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Up Cycling

The increased interest in cycling is providing an opportunity for domestic brands to grab a piece of the high-end bicycle market long-dominated by foreign brands

By Xie Ying , Li Mingzi Updated Mar.1

There are more than 20 steps to assemble and pack a new bicycle (Photo by Li Mingzi)

Chinese netizens were shocked when media reported a Hermès bicycle priced at 165,000 yuan (US$24,265) had quickly sold out in Beijing and Shanghai and the sellers needed to have product delivered from France to meet the demand on the Chinese mainland.  

According to the Hermès website, the Odyssee Terre model bicycle weighs 14 kilograms and has four-speed gears. It has a frame made of ash wood, aluminum and a Hermès-embossed leather saddle.  

When some netizens exclaimed they would rather spend this amount of money on a car, media reports revealed that the supply of high-end bicycles, including mountain, road and fixed gear bicycles, is constricted in China following a cycling boom spurred by transportation restrictions during the Covid-19 pandemic and the growing popularity of personal fitness.  

According to leading bikeshare app Meituan, when the first Covid-19 wave was quelled in April 2020, daily bike use had quadrupled compared to pre-pandemic numbers. Data from popular fitness app Keep saw over 400,000 cyclists register by March 2022, an increase of 34 percent compared to 2021.  

Bicycle producers and sellers are benefiting. Data from the China Bicycle Association shows that in 2021, the bicycle industry was among the slim number of light industries whose growth in value added exceeded 30 percent, much higher than the national average of 18.4 percent. During the Labor Day holiday in 2022 (April 30-May 3), sales of bicycles on Taobao, China’s biggest e-commerce platform, grew by 50 percent year-onyear, and data from JD.com, another leading Chinese e-commerce platform, showed that orders related to cycling grew by 240 percent year-on-year during the “618 Shopping Festival” between May 23 and June 20.  

The high sales growth came largely because of sales of higher-end road and mountain bikes, dominated by imported brands. Although Chinese domestic brands like Phoenix, Forever and Flying Pigeon which make bikes for daily use have shifted focus to high-end bicycles, their laggard development in parts like gears and derailleurs – the mechanism that shifts the gears by moving the chain between the cogs – has prevented them from competing with their foreign rivals. Domestic brands, both legacy and emerging ones, are trying many ways to catch up. 

Cyclists take part in a 100-kilometer ride around Thousand Island Lake, Chun’an County, Zhejiang Province, November 2, 2022 (Photo by VCG)

Shifting Gears 
“This summer, cyclists crowded in each lane along Chang’an Avenue [Beijing’s main axis road]. It looked like a big pot of dumplings jostling in the water,” Alex, a cyclist in Beijing who likes to cycle at night, told NewsChina. He said the cycling club he joined last year has seen its membership rocket from four last year to currently over 100.  

“More and more people now enjoy taking in scenery and pushing themselves [to go further] when they go cycling,” he added.  

In January 2022, a survey from cycling site Biketo.com revealed that China’s user rate of mountain bikes, which are more versatile and cheaper than good quality road bikes, dropped from 65 percent in 2017 to 48 percent in 2021, while the user rate of faster and lighter road bikes surged to 74 percent in 2021, ranking first, followed by mountain bikes and folding bikes. Meanwhile, the survey showed that a growing number of middle-aged people are taking up cycling, while 91 percent said that they cycle to keep fit and healthy.  

The demand change means people are spending more money. The Biketo. com survey showed that following the pandemic, the number of people willing to spend more than 15,000 yuan (US$2,200) on a bicycle had grown, and a quarter of those surveyed had spent between 15,000-30,000 yuan (US$2,200-4,400).  

“A several thousand-yuan bicycle is only for beginner cyclists, and those priced at 30,000-50,000 yuan (US$4,400-US$7,350) are mid-market. High-end bicycles often sell for more than 100,000 yuan (US$14,700) and really luxury ones for around 200,000 yuan (US$29,400),” Alex said.  

“Bicycles represent one’s individualism like other fashionable products... That’s why British brand Brompton with its bike-matching outfits is so hot in the domestic market,” Zhixi, a cycling blogger, told NewsChina.  

While Brompton’s range of city folding bikes is popular, US brand Trek, which sells a range of expensive sport bikes, is selling out too. “We have too many buyers this year,” Ikona, a salesperson in a Trek store in Hangzhou, Zhejiang Province, told local paper Qianjiang Evening News in July. “Buyers now need to wait nearly two years to get a 6,000-7,000 yuan (US$880-1,030) road bicycle and more than three years for a 20,000-yuan bicycle (US$2,950),” he said. 

