Up Cycling

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. 

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.