Market Talk

This week: a company profile of Taiwan OEM Merida; Hero Cycles acquires Firefox and rights to Trek distribution in India; the ‘Asia Bicycle Industry Alliance’ explained; Southeast Asian bicycle manufacturers growing business in western markets; global bike brands’ product managers nail down MY2017 planning in Taichung.CiQ header_1Market Talk is a collection of market intelligence from across the Asia-Pacific region selected to educate and inform anyone interested in understanding the APAC bicycle industry, its key players and the business behind the machines.


MERIDA COMPANY PROFILE

Merida Industry Co., Ltd. started out making bicycles for Raleigh in 1972. Though much has changed in the decades since, the Yuanlin (Taiwan) based manufacturer has consistently played second-fiddle to industry peer Giant Manufacturing Co. Ltd – though it has been experiencing faster relative growth than Giant in recent years. Last month, Merida published a company profile on Youtube which reviews the milestones achieved along the way. Unsurprisingly, there is no mention of its biggest OEM client Specialized, of which Merida is a 35% owner.

 

HERO CYCLES ACQUIRES FIREFOX

India’s Hero Cycles, the self-proclaimed ‘world’s largest manufacturer of bicycles’, purchased Firefox Bikes Pvt. Ltd (maker of ‘Firefox’ branded bikes and also exclusive distributor of Trek Bikes in India) in September this year in a cash transaction reported to be worth INR1’500’000’000 (USD22.6m). In reporting on the deal, national business broadsheet ‘Mint’ offered up some great insight on the local industry. Key takeouts below:

  • Bicycle sales in India have plateaued for a while now. Growth rates have been in single digits for five of the past 10 years, and the market actually shrank 3.24% in 2012-13. But the premium category has witnessed a 25% compounded annual growth rate between 2000-01 and 2014-15.
  • According to bicycle makers’ lobby All India Cycle Manufacturers’ Association (AICMA), only 90 out of 1,000 people in India own bicycles, compared with 149 out of every 1,000 in China and 400 out of 1,000 in the US.
  • In the last decade, the premium bicycle segment in India has started to take off. More than 200,000 leisure bikes were sold in 2014-15 in a market whose estimated size is 15 million bicycles a year. The growth in the segment is largely on account of customers taking up cycling for fitness, recreation and lifestyle reasons.
  • Firefox was among the first to enter this segment in India in 2005 and created a niche for itself. It controls 40% of the premium bicycle segment as of 2014-15.
  • In 2010, production of bicycles in China declined 13.2% to 76.06 million units. By 2013, the rot had been stemmed and production was at 82 million, as per data provided by the China Bicycle Association.
  • To be sure, much of China’s production—close to 60 million bicycles a year—is exported, according to AICMA. In contrast, India exports less than two million bicycles a year.

 

ASIA BICYCLE ALLIANCE INAUGURATED

In 2002, Taiwan’s largest bicycle manufacturers, Giant and Merida, initiated the formation of the ‘A-Team‘; beginning as a consortium of 13 manufacturers that sought to collaborate together to improve processes, competitive advantage, added value and innovation capacity of their respective firms. With support from the Taiwanese government, and with systems training from Toyota, Taiwanese bicycle manufacturers went on to establish a world-leading reputation.

China’s Bicycle Association (CBA) expanded upon the A-Team concept this year by inviting bicycle associations from neighbouring Asian countries to create the ‘Asia Bicycle Alliance’ (ABA). Representatives from China, India, Japan, Korea, India, Indonesia, Philippines, Russia, Turkey and Vietnam met at the ‘China Cycle‘ show (Shanghai) in May to hold their inaugural meeting, during which CBA Chairman Mr. Ma Zhongchao was voted in as Chairman.

According to a Bike Taiwan special report, the Alliance “was defined as an open, non-official, non-binding and non-profit platform to advocate and promote information sharing, and cooperation, facilitate technical progress, maintain industry security and develop industry culture. The ABA aims to play a significant role in the composition of a new chapter in the common development of the Asian bicycle industry.”

 

INDONESIA, THAILAND, LEAD SE ASIA INDUSTRY GROWTH

Japan’s Nikkei Asian Review has published an interesting report on the trajectory of Indonesia’s Insera Sena (maker of ‘Polygon’ branded bicycles) and Thailand’s LA Bicycle Group (maker of ‘Infinite’ branded bicycles).

In summary, the article determines the two companies, which started out as Original Equipment Manufacturers (OEM), wish to combat shrinking margins caused by rising wage costs and price deflation to focus more on their own brand of bicycles in the same way that firms like Giant and Merida have done.

Table: Nikkei Asian Review

Chart: Nikkei Asian Review

 

TAICHUNG BIKE WEEK: IT’S A WRAP

‘Organized by the bicycle industry for the bicycle industry’, Taichung OE Bike Week is just like any other bicycle exhibition – oh, except for the fact that wholesalers and the public are not allowed.

Spread across the floors of three well-trodden hotels in Taichung, the event is designed to allow product managers and suppliers from the bicycle industry the chance to see and discuss new components which will be bolted onto (or integrated into) new bicycles that will be released 1 or 2 model years (MY) into the future. In the case of Bike Week 2015, this means the composition of MY2017 bicycles are already being finalised by many brands in October 2015.

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