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An NBDA Publication

July 1, 2008

Vol. 17, Number 11

Gas Price Hikes Fuel Sales of Commuter Accessories
Retailers React To Changing Mindset
BY NICOLE FORMOSA BURBANK, CA—When Rob Stotts moved his H&S Bicycles to a new location in Burbank, California, this spring, he stepped up his stock of commuter-related accessories like panniers to hold laptops, slick tires and racks. He also reorganized his shop’s layout to emphasize commuter bikes from Kona, Jamis, Giant and Electra. Stotts hasn’t changed his business model—he still sells high-end bikes and has a VIP room for custom fits—but he says if his customers aren’t already clamoring for commuter-oriented products, which many are, they soon will. “I have a lot of friends who own bike shops and we all agree: Once gas hits $5 a gallon, we’re going to see a huge influx of bicycle sales,” Stotts said. Some economists say the nation’s pumps could reach that benchmark by the July 4 holiday. Americans already appear to be driving less. The Bikestation will add three new commuter facilities, like this
Continued on page 26
Photo courtesy of Bikestation

Distributors Stock For Rise in Repairs
BY MARC SANI BLOOMINGTON, MN—When Steve Flagg reviewed his inventory reports recently, one item jumped off the page—27-inch tires. “We were totally unprepared for the demand in 27inch tires,” said Flagg, president of Quality Bicycle Products. Wayne D. Gray, vice-president of KHS/FreeAgent Bicycles, noticed the same trend. “We’re seeing a lot of demand for them. It’s people taking their old Schwinn Varsity out of the garage and to a shop for new tires and a tuneup,” said Gray from his Southern California office. While no one thinks 27-inch tires are staging a comeback, retail demand for them is anecdotal evidence that consumers are behaving differently this season. And, from the standpoint of some of the nation’s key distributors, that’s good news. Distributors are enjoying a strong uptick in orders for a variety of parts and accessories, parContinued on page 27

one, by early next year due to growth in bicycle commuting.

China Remains On Top Despite Pressures Study Suggests
World Stats
BY JOHN CRENSHAW AND DOUG MCCLELLAN SHENZHEN, China—It’s far too early to write China’s obituary as bicycle factory to the world. Yes, Chinese manufacturers are grappling with a now familiar litany of profit-squeezing challenges including higher labor costs, higher government taxes and a currency that keeps getting stronger against the dollar. Still, China remains head and shoulders above all other countries when it comes to making complete bicycles, frames, and other parts and accessories, according to our annual review of global export and import statistics. Perhaps inevitably, China’s pricing pressures are causing some production to shift to other Asian countries, such as Taiwan (no surprise) and Thailand (more of a surprise). Vietnam, which the European Union also slapped with anti-dumping duties, has almost been erased from the bicycle map. Here are the key leaders and laggards in the global bicycle industry, both for bicycle manufacturing and for bicycle sales. Pull out your world atlas and follow along. China. Bicycle exports rose 5.7 percent in 2007 to 59 million units, with half of those exports children’s bicycles (wheels under 22 inches). The United States remains China’s
Continued on page 32

Top Tier Brands Losing Share

BY NICOLE FORMOSA COSTA MESA, CA—The weight of the 10 biggest brands in the U.S. specialty bicycle market continued to slip in 2007 as the number of smaller, niche brands grew and gained strength, according to research released by the National Bicycle Dealers Association. The U.S. Bicycle Market Overview for 2007 shows the top 10 brands accounted for 2.28 million units at the retail level in 2007, or 73.7 percent of the specialty market share, while the rest of the brands equaled 26.3 percent of the market, or 814,859 units. The breakdown was 75/25 in 2006. The numbers continue to stray from the 80/20 split, which was the norm until 2001 when specialty retailers began focusing on owning niches like custom,
Continued on page 35

