom and/or mobility to get to school, or find better-paid work, further afield?
I’m not saying I agree with the sentiment expressed above, just that there are several angles to the question of whether cheap bicycles are ‘good’ or ‘bad’ for consumers.
Ultimately, if we can personally afford to choose, it is our responsibility to be informed and only invest in companies who share our values. As society becomes better informed/educated, the worst offenders will likely be squeezed out.