Taiwan Becomes Largest Supplier of High-level Bicycles to U.S.

Both the volume and value of Taiwan-made bicycles exported to the U.S. in the first eight months grew strongly, by 12.4% and 54%, respectively, from the same period of last year. Both figures represent record highs.

The average FOB (free on board) price of Taiwan-made bicycles exported to the U.S. market also climbed by 38% to US$285, a significant increase that is expected to help Taiwan become the largest export source for high-level (with unit prices of more than US$250) bicycles to the U.S.

Industry sources say that about 20 million bicycles are sold in the U.S. per year, and that around two million of those units are high-level models, which are not sold in general chain stores, but by independent dealers of bicycles (IDBs).

Currently, the top-three brands in American IDB sales channels are Trek, Specialized, and Giant. Trek now contracts with mainly Taiwan partners, including Giant Manufacturing Co., Ltd. (the No. 1 bike manufacturer in Taiwan), and Ideal Bike Corp. (No. 3), to supply high-level models. Specialized commissions its major Taiwan partner, Merida Industry Co., Ltd. (Taiwan's No. 2 bike maker), to develop and manufacture about 90% of its products. Giant, however, is a purely Taiwan-based brand.

A senior official at Merida points out that Specialized is a generally deemed the top bike brand in the U.S. market, and Specialized high-end bicycle models are often priced at the upper end of the range. In order to maintain its market-leading image, Specialized closely cooperates with Merida to design new models. Specialized also attempts to introduce bikes with new technologies at least one quarter before other manufacturers bring them to market, while Merida does its part by supplying its newest frames, including those made from high-end carbon fiber, to its American partner.

Under such cooperation ties, Merida's export value to the U.S. grew by about 20% in the first eight months, though its volume was up only about 5%. In addition, the average selling price (ASP) of bikes exported to the U.S. market in the first eight months reached NT$18,000 (US$540 at US$1: NT$33.3), the highest of any market around the world.

Jeffery Sheu, special assistant to Giant's general management department, points out that his company has been enjoying healthy sales in the U.S. market this year because of the strong market splash generated by the company's high-end Maestro suspension bikes, and because the Giant-sponsored bike team won a group gold medal in the 2005 Tour De France.

According to Sheu, Giant's sales of high-end bikes in the U.S. this year are expected to maintain a volume level similar to last year's, but the company's overall sales value is expected to grow by more than 20%. Giant's ASP for bikes exported to the U.S. is expected to outstrip NT$12,000 (US$360) this year.

Giant, Merida

An industry analyst attributes the high value growth in Taiwan-made bicycles exported to the U.S. to the successful strategies of the top-two bicycle exporters in Taiwan, Giant and Merida. The two companies adopt totally different policies, one focusing on own-brand marketing, while the other supplies the OEM/ODM market, but together they have grabbed a big share of the American high-end market.

The source points out that Giant utilizes its established brand to successfully tap the U.S. market. Three deciding factors-including brand image, sales channels, and products-will determinate the Taiwan company's future market development in the important region.

Giant has been devoting many resources to promoting its brand image. The company pours a large amount of money into sponsoring major bicycle teams around the world, some of which win key bicycle races. The effects of this kind of sports marketing have proven influential and have set up a solid base for Giant to become a major high-end bike brand in the U.S. market.

Good products are also required to support a company's brand image. Giant has been actively developing innovative bicycles such as those found in the Maestro line, which includes everything from cross-country to downhill models, and the new-generation TCR carbon-framed top-end race models. On the other hand, the ambitious Taiwan company also constantly weeds out poorly performing shops among its approximately 2,000 dealers in the U.S. to get better sales results.

Compared with Giant, Merida's strategy seems simpler, but requires better coordination with customers, prompter product-development capability, and constant improvement in production techniques and equipment. Merida provides all of these things to build high-quality frames for Specialized, the No. 1 top-end bike brand in the U.S.

Because Specialized tries to push new products and technologies to market one season faster than its leading competitors, both the prices and margins of the company's products are higher than those of its major counterparts, and its stock inventory can often be smoothly digested.

Merida has set up a paradigm for local bicycle makers that want to develop their OEM/ODM business, the source says.

Taiwan Bicycle Exports To U.S. (Jan.~Aug.)
Period	Export Value	Export Volume	ASP (FOB)
2005 Jan.~Aug.	US$170 million	600,000	US$285
2005 Jan.~Aug.	US$110 million	534,000	US$207

Table 2:

Carbon-fiber Bicycle Sales of Top-3 Brands in U.S.
Company	2004 Production/Sales Volume	Supply Source
Trek	50,000-60,000 units	Self-production; Giant and Ideal of Taiwan.
Specialized	40,000 units	Giant, Merida of Taiwan.
Giant	30,000 units	Self-production.