World Stats

dumping duties, many manufacturers top market. Last year, U.S. import the pieces to plants in the Euimporters brought in 17.3 ropean Union for assembly. million Chinese-made China produced more than 13.7 milbikes—96 percent of lion frames for bicycle assemblers in total bicycle imports in the 27 nations of the European Union, 2007. In other words, or 88 percent of the E.U.’s total imports 24 of every 25 bicycles and therefore nearly that percentage sold in the United States of its total bicycle production. Despite are made in China. high duties, the European Union imJapan is also heavily dependent on ported 786,476 bicycles from China. China, with 97 percent of its imported The world’s largest bicycle producer bicycles, or 9.3 million units, coming remains the world’s biggest bicycle from China. market, even as China’s surging middle Europe continues to do a significant class rushes to buy status-conscious volume of business with China despite automobiles. Domestic sales in 2007 regular and anti-dumping duties that totaled 28 million, a decline of 3.8 peradd 63.5 percent to the cost of a Chi- cent from 2006. Electric bike sales reached 21 milTaiwan’s Bicycle Exports lion units, a 10 percent uptick from the previous year but below the heady 1997-2007 growth rates of recent years as a shakeNo. Units Value (U.S. $) out forced hundreds of e-bike factories 1997 8,955,424 $873 million to close. China exported about 350,000 1998 9,388,311 $897 million e-bikes, according to the China Bicycle 1999 7,782,869 $760 million Association.
2000 2001 2002 2003 2004 2005 2006 2007 7,534,350 4,796,148 4,219,038 3,882,835 4,348,037 4,594,991 4,083,637 4,751,967 $821 million $536 million $524 million $583 million $721 million $919 million $840 million $1,054 million

Because frames and China Remains… na-made bicycle. not subject to antiother parts are
Continued from page one

China’s Bicycle and E-bicycle Market in 2007
Bicycle (units in million) Total production 87 Exported units 59 Sold domestically 28 Compared to 2006 2.5% 5.7% -3.8% E-bicycle (units in million) 21 0.35 20 Compared to 2006 9.7% 7.9%

* 1. The number of exported bicycles with wheel diameters under 22 inches in 2007 is approximately 30 million, accounting for 50.8% of the total number of bicycles exported. 2. The unit of numbers collected is in millions and decimals are neglected.

nearly 933,000 units, or nearly one-fifth of Taiwan’s total export production. Based on total value, however, the United States remains Taiwan’s most important market. U.S. suppliers imported $231 million in Taiwan-made bikes last year—596,000 units with an average price of $388. Japan. Japan’s bicycle factories, like those in the United States, have collapsed under the weight of Chinese imports. The Japan Bicycle Promotion Institute reported that 2007 domestic production was 1.14 million units, down 15 percent from 2006 and barely half what it was five years earlier. Of the 9.6 million bikes Japan imported, 9.3 million came from China. Thailand. Led by Bangkok Cycle, Thailand is starting to boom. Thai bicycle exports to the European Union reached nearly 1.5 million units in 2007, more than doubling in one year and rising some four-and-a-half times within five years. The value of Thai-made bikes was 110 million euros ($160.5 million at Dec. 31 exchange rates), with average price reaching 74.12 euros ($108.22) The United Kingdom, which once was Vietnam’s biggest European customer, is now Thailand’s biggest market, taking 892,000 Thai-made units in 2007. Other Southeast Asia. Vietnam reported exporting only 29,000 units to the European Union last year compared to its 2004 peak of 1.85 million. Suppliers in other Southeast Asia countries have had modest success in taking advantage of anti-dumping duties levied on Vietnam and China. The Philippines, for example, exported 8 percent more bikes to the European Union in 2007 to 647,000. But that only brought the country back to where it had been in 2005. Cambodia, where some Vietnam factories moved after the anti-dumping duties were imposed, has increased

production to 431,000 units after starting from zero in 2005. Malaysia’s E.U.-bound exports jumped from 11,000 units in 2004 to 496,000 in 2006 and 402,000 last year. At least one Chinese bike manufacturer, Peerless, is starting a factory in Malaysia this year and is tantalizing E.U. suppliers with promised savings over imports from duty-laden China. Bangladesh shipped 355,000 bikes to Europe last year, on par with previous years.

Sources: Taiwan Bicycle Exporters’ Association, Taiwan Bureau of Foreign Trade

Taiwan. As reported previously, Taiwan has roared back in the middle- to high-end segment of the market. Unit exports climbed to 4.75 million units last year, a level not reached since 2001. More importantly, the Taiwan industry has made continued strides with its focus on quality over quantity. The average sales price of a made-in-Taiwan bike reached a record $222 last year. The United Kingdom is Taiwan’s single biggest export market, taking

Chinese manufacturers are grappling with a now familiar litany of profit-squeezing challenges including higher labor costs, higher government taxes and a currency that keeps getting stronger against the dollar.
Eastern Europe. The countries of Eastern Europe have become increasingly significant for the European Union’s bicycle industry. Poland retains its long-established lead over other eastern European producers and remains among the top 10 suppliers to other E.U. nations. According to Eurostat, Poland exported about 785,000 units to other E.U. countries last year at an average sale price of $130. The E.U. imported slightly more than 302,000 bikes from Lithuania, valued at a respectable average of $144. Bulgaria’s fledgling industry is the newest member of the E.U. trade group COLIBI. Bulgarian factories produced around 450,000 bikes last year, exporting about 350,000 of them. Bulgarian industry leaders predict a 40 percent increase in production this year, with a www.bicycleretailer.com

