Chapter 3 Bicycle Industry in China
3.2 Bicycle Industry Development in China’s Southern Region
Guangdong’s was 9% in 2010, ranked the fourth for the total production and its electric bicycle production was behind the top 5 provinces. Shanghai took the fifth position for total production.
The share of Zhejiang, Jiangsu and Shanghai in Central China in the total production in 2009 and 2010 was just even with Tianjin’s, around 43%.
Table 3-4 Bicycle Production of TOP 5 Provinces in China
Province imported mainly from Taiwan, Japan, Singapore, and Malaysia. Taiwan accounted 37% of total imports to USD117 million; Japan with 20% share of the total to USD63 million; Singapore with 18% share to USD 57 million; Malaysia with 14% share to USD44 million in trade values.
Guangdong and Jiangsu are two biggest importers, importing more than 85% of total imports.
The both imported mostly bicycles parts for assembling bicycles (Fu, 2010).
3.2 Bicycle Industry Development in China’s Southern Region
Before the establishment of People's Republic of China there was no one bicycle assembly factory in Southern region. In 1960 Guangzhou set up Guangzhou Bicycle Industry Factory, which produced two brands, Wu Yang and Hong Mian. By combining 22 bicycle parts manufactures in Guangdong Guangzhou Bicycle Industry Factory was reorganized by local government into Wuyang Bicycle Group. In 1995 Guangzhou Wuyang Bicycle Group was reorganized again to be subordinate to state-owned Guangzhou Motorcycle Group. The production of Guangzhou was highly effected by central and local government’s policies. Before
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the year 1990 Guangzhou Wuyang was still consider as a pronoun of Guangzhou Bicycle Industry.
3.2.1 Production of Guangzhou and Guangzhou Wuyang
The production of Guangdong Guangzhou and Guangzhou Wuyang from the year 1982 to 2007 is as presented in Table 3-5. The production of Wuyang Bicycle En represented as that of Guangzhou from 1982 to 1989. From 1990 Guangzhou Bicycle Enterprise’s production was increasing from 99% of total Guangzhou’s production to 8.5% in 2003. 1980s was the peak for Guangzhou Bicycle Enterprise (Komagata, 2011).
From 1980 government’s policy underwent institutional reform and all the SOEs had to take the profit and loss of running business sectors by their own. Guangzhou started to borrow money from banks and invested money and modern facilities from Japan and Germany into the production. In 1988 Guangzhou Bicycle Enterprise produced the highest volume since it was set up in the beginning. Then Guangzhou Bicycle Enterprise was allowed to do trading business with foreign buyers by setting a company in Hong Kong and was reorganized to Guangzhou Wuyang Bicycle Group by absorbing 22 bicycle and parts factories located in Guangdong.
Wuyang enjoyed the prosperous growing by running business without interference from the central government. However the advice from China National Light Industry Council to promote motorcycle’s industry in 1980s resulted in the motorcycle’s boom and accelerated bicycles’ replacement by motorcycles. The declining production of bicycles of SOEs in 1990s also happened in Zhejiang, Jiangsu, Shanghai and Tianjin.
In 1990s the central government declared that the large number of bicycles on the road caused conflicts between motorized and non-motorized vehicles. Guangzhou government adopted policies to decrease bicycle use. Guangzhou cut the bicycle modal share from 33.8% in 1992 to 13.3% in 2010 (Ma, 2004).
To increase the lost share of bicycle production of SOEs, in the late of 1980s Shenzhen Spatial Economic Zone was set up and Taiwanese bicycle manufactures were coming for building bicycle networks. In 1990s private bicycle parts enterprises increased and competed with Guangzhou Bicycle Industry Factory, causing the declining market share of Wuyang. The share of Wuyang in Guangzhou dropped from 99% in 1990 to 28.8% in 1999 (Table 3-5). In the
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mean time the state-own bicycle firm also faced the fierce competition from Taiwanese, Japanese and other multi-national bicycle enterprises and factories.
Table 3-5 Production of Bicycle in Guangdong, Guangzhou, and Wuyang
Year Guangdong
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3.2.2 Branded Bicycle Companies in Southern China
Shenzhen China Bicycle Company (CBC) was set up in 1985.4 CBC assembled the outsourced parts into a complete bicycle, in a way of which Chinese bicycle producers never used before. Emmelle and Diamond Back are brands of CBC. CBC obtained the investment from Schewinn and Hong Kong Da Huan Bicycle company and aimed at American market. In the beginning of 1990s, capacity of bicycle production of CBC reached 1.8 million sets, 85% went overseas market and 15% sold to domestic market (Komagata, 2011). This joint venture was viewed as a failure due to immaturity of development of bicycle industry clusters around the area.
CBC announced that its net profit for the first half of fiscal year 2012 to be RMB 33million in debt.5
Shenzhen Xidesheng Bicycle Co.; Ltd is a private bicycle manufacturer. Xidesheng is proud of its invented carbon components of bicycle parts and owns the brand “XDS”, which can be bought from 3000 dealers over the country. Aluminum frames are the main products for exporting items while steel frames are the main products for home market. Xideseng, Giant and Merida are three main branded suppliers of high-end mountain bicycles and road bicycles.
Xideseng sold two times of bicycles volume in 2011 than that in 2010 and made a big progress to have the same market share as Giant for domestic high-end bicycles (Table 3-6). Mountain bicycles accounts 50% share of Xidesheng’s total production, road bicycles takes 40% and the others bicycles 10%.
Merida was founded in 1972, starting bicycle assembly business as an original equipment manufacturer. Merida holds a 35% stake of American brand, “ Specialized,” and also sustained the brand “Centurion” in European market. In 2010 Merida acquired 30% of Japanese Miyata Cycle Co.’s share, which held the exclusive distribution rights in Japan for Merida bicycles (Beckendorff, 2010). In China Merida set up three factories in Shenzhen, Jiangsu, and Shandong.
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4The brand, Emmelle, is its brand in the global market,
http://www.moneydj.com/kmdj/wiki/wikiviewer.aspx?keyid=81a48941-5c9d-41e3-9dfd-27c606379bb7.
5The company cited the debt interest as the main reason for the loss of the first half of fiscal year 2012, http://www.reuters.com/finance/stocks/200017.SZ/key-developments/article/2572063.
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