China's bicycle industry is taking several steps to prop up sales and sustain financial viability in the months ahead. Since Global Sources last covered the sector in October 2008, overseas demand weakened at a faster pace, as reflected by export volume declining at double-digit rates during November and December. This culminated in a total drop of 4 percent for the year 2008.

Aggregate sales, however, rose 18 percent to $2.6 billion, primarily as a result of higher prices. The growth also reflected a better sales mix, with more midrange and upscale units estimated to have been shipped overseas.

Despite the industry's positive sales performance, concerns about softening demand are mounting, with some companies reporting 70 percent fewer orders in the past six months. In January, year-on-year comparisons of customs statistics show export volume and value declining 34 and 12 percent, respectively.

As consumers continue to remain frugal amid the economic slowdown, several suppliers have started reducing prices to stimulate buyer interest.

Companies are generally reluctant to compete solely on price, however, as they do not want to engage in a price war that may prompt certain markets to initiate anti-dumping investigations. Further, most cannot afford major cuts without risking profitability, since labor-related expenses and additional testing fees keep margins slim despite lower raw material costs.

Amid this business environment, the following are some of the key trends we see in China's bicycle industry.

• Suppliers will continue shifting to the midrange and high end. In line with this, they will enhance their design capability and quality management systems by investing in additional training for key personnel.
• Efforts toward product differentiation will range from simple changes in aesthetics to improved practicality, ergonomics and safety. Heightened environmental awareness will also be reflected in several releases.
• In terms of geographic market, suppliers will continue to expand their reach beyond North America and the EU. Many are exploring Eastern Europe, the Middle East, South and Central America, and Africa for growth opportunities.
• Most companies will also widen target segments. Besides creating units for cycling enthusiasts, several are developing models for students and office workers who live in urban areas.
• Export sales are expected to return to a growth track in the next 12 months. A few suppliers are expecting the increase to exceed 20 percent.

This report covers the major types of bicycles manufactured in China. These have been classified into six categories, namely mountain, BMX, racing, city, children's and electric bikes. The different styles offered in each category, their common features and price determinants are detailed in the Products and Prices section. An overview of the parts and accessories that suppliers export is also provided.

The Industry Overview discusses the issues affecting production and exports, and the strategies suppliers are implementing in the face of these challenges. In addition, this section describes the composition of the supplier base, and the key characteristics of small, midsize and large makers.

Details about the local industries in Tianjin and the provinces of Guangdong, Jiangsu and Zhejiang are given as well. Bicycles and related components from these areas constitute more than 80 percent of China's total output in the two lines. Their overseas shipments account for 90 percent of the nation's aggregate.