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Taiwan manufacturers look to China for sales

Published December 30, 2011

By Nicole Formosa

TAICHUNG, Taiwan—Uncertainty over economic stability in Europe has Taiwanese manufacturers in wait-and-see mode as 2012 orders dip from suppliers in its most important export market.

European leaders wrapped 2011 debating a compromise that would save the troubled euro, and companies worried that consumers would keep a tight grasp on their wallets this year as the debt crisis persists.

“It will be a difficult year,” said Jeff Chen, marketing manager for Taichung wheel manufacturer Joy Industrial.

Speaking during Taichung Bike Week, an end-of-the-year OEM show held in the heart of Taiwan’s manufacturing region, Chen said distributors and retailers are sitting on too much inventory, and he wasn’t sure holiday sales would clear it out. As such, orders are down from European suppliers.

Some manufacturers, like RST forks and TaYa Chain, said they didn’t expect to have a good indication of any European fallout until after the Jan. 23 Chinese New Year holiday break.

Ketty Kuan, director of sales and marketing for cable maker Jagwire, has lowered sales forecasts for markets like Italy and Spain that have been hit hardest by Europe’s economic woes while hoping more insulated countries like Germany and Switzerland would hold steady. On a more upbeat note, Kuan’s boss, Jerry Huang, said that the recent recession in the U.S. has shown that consumers don’t stop cycling during times of financial strife. Also, sales in Asia continue to grow, helping to cushion any potential decline in Europe and North America. And even as units shipped from the island nation fall, the average selling price is increasing as Taiwan manufacturers focus on quality over quantity.

This falls in line with third-quarter export data released by the Taiwan Bicycle Exporters’ Association (TBEA). Through September 2011, Taiwan exported 3.25 million bikes with a total value of $1.1 billion. While that constitutes a 14 percent decline in units over the same period in 2010, the value of those units rose 13.5 percent. P&A exports reached $570 million, an increase of nearly 19 percent from $480 million for the first nine months of 2010.

But a closer look at how those numbers break down indicates that Taiwan exporters may have cause for concern. The European Union market, which has historically taken in about 70 percent of bikes shipped from Taiwan, shrunk 21.8 percent in the first nine months of 2011 in terms of units, and 2 percent in value. A total of 2.05 million bikes were exported to the EU with a value of $546 million.

“Exports to the U.K., the Netherlands, Sweden, Belgium, Spain and Denmark all showed significant declines with the chief reasons being heavy snowfall in Europe at the start of the year that made riding difficult and continued uncertainty over the euro,” the TBEA said in a report made available to journalists attending a press conference for the Taipei Cycle show in early November. The Netherlands is Taiwan’s No. 2 export market, just ahead of the U.K.

The European Free Trade Association countries—Norway, Switzerland and Iceland—performed markedly better, growing by 28.7 percent in units and 73 percent in value. Still, those countries only represent 108,000 units, a blip on the radar compared with the EU. Exports to other markets also grew in the face of the EU’s decline—exports to Japan increased 16.6 percent in units and 34.8 percent in value; the value of bikes shipped to Australia increased by nearly 12 percent; and North America took in 2.25 percent more bikes at a value 31.6 percent higher than in 2010.

“These figures indicate that the Taiwan bicycle industry is continuing to grow steadily in spite of global economic hurdles,” the TBEA said.

While the EU remains a wild card for the Taiwanese this year, as Jagwire’s Huang noted, the growing domestic market in Mainland China could bolster manufacturers. That’s thanks in part to the Economic Cooperation Framework Agreement, a trade pact that ends 12 percent duties on bikes shipped from Taiwan to China this month.

In the first 10 months of 2011, Merida’s revenue from the Chinese market soared 124 percent, compared with growth of 20 to 30 percent in Europe and America. The average unit price of a Merida bicycle was up 13 percent in China, and the company is expanding production at its factories to keep up with demand, according to a newsletter issued by the Taiwan External Trade Development Council, the same group that organizes Taipei Cycle.

“Merida’s factories in Taiwan have been in full throttle since October, operating through midnight hours. Its expanding factories in China will also ramp up production from the current 50,000 units per month to 60,000 in the coming months,” the report said. Merida makes bikes for its own brand and is a key supplier for Specialized.

Giant’s revenue from China grew by 40 percent in the first eight months of 2011. TAITRA has also reported that Tainan, Taiwan, rim manufacturer Alex Global had seen turnover in China triple this year as tariffs on rims and spokes dropped from 12 percent in 2010 to 5 percent last year.

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