Following years of progressive growth, several factors led to a downturn for Taiwan's bicycle industry in 1999. Perhaps the most fundamental reason for the slide was the swell beyond sustainable levels of the industry's export volume in 1997 and 1998. In the US, bicycle giants Huffy and Brunswick transferred orders to new Mexican plants in an effort to trim costs, thus contributing to a 25% nosedive in Taiwan's complete bicycle exports to that country. At home, delays in Taiwan production due to Shimano's late release of components and the September earthquake, along with the continued migration of Taiwan's low-end manufacturing to China, also contributed to the fall-off.

Taiwan's sales revenues from exports of complete bicycles dropped 15% in 1999. However, the average price per bicycle rose to US$97.70, up from US$95.54 in 1998. Continued efforts in new product development, the move to value-added products, and the benefits of more profitable low-end manufacturing in China should aid this trend in 2000.

China: What Stays and What Goes
According to Singer Chen, Secretary General of the Taiwan Bicycle Exporters' Association (TBGA), by moving to a location where it is more viable, the migration of low-end manufacturing to China will increase manufacturers' margins. As testament to the benefits of Mainland production, Taiwan complete bicycle maker Giant Manufacturing saw a 31% drop in Taiwan revenues, but a 2% increase in global operations in 1999. The bottom line for components maker Falcon Cycle-Parts was similar, with Taiwan revenues down by 23%, but Taiwan-China combined revenues up by more than 8%.

Chen believes that the bulk of the migration has already gone to the cheap labor centers in mainland China. What remains in Taiwan looks to elevate its value. Raw materials of higher grade come out of Taiwan, and technical and quality levels exceed those of China. In addition, Chen says that a few Taiwan companies will produce magnesium frames and forks this year, whereas only Merida was able to develop a prototype magnesium frame last year.

Components makers will also look to loftier goods. Last year Lee Chi was the first in Taiwan to come out with disc brakes, and this year Falcon, Tektro and Vanguard will follow them. Falcon has new production lines in Taiwan, not China, for high-end derailleurs and freewheels. Components makers like Falcon are also developing internal hubs and other new types of parts for "comfort bikes" and "city bikes", a product shift actually spearheaded by Shimano. The introduction of new products is a welcome injection for international markets.

USA: Lacking Innovation
Combine a lack of innovation in the US market and major US producers who were looking to trim costs, and it is easy to see why Taiwan's complete bicycle exports to the US slid in 1999. Taking advantage of the NAFTA free trade zone, potentially shorter lead times and lower transportation costs, Huffy and Brunswick each established 1.5 million units annual capacity plants in Mexico last year. However, they continue to rely on many China and Taiwan-made components. Taiwan suppliers have so far been reluctant to set up feeder plants across the Pacific. Chen states, "For Taiwan manufacturers, it's just easier to find cheap manufacturing in China."

Europe and Japan: High-end Growth
It was a different picture in Europe and Japan. Japan's market absorbed more than one million Taiwan-made bikes in 1999, an increase of more than 25% over 1998. Although Europe exports fell by 17% last year, Chen predicts that the removal of the dumping complaint against frames and forks made in Taiwan and China will aid local manufacturers tremendously. Moreover, the European market is more pliable when it comes to new products, and new trends such as comfort bikes mean new sales.

2000: The Year of the Electric Bicycle?
Taiwan's fastest developing value-added product for 2000 may very well be the electric bicycle, with 1999 export figures tripling those of 1998. In particular, Giant worked deals with both Renault and Ford automakers whereby Giant will manufacture electric bicycles for both companies, and Renault and Ford will manage marketing, distribution and sales. Giant only sold 5,000 e-bikes in 1999, but according to a company spokeswoman, 30,000 units is a conservative estimate for production in 2000. The Lee Iacocca-invested EVG Motors, one of Giant/Ford's major US competitors, released its e-bike last March. EVG will have the Fairly Manufacturing Co. take care of its production in Taiwan.

All of this leaves Chen feeling optimistic about growth for electric bicycles. He sees possibilities for sales in Europe, and says that "...the really big news is that electric bikes are selling in the US, and I'm not even sure why. It's a really big change."

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