Taiwan Exports of Complete Bicycles in 2007
United Kingdom United States Germany Netherlands Belgium Sweden Japan Denmark Spain Australia All Others 2007 Total 2006 Total 2005 Total 2004 Total Units 932,748 596,305 491,716 396,442 323,082 295,221 206,661 151,409 146,314 131,997 923,096 4,751,967 4,083,637 4,594,991 4,348,037 Value/$1,000 130,609 231,459 95,075 108,711 60,719 29,078 49,900 23,812 27,505 48,660 248,992 1,054,521 839,436 918,720 720,746 $/ASP $140.03 $388.16 $193.35 $274.22 $187.94 $98.50 $241.46 $157.27 $187.99 $368.65 $269.74 $221.91 $205.56 $199.94 $165.76

Sources: Taiwan Bureau of Foreign Trade, Taiwan Bicycle Exporters’ Association Dollar amounts based on average exchange rate for each year

32

Bicycle Retailer & Industry News • July 1, 2008

Top Sources of E.U. 27 Bicycle Imports
(Unit figures in millions; by 2007 ranking) Country Taiwan Thailand Italy Netherlands China France Poland Philippines Total, Extra E.U. Total, Intra E.U. Total, All Sources
Source: Eurostat

E.U. 27 Frame Imports*
Italy Germany Netherlands Poland Spain E.U. 27 2003 2.287 3.240 1.132 NA .702 11.935 Source Country: China 2004 2005 2.895 3.039 2.985 2.961 1.124 .955 1.174 .935 .935 1.130 13.733 13.163 2006 3.125 2.923 1.186 .980 .911 12.838 2007 3.378 3.047 1.180 1.015 .944 13.698

2003 2.116 0.326 1.553 0.449 2.069 0.420 0.766 0.624 7.862 6.022 13.884

2004 2.403 0.451 1.549 0.439 2.352 0.582 0.850 0.542 9.161 6.667 15.828

2005 2.899 0.696 1.398 0.566 1.449 0.723 0.943 0.647 8.874 7.653 16.526

2006 2.798 0.692 1.515 0.745 0.809 0.956 0.714 0.599 8.350 7.299 15.649

2007 3.092 1.483 1.264 0.873 0.786 0.860 0.785 0.647 9.474 7.211 16.685

% Change 06-’07 10% 114% -17% 17% -3% -10% 10% 8% 13% -1% 7%

corresponding jump in exports. The Czech Republic exported 216,000 bikes to other E.U. countries at a high average price of $280. Hungary nearly matched that with an average price of $271 for the 187,000 bikes exported throughout Europe. Romania’s bicycle exports have gone from zero to nearly 100,000 units within five years. Average price was $132. Germany. Independent bike retailers in Germany gained ground both in market and revenue share last year, according to the German trade association Zweirad. The specialty channel sold 59 percent of all units, up from 56 percent on 2006, and reaped 77 percent of the revenue, the association reported. Germans bought 4.58 million new bicycles last year, a 4 percent increase over a relatively slow 2006. Average retail sale prices, boosted in part by an increase in the value-added tax, hit 368 euros ($537) and generated revenues totaling nearly 1.69 billion euros ($2.46 billion). Domestic manufacturing fell by 90,000 bicycles to 2.4 million units. German manufacturer-assemblers nonetheless supplied about 40 percent of the bicycles sold within the country and exported about 574,000 units, a 19 percent increase that came on top of a 27 percent increase in 2006. Imports rose by 300,000 units to 2.76 million bikes, led by Taiwan (425,000 units), Poland (348,000) and Thailand (311,000). E-bike sales nearly tripled to 65,000 units, and Zweirad predicts continued rapid growth in that high-priced segment. Trekking bikes retained their hold on Germans’ hearts, accounting for a third www.bicycleretailer.com

