Two of Taiwan's leading bicycle makers, Giant Manufacturing Co. and Merida Industry Co., recently decided to switch some of their big-ticket contract orders to suppliers in Vietnam in a bid to escape the 30.6% anti-dumping tariff now levied on their Chinese-made bikes in Eastern European nations that joined the European Union on May 1.

All China-made bicycles are currently subject to a 30.6% anti-dumping tariff in the EU, which will be continued at least until July 2005.

Giant reports that it ships 70,000 to 80,000 bicycles to Eastern Europe each year, about half of which come from its plants in China. To sidestep the European tariff, the company has placed contract orders with Ming Tien in Vietnam.

A senior Merida executive says that his company's bicycle factory in Shenzhen, in mainland China's Guangdong Province, ships about 50,000 bicycles annually to Eastern Europe. Now, much of that volume will be switched to Vietnam.

As a result of this trend, the Taiwan-based Ming Tien Hang Corp. has been forced to expand the capacity of its bicycle plant in Vietnam. The plant currently has an annual capacity of about 600,000 units; half of that volume is being taken by Giant and Merida this year, and smaller Taiwanese companies are expected to take more of it.

Some of the island's bicycle makers are not troubled by the European import tariffs. One of these is Ideal Bike Corp., which operates a plant in Poland. Capacity there is kept filled by orders from European companies taking advantage of its low costs, zero tariff for products sold in Europe, and wide range of the fully equipped (front and rear mudguards, luggage carriers, headlights, etc.) bike models that European riders favor.

Business is so good, Ideal reports, that production at its Polish factory is filled to May next year. It will turn out about 250,000 bicycles this year—50,000 more than its design capacity—and plans are under way for an expansion project.

Some of the new EU members, including the Czech Republic, are already production bases for low-priced bike parts for the European market. This poses a severe competitive threat to Taiwanese bike-parts makers.

The Quality Advantage

Leading parts makers in Taiwan, including Lee Chi Enterprise Co., Falcon Cycle-parts Co., and Joy Ind. Co., claim that most of the island's bicycle parts offer better quality and design than their Eastern European counterparts, and that they have long been popular in Europe's high-end market. For this reason, they say, they are not afraid of the European competition—at least in the short term.

Lee Chi, for example, says that its disc-brake systems are very competitive in Europe, where it controls more than 50% of the market, despite the fact that the new EU members will have an initial cost advantage (which, however, is expected to weaken as labor costs rise with EU membership). The company claims that both the quality and consistency of bicycle parts made in Eastern Europe are inferior to Taiwan's.

Falcon, a leading maker of brake clippers and derailleurs for the international market, reports that its sales in Poland have been growing rapidly even in the face of fierce competition from local rivals there. The company exported about NT$6 million (US$180,000 at NT$33.3:US$1) worth of bicycle parts to Europe in April, about a third going to Poland.

Chen Jun-hsiung, chairman of Joy Industry, reports that his company has become the world's largest maker of bicycle-wheel hubs and that it has mapped out a comprehensive market-positioning program to meet varying requirements in different markets. The chairman insists that Joy will meet any competition from Eastern European bike-parts makers without fear.