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In recent 30 years, China has changed far more than the West has. Regardless of the abandoned structures of communism, China retains a heavy measure of state involvement in the economy. Today’s China has been stuffed by rapidly modernizing mega cities with freshly poured streets and landscaped urban boulevards. The Bicycle Market in China has been greatly affected by the development of the society. This article is aimed to make a summary of these changes and bring a new image of this market to investors.
Industry Analysis: The Bicycle Market in China
China boasts the world’s largest production center and the biggest market. It is also the leading bicycle and e-bike manufacturer. The population of China has been entitled ‘the kingdom of bicycle’. 78% of China’s 1.3 billion people have bicycles. According to a recent survey, the total number of household bicycles has reached 450 million. Ten years ago, the number was at 487 million. With the economic development, the bicycle market has been carved up with private cars, buses, subway and another way of transportation. At present, China’s bicycle production and sales growth have a momentum slowed and reveal a decreasing trend. Over the last decade, most of the bike manufacturers have reduced their production. China’s annual production is reaching more than 5,000 million of bicycles. Currently, the total amount of bicycles manufacturers has reached 881. The total industrial output value reaches 51.83 billion yuan. Although China has become the world’s number one bike manufacturing country, but due to the decrease in terms of sales, many companies have to take the path of low-cost strategy, which often results in a very low-profit margin. Therefore, both adjustments of the industrial structure and establishing brand awareness have got up on the table in a country that is supposed to sell the highest number of the bicycle in the world. Over the past few years, the revenue for the Bicycle market in China has been growing at an annualized rate of 0.8M, the main drivers of this industry have been seen in the domestic demand, specifically in the rural regions. The industry revenue is now at $ 11.3 billion. An industry that is also characterized by the high volumes of export, expecting to account for 60% of total revenue.
Industry Trend: Urgent Need to Adapt the Market
- The industry is now turning to another market and is trying to adapt to the demand by restructuring the production. Indeed, manufacturers are now strengthening and developing the production of electric bicycles. When traffic congestion, air pollution, new traffic regulation etc. are becoming long-standing problems, the electric bicycle as an environmentally friendly, convenient, healthy green vehicles is emerging. 90% of the electric bicycles are from domestic brands. Indeed, the global financial crisis affected less the Chinese domestic market, compared to the bicycle industry which depends more on the export market. The pedal bicycle industry continues to decline, and the development of electric bicycle industry rise steadily since the first half of 2009. The total industrial output value and yield growth still reached 15.82% and 11.65%. Seen in the sluggish export situation, the domestic market has become the main driving force to promote the development of the industry.
- Monotonous product mix. Currently, the main export products are the scooter such as BMX 20 inches, mountain bike. Whatever China’s bicycle products in the global market have an absolute advantage in the low-and-middle-end export products, low technological products with the lack of investment in technological innovation, have become the general problems. The average export price of Bicycles has risen due to the metals and fuel higher costs; In addition, the Chinese labor costs appreciation has also contributed to the rise of the export prices. Thus, the price of the export product highly increases, not only due to the change in the type of product and innovation but mainly due to the rising cost.
- The industry lacks branding strategy. The number of domestic market with well-known brands is really low. Compared to the foreign market, the Chinese bicycle brand is still in its infancy stage. 80% of the production are dedicated to the foreign company through Chinese OEM company, the remaining is still less than 20% which is mainly sold through local supermarkets. For instance, regarding the BMX-based products. It is difficult to enhance even more on the quality of the product. In order to enhance the sales, communication in branding strategy is the key.
To change the habits of the bicycle from a means of transport to a leisure and fitness functional product, it is a must to create more social needs among Chinese consumers, a favorable external environment for the development of the industry. Development of the industry is mainly driven by the domestic growth, the product innovation, growing traffics and increased environmental consciousness.
Case Study: Bicycle Industry
Daxue Consulting has provided Market research services for one of its clients, a well known international brand in the industry. The client wanted to develop its product with a new bicycle concept, offering customized bicycles in China. Knowing the trend for the leisure bike market in Europe, the client wanted to get an in-depth understanding of the need of the Chinese consumers. In other words, their business model had to adapt thoughtfully to the Chinese context. Daxue’s consultants started with a desk research in order to get an overall vision of the clients demands. The study revealed a lot of information regarding the behavior of the bicycle users in 1st tier cities in China. A survey was conducted upon bicyclists and also non-bike users. Daxue’s consultants conducted 8 in-depth interviews and 6 casual interviews with the presence of bicycle sellers, for collecting rich and detailed information. Daxue Consulting’s report offered its expert insight and helped the brand to define the industry trends in China’s market, allowing the client to better identify the products on the market and the future customers’ profitability. Daxue’s various reports on the industry, have helped some leading companies by providing them consultations and custom solutions for their specific business challenge. See our services: