Facing a still uncertain economic environment, China's bicycle manufacturers are implementing a range of measures to counter current and projected threats to sales growth and profitability in coming months. Several are also positioning themselves for the long-term both in the domestic and global markets.
To stimulate demand and reverse the downward trend in exports, most are planning to keep a tight lid on prices for the next half year. As long as there is no steep fluctuation, these enterprises are willing to shoulder increases in the cost of key raw materials and components.
Among the manufacturing inputs that have already risen are steel and aluminum. At about $750 per ton, the former is 7 percent more expensive than it was in March 2009. Aluminum topped $2,000 per ton in July, its highest since October 2008.
To minimize the risk of loss should costs rise beyond projected levels, many midsize and large suppliers are moving their sales mix toward high-value products. At these companies, R&D and marketing efforts are focused on designs that will not only boost margins but expand their customer base as well.
For cycling enthusiasts, the latest releases include structures employing magnesium alloys and carbon fiber. With densities generally lower than aluminum and steel grades, the two materials are increasingly being used in the production of lightweight high-performance bicycles.
Adoption, however, is limited to upscale models. This is because in addition to being costlier, magnesium alloy frames are prone to oxidation. Carbon fiber versions are more complicated, and consequently, take longer to manufacture.
Recent magnesium alloy releases weigh less than 8kg. Products using carbon fiber, even with batteries and other accessories, can be as light as 12kg.
Targeting urban commuters, as well as cycling enthusiasts, a number of companies are coming out with city bikes suited for multimodal travel. Many designs are collapsible in seconds, allowing cyclists to conveniently carry these onboard trains, buses and other forms of public transportation. They can be parked outside or kept inside homes and offices, a major advantage in areas where space is limited.
By releasing such constructions, suppliers hope to increase penetration of the US and the EU, where demand has been growing together with environmental concerns and gas prices. In the past five years, several towns and cities in the two regions have built special paths and initiated other projects to encourage bicycle adoption for both leisure and transportation purposes.
Asia's developed and developing economies are also potential high-growth markets for city bikes. Several are already offering or planning to provide incentives similar to those in the EU and the US as part of efforts to generate energy savings and reduce carbon emissions.
South Korea, for instance, aims to lay down over 3,000 kilometers of bicycle lanes by 2018. This year, 170 kilometers is scheduled to be built.
Several suppliers are also entering the electric or e-bike segment in pursuit of greater competitiveness at home and overseas.
Within China, demand for the line has been growing as a low-cost means of transportation, prompting companies that focused only on exports to gain a domestic foothold. In terms of international markets, e-bikes provide companies the opportunity to increase penetration of the EU. This is because, unlike most conventional models shipped to the region, it is not subject to the 48.5 percent anti-dumping duty.
According to customs statistics, China sent more than 480,000 electric bikes and other cycles abroad in the first six months of 2009. Although this is 30 percent fewer compared with the same period in 2008, total sales declined only 3 percent with average per-unit value reaching nearly $177.
In contrast, revenue from overseas shipments of conventional models slid 10 percent year on year. Export volume, meanwhile, slumped to 75 percent its previous level.
The US was the largest single-country market for electric cycles. Models sent there generated 15 percent of China's total sales in the line.
Regionwise, the EU was the top source of revenue during the six-month period, accounting for nearly 60 percent of the national aggregate. The Netherlands, Germany, Italy, Belgium and the UK were the primary destinations of exports to that market.
Bicycle suppliers aiming for greater differentiation in the e-bike segment are making their designs more environment-friendly through the use of energy-efficient batteries containing less heavy metal and other toxic substances. To this end, most are employing NiMH and lithium-based power sources instead of lead-acid types. Some companies are also adopting units that can be recharged via solar panels.
China's government has put several policies in place to help makers survive the difficult period and encourage innovation. Among the latest is the raising of the export tax rebate to 15 percent effective June 2009.
This article "Electric bikes: Makers brace for tough times" is originally posted in Global Sources.
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