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<b>Taiwan 2007: </b>Double-Digit Growth in Europe

Sales & Trends

TAIWAN, Taipei – The Olympic torch is not the only fire blazing towards Beijing later this year. The entire world seems to be stricken with China fever, and heading into 2008 and the ‘year of the Panda’, Taiwan’s largest bicycle makers are starting to cash in on China like never before. Many long-supported factories are […]

<b>Taiwan 2007: </b>Double-Digit Growth in Europe

TAIWAN, Taipei – The Olympic torch is not the only fire blazing towards Beijing later this year. The entire world seems to be stricken with China fever, and heading into 2008 and the ‘year of the Panda’, Taiwan’s largest bicycle makers are starting to cash in on China like never before.

Many long-supported factories are finally becoming profitable, China’s domestic sales are taking off, and top makers – namely Giant, Merida and Ideal – are all increasing capacity. These days, the hot questions on people’s lips are infused with a boom mentality, like: can Giant really produce 10 million bicycles in 2010, as Giant CEO Tony Lo has surmised?

Along with a few adjustments in Western markets, China’s surge made 2007 a solid year for Taiwanese manufacturers, who’s top makers saw sales and production increase in the 20% range.

Taiwan Bicycle Exports by Country: Jan – Sep 2007

 
2007 Units
Change
2007 Value (US$)
Change  
2007 average
price (US$)
Change
 
 
 
 
 
 
 
NAFTA
476,798
-4.13%
185,203,763
8.52%
388.43
13.20%
U.S.A
415,683
-2.15%
161,090,407
10.96%
387.53
13.40%
Canada
53,141
-21.34%
22,778,786
-6.75%
428.65
18.54%
Mexico
7,974
60.18%
1,334,570
26.62%
167.37
-20.96%
 
 
 
 
 
 
 
EU
2,470,953
14.54%
392,536,929
25.68%
158.86
9.73%
United Kingdom
714,805
13.57%
94,286,396
27.69%
131.91
12.43%
Netherlands
325,494
56.00%
84,292,011
61.46%
258.97
3.50%
Germany
340,291
3.10%
61,130,380
9.18%
179.64
5.89%
Belgium
220,914
-8.74%
37,593,179
-6.23%
170.17
2.76%
Sweden
235,441
4.22%
22,433,291
9.38%
95.28
4.95%
Spain
111,720
54.07%
17,953,073
59.14%
160.70
3.30%
Denmark
101,581
17.88%
15,409,209
53.38%
151.69
30.12%
Italy
47,921
-32.10%
12,604,900
5.30%
263.03
55.07%
Poland
63,228
6.64%
8,392,837
0.09%
132.74
-6.14%
France
50,932
18.54%
7,738,796
76.72%
151.94
49.08%
Finland
60,912
32.20%
7,297,085
24.42%
119.80
-5.88%
Portugal
33,697
79.09%
4,886,510
42.51%
145.01
-20.42%
Ireland
42,334
80.68%
3,034,311
41.42%
71.68
-21.73%
Slovenia
24,974
49.31%
2,938,740
22.43%
117.67
-18.00%
Czech Republic
16,769
48.14%
2,882,588
17.92%
171.90
-20.39%
Estonia
19,682
68.89%
2,479,329
65.24%
125.97
-2.16%
Austria
9,567
9.90%
2,181,672
30.08%
228.04
18.36%
Latvia
12,259
35.77%
1,631,181
58.89%
133.06
17.03%
Greece
15,779
-18.32%
1,395,701
25.92%
88.45
54.15%
Hungary
14,209
-28.66%
1,300,593
-13.04%
91.53
21.89%
Slovakia
1,450
3.87%
242,303
4.48%
167.11
0.59%
Cyprus
2,067
5.19%
178,729
5.35%
86.47
0.15%
Lithuania
3,984
306.95%
152,068
51.36%
38.17
-62.81%
Rumania
553
77,199
139.60
0.00%
Bulgaria
390
104.19%
24,848
77.61%
63.71
-13.02%
 
 
 
 
 
 
 
EFTA
94,687
28.11%
31,170,943
43.05%
329.20
11.67%
Norway
67,733
33.34%
20,328,915
46.83%
300.13
10.11%
Switzerland
26,434
29.18%
10,767,158
40.92%
407.32
9.08%
Iceland
520
-80.39%
74,870
-75.34%
143.98
25.78%
 
 
 
 
 
 
 
Other major countries
259,175
10.92%
70,743,671
22.86%
272.96
10.76%
Japan
139,922
-4.01%
32,430,606
15.53%
231.78
20.36%
Australia
91,887
35.03%
30,545,825
30.58%
332.43
-3.30%
Korea
44,751
90.79%
17,011,615
112.37%
380.14
11.31%
New Zealand
18,861
3.55%
8,433,439
23.50%
447.14
19.27%
Russia
35,300
165.45%
7,860,720
152.47%
222.68
-4.89%
South Africa
7,002
-5.85%
3,634,533
15.73%
519.07
22.92%
Israel
7,993
5.97%
3,351,750
11.02%
419.34
4.77%
Brazil
5,399
0.22%
1,853,904
-3.72%
343.38
-3.94%
Ukraine
7,381
34.49%
1,652,813
66.74%
223.93
23.97%
Argentina
4,378
64.15%
1,293,866
89.58%
295.54
15.49%
United Arab Emirates
5,624
210.55%
761,087
306.06%
135.33
30.76%
Chile
3,972
63.59%
506,633
66.83%
127.55
1.98%
Rest of the Countries
42,325
-29.74%
9,169,732
4.31%
216.65
48.46%
Total
3,457,233
11.87%
727,418,158
22.62%
210.40
9.61%

Source: Taiwan Bureau of Foreign Trade, organized by Taiwan Bicycle Exporters’ Association

Financial reports

When the year-end financial reports are done, Giant will probably see factory revenues on both sides of the Taiwan Strait for the first time ever top US$ 1 billion (€ 681mn) – through November, revenues hit TWD 30.3 billion  (€ 645mn) – and total production at around 5.2 million bicycles.

