Chapter 2 Bicycle Industry in the World
2.6 Summary
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In collaboration with Giant Taiwan, the Taipei city government initiated the Taipei Bike Sharing System Service Plan, known as “YouBike” since 1998. YouBike is a sub-system of MRT service.
Easycard, credit cards and cell phones are accepted as payment methods for YouBike rentals.
The bicycle sharing system is promoted by the model cities, and Taiwan government hope this system can be promoted to the whole island and Ministry of Transportation and Communication will build the bicycle lane network connected between cities through the whole island.
2.6 Summary
Concerning weather changing, starting the year 2000 France started to levy tax to companies and individuals for releasing carbon dioxide to force citizens to change their energy consuming habits. France has started purchasing electric bicycles since 2009. In 1993 the EU imposed anti-dumping duties on imports of bicycles originating in China since the European Bicycle Manufacturers Association (EMBA) alleged that Chinese bicycle producers were dumping in the EU. EMBA represents an industry that employs around 20,000 people, mostly in Germany and Italy. This is might be why bicycle industries in EU have not had to face challenges for 20 years from the cheap bicycles imported from China.
However it was not a case for electric assistant bicycles. EU’s members are highly promoting electric assistant bicycles in public use. Sweden, Denmark and Norway have already introduced carbon tax in its own countries. France intended to introduce a levy of 32 Euro for every ton of carbon dioxide emitted due to the pressure from the government. Germany and Italy are two main importers which imports Chinese-made electric assistant bicycles. France are planning to purchase 10 million electric bicycles for uses of government’s mechanic and state-owned companies.
The Europe of fifteen, the U.S., and Japan are the main consumers of oil. The emergence of bicycle using or ownerships is the clear evidence that bicycles usage is catching the eyes of the countries. Although hybrid vehicles and natural gas vehicles, recognized for good environmental performance, are already available these transportation can’t be moved without gasoline. Though the bicycle production in EU was not growing, bicycle ownership or usage rate are increasing rapidly due to the bicycle related policies which are widely adopted by EU and Japanese governments. Government concerns bicycles industry not only in the way about the industry development but also in the way to connect bicycle with people’s routine life.
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C HAPTER Bicycle Industry in China 3
China economic reform had introduced foreign investment and foreign advanced technological facilities and knowhow into its industry development. Bicycle industry is by no means with no exception. Komagata (2011) mentioned China as a top one world factory, bicycle industry ranked the second in terms of volume. Computers ranked the first and digital cameras ranked the third. In addition to its abundance labors and juggernaut attraction induced by domestic requirements to pull in the investment from multi-national enterprises. Although China’s bicycle industry was facing the anti-dumping duties imposed by EU, this won’t stop China’s step. The foreign and local producers are turning their focus on domestic market. In the following sections which will show the conglomeration of foreign enterprises and domestic enterprises is interdependent and can be distinguished by its different orientation toward overseas or domestic market.
The agglomerations locate in three regions, which are Northern, Central, and Southern China. Tianjin province leads and plays a vital role in Northern region. Flying Pigeon was the biggest bicycle producer in China as a state-owned company until 1980s. It is the icon of China cycling. The bicycle producers in central region such as Shanghai, Jiangsu and Zhejiang provinces are varied. Forever and Phoenix are two famous Chinese brands in Shanghai. Most of Japanese and Taiwanese producers set factories in Central China. Taiwanese Giant founded in Kunshan and targets the domestic market of Central and Northern China. Shenzhen in Guangdong in Southern China is the first place where most Taiwanese companies built the factories.
3.1 Production Export and Import of Chinese Bicycle
By presenting the outstanding data of production exports and imports of Chinese bicycle in this chapter, the bicycle industry development can be checked. In addition to the analysis of
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geographic movement and distribution on bicycle regions clusters, the panorama of Chinese bicycle industry movement can be seen.
3.1.1 Exports and Imports of Bicycle in China
China has been a biggest producer and has a biggest domestic market in the world (BMU, 2009). According to Fu (2010), the country exported USD2.6 billion worth of non-electric bicycles in 2008, an increase of 18 percent over the previous year. Overseas shipments in terms of volume, however, dropped by 4 percent to 57 million units. In 2011 the country exported 56 million units, 2.9 billion US dollars in terms of value in 2011(not including electric bicycles).
The average exporting FOB price went 16.1% increase than last year to USD52.
China’s bicycle exports consist mostly of mountain bicycles, which enjoyed 36% increase in terms of volume and 19% increase in terms of unit price to 261in light of Table 3-1. In 2011 only Racing and other bicycles (including children’s bicycles) had an increase of 36% and 6%
separately than the year 2010. However in terms of sales in value, the turnover went up for all items benefiting from the rising price of unit price for every kind of bicycles.
Table 3-1 Sales of Bicycles by Category
Item
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USA and Japan are two biggest exporting markets of China. The two countries took over 50 percents of total exports as displayed in Table 3-2. Exports volume in 2011 dropped 4% to56 million sets but exports value went up to 29 million US dollars comparing with the year 2010.
Exports to USA dropped 22% but the exports value dropped only 9% to 8.2 million US dollars, favored by an increase, 18% on average unit price in 2011. However the average unit price exporting to USA was USD55, which was less than Japan USD80.1, Korean USD70.8, Canada USD65.5, Australia USD76.2. The average unit price exporting to Asian countries except Korean remained around USD30-45.
Table 3-2 Countries Importing Bicycles and Parts from China
2010 2011 value Netherlands was biggest. U.K., Japan, Belgium, and Italy took separately 3 to 5% of total trade in terms of value. In terms of quantity the trade units in 2011 reduced 14% than previous year. In terms of value, e-bicycles exports increased 2% in 2011 compared with 2010. With respect to average unit price, it grew 18% to USD 285 (Table 3-3).
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Table 3-3 Top 10 Countries Importing Electric Bicycles from China
2010 2011
3.1.2 Production and Exports of Five Dominant Provinces
In terms of exports values of bicycles and parts in China, it grew 24% to USD4.4 billion compared to the year 2010. The complete bicycle accounted 59%, an increase of 22%, and the parts accounted 41%, an increase of 28%. Guangdong, Tianjin, Jiangsu and Zhejiang accounted almost USD4 billion with a share of 88% of total trade values. In terms of exports, the general trade took 58% of total exports to USD2.6 billion and the trade value of processing with imported materials took 40% to USD1.8 billion (Fu, 2010).
Bicycles production in 2010 and 2009 among five top provinces in China is displayed as presented in Table 3-4. The share of these five dominant provinces for bicycle production accounts for more than 95% of total production in China. Tianjin in Northern China remains the first for both items of bicycles and electric bicycles in 2009 and 2010. Tianjin took the share of 44% of the total production.
Zhejiang took the share around 22% in total production in 2011, ranked the second, but ranked the third in electric bicycle’s production. Jiangsu took the second position for electric bicycles production in 2009 and 2010 and ranked the third in total production. The share of
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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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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
Phoenix sold 49% to Jiangsu Meile, and now Meile’s President Wang is in charge of Phoenix