“We’ve ordered 1,500 bicycles below 60,000 yuan (US$8,820) from Trek’s headquarters, but those orders are all backed up. Many of these orders have been pending since the beginning of 2022,” he added.  

Taiwan-based Merida, which manufactures in Germany, the Chinese mainland and Taiwan, is also selling out. Fang Chao, manager of a Merida store in Hangzhou, told the same newspaper that their store’s best-selling road and mountain bikes were out of stock and new buyers have to wait for at least three months.  

Other high-end mainland brands like Heilongjiang-based Pardus are in the same position. Kong Lingman, Pardus’s regional manager in charge of the northern China region, told NewsChina that their sports bicycles are in short supply and that their plants have racked up back orders through 2023.  

“We could only take pre-orders since the end of 2021 for both domestic and overseas markets since we have nothing in stock. Buyers have to wait two to three months on average,” Liu Zhiquan, brand marketer for SEKA Bike, a Shanghai-based sports bicycle brand, told NewsChina. 

The surge in demand, according to media reports, has even seen used highend bicycles from renowned brands like Brompton change hands for much more than their original price.  

Despite the supply crunch, manufacturers are eyeing more development in what they deem is a market ripe for expansion.  

“Leisure cyclists account for less than 1 percent of the total Chinese population, much lower than the 40 percent in the US and European countries. It means the market in China has vast space for development and expansion,” Wang Chunqing, general manager of Shandong Taishan Pardus Composite Materials told NewsChina, who predicts the supply shortage may last three years. 

Narrow Road 
According to Wang, the severe shortage of high-end bicycles hinges on supplies of derailleurs. Japanese cycling component company Shimano and Chicago-based bike component company SRAM dominate the derailleur market.  

Media reports said that affected by the pandemic, Shimano’s plants in the Philippines and Singapore were shut down for some time, and because plants in different countries produce components for Shimano derailleurs, the entire supply chain was disrupted. “We bicycle manufacturers are always waiting for core parts to arrive,” Wang said.  

China’s domestic manufacturers still cannot fill the gap.  

Often dubbed the “kingdom of bicycles,” China remains the world’s biggest bicycle producer and exporter. Data from the China Bicycle Association shows that 60 percent of the bicycle trade worldwide is from China and the country’s bicycle exports account for 65 percent of the world’s total. China has the world’s biggest bicycle manufacturer, the Tianjinbased Battle, and the world’s biggest bicycle parts producer, Shenzhen-based HL Corp, whose bicycle handles, front forks, disc brakes and riser parts account for the biggest share of the world market.  

Yet these products are all low-profit and labor-intensive. The CITIC report revealed that although China’s finished bicycle imports are less than one-thousandth of its total bicycle exports, imported bikes are priced 17 times higher on average than exported ones. Meanwhile, domestic bike manufacturers, whether they are producing and exporting their own designs or manufacturing for other companies, have a less than 15 percent profit rate, half of the average profit rate of overseas bicycle makers.  

“Current mid- to high-end bicycle brands are concentrated in Europe and the U S , such as Italy’s Colnago, Trek, Canada’s Cervelo, as well as Chinese Taiwan’s Giant and Merida, which have higher market recognition. The market only acknowledged mainland brands like Pardus and SEKA in the last few years and they aren’t strong enough to break the dominance of overseas brands,” Alex said.  

When Shimano committed themselves to the R&D of derailleur gear change systems for high-speed gear changers in the 1980s, Chinese bike brands like Phoenix and Forever shifted to invest in real estate for quick profits in the late 1990s, a time when the domestic bicycle market was saturated and people wanted cars instead. In 2014 and 2015, the first wave of sharebikes swept China, and Phoenix and Forever hurried to cooperate with bike-sharing platforms, only to find that capital soon withdrew from the field after excessive competition drove the market decline. In comparison, Giant stuck to their own path. They slapped down rumours they would cooperate with bike-sharing platforms, saying they had to maintain their brand.  

According to a report on business news site wenshannet.com, every year Giant takes out 8 percent of their operating revenue for R&D and marketing by sponsoring cycling teams and training cyclists. Phoenix only put 22.2 million yuan (US$3.3m) into R&D in 2021, 1.08 percent of their total operating revenue.  

