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Restructuring & upgrading seen in China's bike industry
Last Updated(Beijing Time):2007-07-18 14:21

By Kang Hua

In recent years, China's bicycle industry has been developed rapidly. In 2006, the total bicycle output has reached 85 million across the country with the export of 56 million, which accounted for 70 percent of the world bicycle trade volume. Electric bicycle industry has grown rapidly during the recent five years, and the annual sales reached 19.5 million in 2006 with an increase of more than 60 percent compared with that in 2005. Seeing the change from heavy bicycles and light bicycles 10 years ago to sport bicycles and folding bicycles today, we can find the quality level of bicycles is increasingly high. Electric bicycles also have developed from only one or two old simple types in early time to nearly 100 styles of luxury, light motorized and high-grade lithium battery at present. Big change and rapid update shaped the first feature in the bicycle market.

With the rapid development in the electric bicycle industry and the elevated social purchasing power, the market demand for bicycles and electric bicycles has undergone new changes. The market competition also has evolved from the competition in production and price to the high level competition in business technical strength, product quality, brand influence and so on. A reporter recently interviewed Gong Xiaoyan, the chairman of Tianjin Bicycle Industrial Association. In her view, Restructuring and upgrading are being launched silently in three aspects in China's bicycle industry.

Leading enterprises expanded and strengthened further

By the end of 2006, the bicycle industry in Tianjin has achieved sustained and stable development for seven consecutive years. Last year, the total output of bicycles and electric bicycles in Tianjin reached 46.323 million, accounting for 44.3 percent of the total yield in China.

Gong Xiaoyan told the reporter that some bicycle enterprises with strength have upgraded quickly in technological innovation, production capacity and other aspects in the past two years. It shows three characteristics: Firstly, the capital input was increased generally to strengthen the technical transformation of enterprises and reinforce enterprises' productivity significantly by upgrading enterprises' technical qualification. Secondly, on the basis of strengthening the technical transformation of enterprises, close or half-close supply chains around enterprises were created through the cooperation with enterprises supplying motors, batteries and plastic jackets and technology research and development agencies to promote their market competitiveness significantly, and to make them leaders in bicycle industry with annual output rise to 200,000 to 500,000 bicycles. Thirdly, intensive production bases were built up by strong players' alliance.

Alongside the strengthened power of enterprises, in order to guarantee their core industries can be developed continuously, there is no doubt that the whole supplying chains must operate surround the core business of the enterprises and thus the whole industry chains are integrated, ultimately control the upstream and downstream resources of the whole industry chains, thus to really master the flow of information, capital, warehousing and logistics, effectively reduce inventory and costs, and improve operational efficiency. Therefore, this change will certainly accelerate the entire bicycle industry's restructuring and upgrading.

The pace of industrial restructuring and upgrading was accelerated.

The market research conclusion of Horizon Research Consultancy Group shows that currently domestic bicycle market has become saturated while two of thirds of the products rely on exports. And the output of electric bicycles has reached over 20 million while the market demand remains a considerable room. The electric bicycle market demand curve will not reach the saturation area until the output of production increases to 40 million. And it will spend 5 to 10 years on arriving to the stagnation area for the production and marketing as Horizon Research Consultancy Group forecasted. That is to say, the market status is still optimistic in the next five years at least.

However, according to the analysis from the Tianjin Bicycle Industrial Association, the situation is not so optimistic. Gong Xiaoyan stated that under the current volume and rate of production incremental, it will not spend five years when the output reaching 40 million. According to the statistics provided by Certification Center of China National Light Industry Council, there have been 2,095 enterprises applying electric bicycle production permits. Taking 20 million as a total output of the industry, every enterprise is expected to produce less than 10,000 bicycles. As the domestic motorcycle industry and home appliances industry as a whole will accelerate their paces entering into the electric bicycle market, the capacity expansion will lead a fiery market competition. Moreover, with the continuous rise in prices of production materials, the gradually increased production costs and the gradually reduced profit margins, especially the gradually concentrating of the production to the dominant companies, the situation will increase much pressure to the SMEs in competition. According to the forecasting from China Bicycle Industry Information Center, the enterprises with an annual sale of 40,000 currently have been at the break-even point while the SMEs with an annual sale volume of 20,000 to 30,000 are facing challenges.

The pace for product innovating and quality elevating was accelerated.

In last decade, with the continuously rapid development in bicycle and electric bicycle industry, the overall technical level in this industry has improved significantly, which has made the renewing rate, the intensity of independent innovation and product quality levels in terms of bicycles, electric bicycles and spare parts significantly improved. Take bicycle products as an example, there has been a quickly change from heavy bicycles and light bicycles 10 years ago to sport bicycles and folding bicycles today, and we can find the quality level of bicycles is increasingly high. Electric bicycles also have changed from only one or two old simple types in early time to nearly 100 styles of luxury, light motorized and high-grade lithium battery at present.

At present, as the continued production expansion and the increasingly intensified market competition, some power-oriented enterprises have started focusing on upgrading the technical level of enterprises and the quality level of products and set up their own research and development centers on the basis of stabilizing their production scale in order to consolidate and expand their market shares and enhance the competitiveness in domestic and international market. Meanwhile, product research and development activities have become increasingly active, new types of bicycles, electric bicycles and bicycle parts were actively developed through the introduction and application of new technology, new materials and new techniques. 
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