China Slowly Becoming a Larger Market for High-End Bicycles

This is an article that was recently published in the Bicycle Retailer on the Shanghai Cycle Show in April.

SHANGHAI, China—Despite air traffic problems in Europe due to volcanic ash that forced the delay of some European company executives, the Shanghai show enjoyed strong turnout with exhibitors representing thousands of factories from China and Taiwan.

The April 27-30 show was considerably bigger than the Taipei Show held a month earlier, but focused on mass- produced lower-end bicycles and parts. Taking center stage were electric bikes. Attendees had the opportunity to test ride the e-bike President Obama was presented with on his last visit to China.

The e-bike category has seen amazing growth over the last few years and it is one of China’s most competitive indus- tries as evidenced by a hall allocated to the category. The Chinese e-bike indus- try boasts a volume of more than 20 mil- lion units a year.

Chinese e-bike exports are on a steep growth curve, especially in the United States. Within a short period of time, electric bikes have grown to become a global industry worth over $11 billion.

Attracting quite a bit of attention was this Harley Davidson-style bike made by Chinese company Dijiya

Also propelling the bike industry in China is a cycling-for-leisure explosion. The Chinese have more disposable income and are developing an interest in traveling to explore their country. This is evident in the proliferation of cycling events throughout China such as the recent Yellow Mountain (Huangshan) MTB event with more than 500 competitors. With the increase in cycling events comes the demand for higher-end bikes. Fueling the growth of bike events in China is an ever-increasing middle class population. And the Beijing Olympic Games has further inspired the Chinese to participate in more sporting events. Also stimulating demand for bicycles is the need for environmental conservation and energy savings. Domestic sales aside, with a great deal of manufacturing taking place in China, the fluctuation of its currency has a direct impact on product pricing. A large number of buyers from around the world could be placing their orders now to stock up their inventories for later in the year given the pending revaluation of the Chinese RMB. Not only will the revaluation impact prices, but China’s current labor crisis is contributing to wage increases that will have an impact on the bicycle industry worldwide. “Raising the value of the Chinese yuan will affect the cost of bikes and bike products as most brands outsource from China,” said Eric Koh, director of Specialized Bicycles China. “Apart from labor costs, which have been increas- ing regardless of the exchange, material costs would also affect the final cost.”

These factors could result in a price increase of nearly 40 percent for companies sourcing bike parts from China. Combined with longer lead times, this may encourage a number of international companies to outsource their products to other low-labor cost countries. Still, China is a growing market where global companies need to channel their energies with their marketing strategies. With the Chinese earning more and seeking out leisure activities including cycling, they will become discerning buyers of higher-end bicycles and parts.

President Obama's E-Bike

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