“R&D for high-end bicycles is costly and time-consuming... restricted by the [purchase] cost of core parts, domestic high-end bicycles will not be as profitable as expected,” a bicycle industry insider who refused to reveal his name told NewsChina, adding that derailleurs are sophisticated systems involving a variety of advanced technologies.  

To maintain their dominance, Shimano and SRAM, according to incomplete media statistics, hold some 6,000 patents worldwide, which has restricted other firms from developing their own gear systems.  

“Developing a derailleur [of our own] is like disassembling a black box,” said Liu Weibing, general manager of S-Ride Bicycle Components. The firm, based in Foshan, South China’s Guangdong Province, has been developing its own gear change system for years.  

“Developers have to keep ruling out designs and make new ones to test. Once any part of a design falls into a patented area, we have to go back to the drawing board,” he said, revealing that his company lost money in its first three years.  

In 2017, Liu Weibing’s company launched their first derailleur for mountain bikes, only to find that few bicycle makers would use it. “They often asked me if my derailleur would raise their brand premium and if we could lower our prices to below the cheaper copies,” he said. He turned to the overseas market where customers are more sophisticated and less likely to be loyal to one brand.  

In summer 2022, one of S-Ride’s gear systems helped a cycling team they sponsored to win the women’s championship in an endurance competition held in Italy, which gave Liu Weibing the confidence to return to the domestic market. But the anonymous insider warned that domestic-made gear change systems have not yet been tested by the mass market and if a problem emerges, brands will pay a heavy price. 

A Trek store in downtown Beijing, July 9, 2022 (Photo by VCG)

Next Revolution 
Industrial analysts say there is a window – possibly the last chance – for domestic brands to catch up. Dominant international brands cannot meet demand and are increasing their prices. According to Liu Weibing, some bicycle makers are using domestic gear change systems after some companies committed years to developing their technologies.  

L-TWOO Technology Co based in Zhuhai, Guangdong Province, is one of them. The company won an innovation prize at the 2016 China International Bicycle Expo held in Shanghai for its gear change system. According to Chinese media reports, this derailleur accounts for 1-2 percent share of the global market. Though a small figure, it was a breakthrough for domestic brands.  

Others are focusing their R&D on lighter, more portable carbon-fiber bicycle frames. A decade ago, China did not have a mature carbon fiber production line. Since then, Pardus took the lead after their parent company Taishan Sports Industry Group based in Shandong Province became the biggest sports equipment supplier of the 2008 Beijing Olympic Games.  

According to Huang Haiqing, Pardus’s R&D director, the brand first focused on bicycles for professional competitions and then spent seven years researching how to alter these bikes for leisure cyclists.  

SEKA’s Liu Zhiquan told NewsChina that his company began to cooperate with a manufacturer for mid- to high-end carbon fiber bicycles in 2016.  

According to Liu Zhiquan, replica bicycles produced after patents have expired by original equipment manufacturers (OEM) – manufacturing products according to contract – or original design manufacturers (ODM) that design products to be rebranded and sold by others, are very popular among Chinese cyclists because of their lower prices. However, most of the OEM/ODM plants have little awareness of domestic consumer demands. For example, Asian people have different body shapes which will bring new demand for bicycles, and it is actually a good selling point for domestic brands to make a bicycle adapted to Asian people.  

In an interview with Chinese industrial analyst Equal Ocean, Biketo.com’s director He Zhaozhi talked about brand identity and culture, attributing people’s high loyalty to international brands to their years of brand building. Traditional brands like Phoenix and Forever, once an industry leader in the 1980s, have long lost brand recognition, let alone brand loyalty, among consumers. 

They are trying to make up for it. Media reported that at the end of 2020, Phoenix purchased two bicycle makers, one producing high-end bicycles and the other a parts maker, to help it gain a foothold in the high-end market. Flying Pigeon, which became trendy in the past few years, is attempting to distinguish itself by incorporating cultural concepts popular among young Chinese, such as playing on its vintage credentials.  

Domestic brands are also exploring e-bikes and smart bicycles that incorporate a certain amount of digital control, such as gear shifting. L-TWOO is testing its first-generation smart product and holds 100 patents. Although pessimists warn that international brands also have the same new technologies and are more experienced, domestic brands are willing to compete.  

“The rising market is definitely good for the revitalization of domestic brands, but no matter which route a brand takes, they need time to gain some brand influence... and both enterprises and customers should have more patience,” Wang Chunqing said.