Bicycle Industry Development in Central Region of China

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Table 3-6 Domestic Sales of Three Branded Companies

Company 2010 (10,000 Sets)

2011 (10,000 Sets)

Giant 163 200

Merida 30 60

Xideseng 100 200

Total 293 460

Source: JBPI (2012e).

The capacity of Merida in China is 50,000 units per month and the average unit price of Merida bicycles increased by 13% on Chinese market in 2011.⁶ Merida’s revenue was NTD24.38 billion in 2012, up 21% from NTD20.16 billion in 2011, favored by expanding market in China (Schaik, 2013). To expand its e-bicycles production, Merida opened a facility in Germany, aiming at the final assembly of Merida e-bicycles in 2011. The new storage has capacity of 80,000 units.

3.3 Bicycle Industry Development in Central Region of China

Shanghai, Jiangsu and Zhejiang would be three areas in central region where bicycle industry cluster grew prosperous. In Jiangsu over thirty Taiwanese bicycle manufactures came to set factories in Jurong. In Kunshan located the famous branded companies, such as Giant, and Goodbaby (GB). Taicang has absorbed more than one hundred bicycle producers to set the production lines.

Zhejiang Taizhou city and Huangyan are two areas for e-bicycles clusters since the state-owned Gianjiang Motor is located in Taizhou. E-bicycle Enterprises are originally motor’s manufactures and turn into producing e-bicycles because government’s promotion and the similar mechanical structure between e-bicycles and motorcycles. E-bicycles can be propelled by

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6 Merida has seen its global revenue surge 23% in the first ten months of 2011, http://www.bike-eu.com/Sales-Trends/Business-trends/2011/12/Merida-Doubles-Sales-in-China-BIK005505W/

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human pedaling assisted by a battery or viewed as a scooter propelled solely by electricity with perfunctory pedals.

The policies of Shanghai Bicycles Company created the bicycle industry clusters, which was called “Economical Horizontal Integration”. The development of state-owned Shanghai Bicycles Company had deeply associated with the rise of the clusters in Zhejiang and Jiangsu. It turned out that state-owned company receded from the market’s share and the foreign joint ventures and private local enterprises prospered.

3.3.1 Development of Bicycle Groups in Shanghai, Zhejiang and Jiangsu

The state-owned brands, Forever and Phoenix run by Shanghai Bicycle Group, were produced by horizontal integrated bicycle manufactures in Shanghai in light of Shanghai government’s policy to strain unbranded bicycle output. Due to the increasing of southern China’s bicycles into the market of Shanghai and the severe competition between Shanghai branded bicycles, the needs of Shanghai branded bicycles started falling. Phoenix and Forever started cutting brand authorization for bicycle manufactures to decrease the output and stock of branded bicycles (Komagata, 2011) .

In 1986 integrating different sectors from 27 provinces, government departments, to business sectors, Forever Bicycle Group was founded, so did Phoenix Bicycle Group formed from 43 companies of 14 provinces. These two groups were separated from Shanghai Bicycle Group and run the business independently administered under China Light Industry. Forever Bicycle was inflicted 0.32 billion debt burden till 2000, and merged by a private firm, Shanghai Zhonglu Group Co., Ltd (Zhang et al., 2012).

Phoenix struggled with recovering output to 4 million sets in 2003. The share of export in 1995 25% was getting higher and higher to 75.5% in 2003 (Komagata, 2011). In 2005 Phoenix Group was conveyed to State-owned Assets Supervision and Administration Commission of Shanghai Jinshan District and then renamed to Jinshan Development and Construction Co., Ltd.⁷ In 1992 under China’s Open Door Policy, that Taiwan companies can set up factories based the ________________________

7 Shanghai Light Industry Holding Company transferred the stakes of Phoenix to Jinshan Development and Construction Co., Ltd., http://www.moneydj.com/kmdj/wiki/wikiviewer.aspx?keyid=d25be694-7cd6-4ebe-b0db-8c5d4b757312.

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form of joint ventures., Giant Taiwan cooperated with Phoenix Bicycle Group to set up a new bicycle company, Shanghai Giant & Phoenix Bicycle Co., Ltd., with brands, “G & P” and

“Gianix”.

According to Zhang et al., (2012) in 1979 the share of three brands, Flying Pigeon, Phoenix, and Forever occupied 48.2%, almost half of whole country’s market. In 1980s supported by horizontal integrating policy, the bicycle producers in Shaoxing, Jiaxing and Hangzhou of Zhejiang grew prosperously. Shaoxing and Hangzhou Bicycles cooperated with Phoenix; Jiaxing cooperated with Forever. Shaoxing can produce branded bicycles and was authorized to sell Phoenix bicycles. The quality of Shaoxing was getting better and better after the instruction from Shanghai Phoenix and started exploring new items, such as small wheel bicycle (20” or 16”of wheel size), and mountain bicycles. In 1988 Shaoxing attended bicycle exhibition and started exporting bicycles.

In terms of Jiangsu, it was Wuxi Changzheng Bicycle and Changzhou Golden Lion Group cooperated other parts factories and produced Phoenix bicycles under the instruction of Phoenix. Forever set Suzhou Forever Co. Ltd. in Suzhou (Komagata, 2011).

3.3.2 Bicycle Components Companies in Central China

Shanghai’s “Economic Horizontal Integration” provided chances for bicycles and parts producers to develop in the neighbor Zhejiang and Jiangsu by offering technical supports and sharing sales route. Here are two bicycle components companies, which were partners of Phoenix and state-owned companies and then turned out to lead their own business to the global market without government’s support.

In the beginning Jiangsu Meile Rim as a joint venture, cooperated with Taiwan investors.

The president of Jiangsu Meile worked in Danyang state-owned rim company until 1990. In 1993 Meile was founded and had the president to help the rim business. Meile developed into Jiangsu Meile Holding Group. In bicycle industry Meile consisted of Jiangsu Rim Co. Ltd., Miller Jiangsu Hua Long Spokes Manufacturing Co. Ltd., Jiangsu Meiya Chain Co., Ltd..

Phoenix sold 49% to Jiangsu Meile, and now Meile’s President Wang is in charge of Phoenix under a contract of 15 years with Phoenix from 2010 (BMU, 2010).

Another bicycle component company is Ningbo Jialong Industrial Co., Ltd. Jialong began business as a county-owned firm and cooperated with Taiwanese to establish a pedal factory

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(Komagata, 2011). Later Taiwanese drew out capital and Jialong became a 100% local firm. As the biggest pedal manufacture, Feimin is Jialong’s brand and accounts 30% of global pedal market. Jialong also manufactures headsets and bottom brackets (BMU, 2006).