of all unit sales, followed by city bikes at 23 percent, and mountain bikes at 12 percent. France. French bicycle sales were flat last year at 3.53 million units, barely unchanged from a disappointing 2006 and short of 2005’s 3.7 million, according to the annual report from the French industry association Tous á Velo. Revenue from the overall market was up 5.5 percent to 1.43 billion euros ($2.1 billion). French manufacturing continued on its downward trend. Tous á Velo pegged domestic production at 1.66 million units in 2005, 1.29 million in 2006, and 1.13 million in ’07. French builders exported about 226,000 units, on par with 2006, but barely more than half the 446,000 of 2005. The other 80 percent of their product, nearly 900,000 units, went into the French market. Import numbers were down from 2.46 million in 2005 and 2.19 million in 2006 to 1.83 million last year. Mountain bikes sales, at 1.7 million units, slipped by 5 percent. Although mountain bikes continued to dominate the French market, 2007 was the first time in years that the category did not account for more than half of total sales. Road bike sales increased 8 percent to 200,000 units, while sales of e-bikes nearly doubled to 10,000 units and are expected to keep climbing. Italy. Italian production was virtually unchanged in 2007 at 2.52 million bikes, according to the trade group ANCMA. Nearly 1.3 million were children’s bikes, however. The domestic market remained stable at about 2 million units.

Italy Germany Netherlands Poland Spain E.U. 27 All Non-E.U. Sources

Source Country: Taiwan 2003 2004 2005 .039 .068 .092 .141 .143 .193 .342 .237 .251 NA .019 .013 .026 .052 .043 1.260 1.161 1.244 14.417 16.257 15.429
Source: Eurostat

2006 .083 .187 .189 .021 .048 1.038 15.077

2007 .060 .257 .270 .010 .063 .924 15.636

*Number of pieces in millions.

World Players In The Bicycle Market
(Figures In Million Units)
Production
Country China Taiwan United States Japan Italy Germany France 2000 52.2 8.0 0.88 4.7 3.2 3.3 1.9 2001 51.2 5.0 0.91 4.18 2.65 2.99 1.6 2002 63 4.4 0.41 3.08 2.35 3.05 1.42 2003 73 4.3 0.35 2.52 2.55 3.19 1.49 2004 73 4.4 0.335 2.45 2.6 2.92 1.73 2005 80.73 4.7 0.191 1.93 2.4 2.71 1.66 2006 84.9 4.3 0.26 1.33 2.42 2.49 1.29 2007 87.0 4.9 0.26 1.14 2.52 2.40 1.13

Imports
Country 2000 China N/A Taiwan N/A United States 20.3 Japan 6.2 European Union* 9.41 Italy 0.22 Germany 2.3 France 1.4 2001 N/A N/A 16.40 7.09 8.52 0.45 1.80 1.10 2002 N/A 0.07 19.30 8.33 10.20 0.45 2.00 1.45 2003 N/A 0.29 18.20 8.70 12.27 0.47 1.62 0.16 2004 N/A 0.62 14.05 9.14 14.05 0.62 2.45 2.30 2005 N/A 0.68 19.60 9.14 15.65 0.82 2.55 2.50 2006 N/A 0.50 18.06 9.34 14.86 0.77 2.44 2.20 2007 N/A 0.57 18.12 9.60 15.81 0.83 2.76 1.80

Exports
Country 2000 China 32.80 Taiwan 7.53 United States 0.18 Japan** 0.56 European Union* 3.90 Italy 1.75 Germany 0.25 France 0.33 2001 34.94 4.80 0.19 0.56 3.63 1.41 0.23 0.30 2002 46.09 4.20 0.16 0.65 4.32 1.42 0.26 0.37 2003 50.84 3.88 0.13 0.87 5.19 1.59 0.51 0.53 2004 51.75 4.35 0.16 1.01 5.70 1.55 0.56 0.72 2005 52.37 4.59 0.19 1.22 6.10 1.34 0.44 0.88 2006 56.0 4.10 0.10 1.34 6.35 1.25 0.48 0.87 2007 59.23 4.75 0.15 2.09 6.10 1.32 0.57 0.80

*E.U. 15 only: Import/export figures include shipments to and from E.U. members and nonmembers. **Japanese export figures include indeterminate numbers of discarded bikes impounded, then exported to third-world countries as charity. Sources: ANCMA, Bicycle Retailer and Industry News, Bike Europe, Cycle Press, China Bicycle Association, China Light Industry Information Center, China Ministry of Commerce, European Bicycle Manufacturers Association, Eurostat, Japan Bicycle Promotion Institute, Shimano, Taiwan Bicycle Exporters Association, Tous a Velo, Wheel Giant

Bicycle Retailer & Industry News • July 1, 2008

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