TAIPEI, Taiwan (BRAIN) — Industry executives in Taiwan are eager to put 2013 behind them and move quickly into manufacturing and delivering bicycles, components and accessories for a soon-to-start 2015 model year.
With the 27th Taipei International Cycle Show kicking off this week, the industry is pivoting toward China and other developing nations in the vast Asia-Pacific complex as growth tapers in the U.S. and Europe.
The industry should get a firsthand look at the ongoing shift when executives unveil 2013 export numbers at the show. Those numbers also will include a slice of 2014 model year bikes delivered overseas.
The data will reflect a tough year and almost certainly will show another year’s decline in exports to Europe and the U.S.—key markets for the island nation’s manufacturers.
A third-quarter report offered a preview of what to expect. Overall exports through October to the West were off 11.1 percent from 2012, with a 5 percent drop in monetary value.
And the latest import data from the U.S. Department of Commerce offers further evidence of a tough year for Taiwan. Exports to U.S. suppliers last year fell 8 percent, or almost 70,000 units, according to a report released in early February. That drop may have cost Taiwan manufacturers more than $43 million in lost sales at wholesale.
Even overall imports from China to the U.S. fell 13 percent, which would include some higher-value carbon fiber bikes. That’s a further indication of the difficulties manufacturers faced during a year walloped by erratic weather in the U.S. and Europe.
Still, Taiwan companies continue to expand in China, focusing on a growing domestic market there and in other developing Asian nations. Other companies, chasing lower labor costs, were eyeing increased production opportunities in Cambodia, Vietnam, India and other low-wage nations exempt from European dumping duties.
Bob Margevicius, executive vice president at Specialized, summed up the ongoing shift: “The business for Asian suppliers to the developed world [U.S. and Europe] is weak. Growth potential now is concentrated on China and Southeast Asia. Most of the international brands around the world [most of which are made in Taiwan] are struggling,” said Margevicius, one of the industry’s most knowledgeable observers.
Despite that, Taiwan will continue as a key hub in the manufacturing of midrange to high-end bicycles and accessories exported mainly to Western nations, others say.
In general, the industry—including U.S. retailers—face new challenges as global demand for bicycles, components and accessories undergoes what could be a generational shift. Nonetheless Taiwan, with its intense cluster of factories, highly skilled workers and logistical know-how, will remain a dominant player in the global industry.
“Right now the export market is certainly soft,” said Stan Day, SRAM’s president and CEO. SRAM is also a member of Taiwan’s A-Team, a consortium of key manufacturers that control a significant portion of the industry’s production in Taiwan and China. And Day has the luxury of benefiting from a deep relationship with Taiwan executives as well as his experience operating two factories in China.
So as this year’s Taipei show gets under way, all thoughts turn to the 2015 model year. “All bike companies in January and February were stretching until they can get to 2015 model bikes. I think when the 2015 model year starts, factories will be extraordinarily busy, orders will be really strong, and inventory will be well-managed and, in fact, could be a little low,” Day said.
Over the years concerns have arisen that China and other low-wage nations would start to hollow out Taiwan’s bicycle industry¬—that high-value production would shift elsewhere, trimming costs and boosting manufacturing margins. That hasn’t happened and is unlikely to occur, Day and others said.
“Taiwan will continue to be a hub for bicycles, components and accessory manufacturing,” said Day, whose factory in Taichung churns out much of the company’s highest-value products ranging from RockShox forks to drivetrains.
“They have this natural advantage with a compact manufacturing center and vendor base in such a small radius,” he said. As for key production shifting away from Taiwan, it’s unlikely given Taiwan’s advantages, Day added.