Merida meanwhile also had a bumper year, in some ways even a little too good. Sales from its Taiwan factory are likely to total over TWD 10 billion (€ 213mn) when all the receipts go into the calculator, but a flood of orders last fall overbooked its Taiwan assembly lines – where the company produces much of its high-end – and the company had to scramble to meet demand that was around 10% higher than capacity. Still, for the first time in recent memory, Merida outpaced Giant in sales for at least two months of the year (March and April), and its average selling price remains high in the value-added range at above US$ 400 (€ 272).

So across the board, 2007 was strong for Taiwan. In the first nine months, Taiwan’s bicycle exports were up almost 12% to 3.45 million units, the highest total for the period since 2001, when migration to China was hitting hardest. Revenues were meanwhile up more than 22% to over US$ 727 million (€ 495mn), which is more than during Taiwan’s boom years of the late 90s. The average export price meanwhile is at US$ 210 (€ 143), the highest ever. And as huge as Giant’s China numbers were, the company will still draw about one-third of its income from its old workhorse Taiwan factory. This all after a slack year in 2006.

How good is the news?

So how good is this news, with the US economy possibly heading towards a recession, raw material prices still high, and predictions of inflation in China? For the moment the spirit of Olympic optimism is still (like George Bush) unimpeachable, and the prospect of growing sales in Chna is more than just Olympic dreams. For Taiwan’s cycling industry, even in the thought of global warming includes a vision that before the world fries to a crisp, demand for non-carbon-producing and environmentally-friendly bicycles will increase.

As for positive fundamentals, Europe’s economy is basically strong, the continent is far and away the strongest market for Taiwan-made bicycles, and inventories that were overstocked a year ago now need refilling. From January to September last year, the EU received 2.47 million bicycles from Taiwan, over 71% of the country’s total output. Sales for the period to EU buyers were US$ 392 million (€ 224mn). Both figures represented double-digit improvements over 2006. The top EU buyers of Taiwanese bikes were the UK (714,000 units), Germany (340,000), Holland (325,000), Sweden (235,000) and Belgium (220,000).

Taiwan’s A-Team strategy also continues to bear fruits. The Giant-led alliance brings around a dozen of Taiwan’s top bicycle assemblers and components makers into a closer working relationship, using Toyota’s inventory and ordering systems to increase efficiency. The World Economic Forum rated Taiwan first in ‘industrial clustering’ in 2007 (the bicycle cluster is in central Taiwan, near the city of Taichung). Giant has also used the strength of this base to expand its brand internationally.

North China

Growing demand in China is also proved a highly profitable reality for Taiwan’s largest manufacturers, with a new focus on the north China market. Merida reported last fall that all of its 17 China investments were profitable – it was the first time they could make this statement – and Giant said its Kunshan plant was finally in the black. Both companies invested heavily in new factories in north China. This production will feed the new capitalist spirit that has infused Beijing and its surrounding areas.

Giant invested US$ 12 million (€ 8.2mn) on its fourth China factory, this one in Tianjin, a rapidly industrializing port city just an hour’s train ride from Beijing. The 225,000 square-meter plant will go online this spring, with an initial capacity approaching 1 million bicycles, and scaling up to around 3 million bicycles in the next three years. Two of Giant’s other China factories are near Shanghai, with a third in the interior city of Chengdu. The Chengdu and Tianjin plants are the newest, and both will focus on domestic sales. The Tianjin plant will become a major center for production of electric bicycles. Giant sold more than 350,000 e-Bikes last year, most in China.

Merida also built a new China plant last year, its second. This one is in Dezhou in Shandong Province, another area in north China and with coastal access. The facility is scheduled to go online by summer, with capacity of 500,000 and eventually increasing to 1 million bicycles per year. This complements its half-million units a year plant in south China’s export zone of Shenzhen.

New costs

China’s changing regulations however made doing business there more expensive, especially for medium and small manufacturers. To lure investment, China had been giving tax rebates on exported goods for years, but on July 1, 2007, Chinese authorities greatly reduced these rebates on over one-third of the categories of industrial production once covered. This included bicycles (for more see the Market Report China on the next page). Taiwan’s large manufacturers were not greatly troubled by the changes, but said the new costs may merit slight price increases. Smaller factories may see more problems, as stiffer enforcement will also apply to the deposits they must keep in government designated accounts, and will limit cash flow.

Canada last year renewed anti-dumping duties on Taiwan and Chinese made bicycles, citing the EU’s existing duties as an example. Canada’s duties have now been in effect for nearly ten years with the surcharge at 10 to 64%. Taiwanese factories’ costs of exporting to Japan also increased with new set of safety requirements, the Sport Bicycle Association Approved mark. The costs were mostly attributed to the new, added costs of certification.

Home enthusiasm

Taiwan’s manufacturers are also getting more concerned about the home environment – and not just the business environment. Increasingly, they are promoting cycling at home for both health and the environment. Lobbying efforts by major companies have so far spurred Taiwan’s government to build more bike trails, which have increased from only 100 km ten years ago to over 1,200 km presently. The ranks of Taiwanese cyclists are also finding greater numbers of full-fledged enthusiasts, with the roughly 800 km circuit of the island considered a rite of passage for some. The trek was even celebrated in a well received Taiwanese film last year, Island Etude.

 

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