Pedal power gathers speed

Both MOB and David mentioned to me recently that they thought there were a lot more cyclists on the road these days. Seems they are right and this is not only true for Japan.

Pedal power gathers speed

By Robin Kwong in Taipei

Financial Times, February 17 2009

Eric Lin wakes up at the crack of dawn nearly every Saturday to bike for hours in the hills around Taipei with his friends. His mountain bike, a Champion One model from Taiwan's Merida, had set him back T$32,000 ($933) and is a far cry from the 45-year-old software engineer's first bicycle, a grey, no-frills affair that had cost his parents just T$600.

Mr Lin and his friends are among the fast-growing ranks of cyclists in Asia who are fuelling a renaissance for high-end bicycle makers by paying upwards of US$1,000 for the latest models.

The industry, which has expanded rapidly over the past few years, is proving resilient to the economic downturn, thanks partly to the ability of bicycle makers to market increasingly expensive, sophisticated bikes to the masses.

Even as most industries suffered from falling consumer demand at the end of last year, bicycle retailers in the US and Europe were still enjoying robust sales as late as October and November, according to a market survey by CLSA, the Asian brokerage. Even as the global economy slows, bicycle sales this year will still be likely to match 2008's, says Jenny Huang, Taipei-based analyst for brokerage CLSA.

One particular bright spot for bicycle makers is that "Asia [sales] is picking up nicely", she says.

But whereas American names such as Schwinn or Specialized used to dominate the industry, the most sought-after bikes are now largely made and marketed by Asian companies, in particular Taiwanese brands such as Giant, the world's biggest bicycle company by revenue, and its cross-town rival Merida.

Merida, which has seen profits more than double in the past four years to T$1.3bn in 2007, said it had a record month in December in terms of both shipment volumes and average selling prices. It is now planning to expand its sales network.

Giant said its December sales were up nearly a third from a year ago. That fact was borne out by nearunceasing activity at its factory in Taichung, near the middle of Taiwan, which makes high-end models in relatively small quantities.

There, workers work overtime on assembly lines, shaping and welding aluminium frames to meet a backlog of orders. Outside, lorries shuttle in boxes full of parts, such as hand-brakes from Japan, and leave with 40-foot containers, each filled up with 250 bicycles inside.

In the past, nearly all of those bikes would be made under contract for other brands, but now Giant sells more than two-thirds of its bikes under its own brand. The balance is shifting geographically as well. While Europe and the US are still its two biggest markets, Asia now accounts for 40 per cent of Giant's sales, with nearly a quarter of that in its domestic Taiwan market.

The development of local market was instrumental in the birth of Asian bicycle brands, said Bonnie Tu, Giant's chief financial officer. "It took nearly 17 years of lobbying municipal governments to build bicycle paths" and other initiatives to make the sport popular in Taiwan, she said. Now, Taiwan's example is being followed by other Asian countries, such as South Korea.

To capitalise on this boom, bicycle makers began experimenting with innovative ways to expand the range of the bicycle's appeal.

Owen Chang, who runs Giant's research and development centre, says the key was offering hybrid models that add style and comfort to high-performance professional bicycles, or introducing entirely new elements to the humble bicycle.

This has meant inventing folding bicycles that can fit inside a car boot. Or, as in Giant's City Storm bicycle, enlisting the aid of British designer Michael Young to create a limited-edition line. "It's creates a difference that allows us to sell the City Storm for $1,000, whereas regular city bicycles only sell for around $200," says Mr Chang.

In spite of the opportunities for growth, Ms Tu admits there are likely to be fewer people who can afford $1,000 bicycles as the global economy worsens. "We are preparing for [a slump]. The whole industry is very cautious right now," she says, but adds that sales are still holding up and orders now coming in for the peak selling season in spring are "so far, so good".

http://www.ft.com/cms/s/0/91a2e29c-fc93-11dd-aed8-000077b07658.html