The Development of Bike Industry

After entering the industrial society, bicycle becomes the first transportation tool in the world. In addition to the importance of transportation, bicycle has various functional demands for the public. During the period of colony, there are very few bicycles in Taiwan society; even the common components are imported from Japan.

However, Taiwan manufacturers change the status of excessively depending on Japan to locally implement in-house R&D for producing critical components and bicycles (Hsu, 2007). What is more, the industry is active to march forward the remarkable way of Original Design Manufacturing (ODM) and Own Brand Manufacturing (OBM). In the following parts, the industrial history can be divided into several phases of evolutional situations.

3.1.1 The phase of Japanese colony: 1930s-50s

During the Japanese colony, possessing a bicycle, meant being rich or powerful.

However, as for the poor, bicycle had been used to be a lucrative tool which was capable of earning money for raising his family. Almost the first batch of bicycles which was used in Taiwan came from some of famous Japanese manufacturers, such as Fuji, Kent, Large and Premier. In the later stage, facing the difficulties and inconvenience of the repairing and maintaining bicycles; therefore, some enterprising wholesalers, known as the Five Tiger Generals, started abundantly importing Japanese parts to Taiwan market (Hsu, 2007). However, the condition caused initiative

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components manufacturers to decrease or cease production. As for the budding bicycle industry, it seemed to be a crisis and a turning point.

3.1.2 Import substitution and subsequent stagnation: 1950s-70s

After the Second World War, for the sake of reducing the dependence on foreign exchange used for imports and of protecting the domestic bicycle industry as well, the government banned the importation of whole bicycles and twelve parts (rims, front forks, handlebars, frames, chains and hubs) in 1954 (Yan & Hu, 2008). Therefore, bicycle production maintained at around 30-40 thousand. However, four bicycle firms (Da-Tong, Taiwan Bicycle, Taiwan Machinery, and Wu-Shuen) couldn’t meet the demand of the public, then, the market was full of shoddy products flooded and undermined the original market structure (Hsu, 2007). Due to the low level of general customers’ income, the public tended to stress price rather than quality. To make matters worse, in 1962 the local manufacturers started to assemble motorcycles, which directly led to stagnant the bicycle industry. Therefore, manufacturers couldn’t help changing the local market to focus on enlarging the foreign markets.

3.1.3 The export drive and industrial consolidation: 1970s

In 1967, government organized the first International Cycle Show, which caused Wu Lien Bicycle Corporation to have the opportunities of exporting 500 bicycles to Indonesia (Hsu, 2007). As for American market, in addition to the String-Ray (High Raiser), the emergence of the BMX (the first generation mountain bike) marks the beginning of a new golden age for Taiwanese bicycles and the prelude to be second

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exporting country. Moreover, thanks to the coming of oil crisis, the American market brought lots of business, the phenomenon sped up the growth of Taiwan’s bicycle industry. That is the reason why exports sharply rose from 0.1 million to 1.32 million units. Nevertheless, the American government thought of protecting its local manufacturers, the anti-dumping case was filed in 1974. With the emergency of underground bicycle assemblers formed the image of low-end level, not only had the industry lose the market in Canada, but also American bicycle dealers refused to sell and repair bicycles from Taiwan due to the unsafe quality (Wei, 2006). In 1974-75 it was obvious that the export volume dropped to around 0.8 million sets. In order to improve the low atmosphere in bicycle industry, the government in Taiwan established a set of safety standards for bicycle firms and uses the standards to eliminate the sub-standard bicycles exported abroad (Chu, 1997). Consequently, with the shoddy bicycles disappeared, the image of the whole Taiwan’s productive quality began to obtain applause.

3.1.4 Industrial growth and upgrading: 1980s

In 1980, after undergoing the improvement of quality, being devoted to raise product image, and broadening the foreign market, not only did the export volume overtake Japan, but also Taiwan became the number one exporter around the world (Wei, 2006). It was indicated that in Table 3-1 the quantity of bicycles increased nearly constantly from 1978 to 1986, decreasing only in 1982, and reaching the peak of 1024 million sets. Nevertheless, the local currency, the New Taiwan Dollar, obviously appreciated against the US dollar during the later 1980s (Chu, 1997). The changing range, then, had greatly impact on production cost and on price advantage,

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so the export volume diminished. It was noteworthy to note that the rapid growth in the export quantity of Taiwanese bicycles did not go up with the average export price;

and to make matters even worse, the export volume even declined or went flat after 1987 (see Table 3-1).

3.1.5 Innovative capability and global marketing: 1990s and after

In 1991, although the export value amounted to 24.1 million dollars, the export share to American decreased to around 30% (see Table 3-1). It was the reason that the emergence of China and Southeast Asian countries in global markets, Taiwan bicycle industry faced the cut-throat pricing competition. Therefore, both the export volume and the export share to American slowed down. Even in 2001, the export volume declined to 460 million sets and the export share to American decreased to around 20%. For choosing toward high quality and value-added bicycles, domestic manufacturers, with the support of government, couldn’t help innovating new material (carbon-fibre) and key components (derailleur) for improving and raising high level of bicycle structure. Besides, considering lower labor costs, similar culture, and language across the Taiwan Strait, production factories were set up by lots of Taiwanese bicycle firms there, although the R&D and marketing work was conducted and high-end bicycles were still produced or assembled in Taiwan (Wei, 2006). That is, an obvious trend tends to set up factories in mainland China is inevitable. In order to maintain competitive advantages and to raise industry level collectively, the slogan “Order to Taiwan, produce in China, and distribute globally” became a better strategy existing in bicycle industry.

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Table 3-1 Exports of Taiwan’s bicycle industry, 1970–2005

Year

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2003 4,792,601 4,562,892 21,854,000 95.21 26.50 4.79 2004 5,200,000 4,957,822 26,034,000 95.34 24.40 5.25 2005 5,562,000 5,241,000 30,684,000 94.23 25.80 5.85

Source: Ministry of Finance (various years)

Figure 3-1 Average export price for Taiwan’s bicycles, 1970-2005