Pedaling Prosperity: New Market Opportunities for the Chinese Bicycle Industry

With the rise of environmental consciousness and the lift of pandemic restrictions, the city-cycling trips of Chinese college student symbolized the resurgence of cycling enthusiasm among urban middle-class individuals. Recognizing the trend, Chinese Bicycle Industry observes new opportunities to alter the dominance of foreign enterprises in the market that could worth over 20 Billion RMB by 2027.
April 30, 2024
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Lin Jie
Editor, ValuePlanet

Recently, photos of shared bicycles went viral on a short video platform in China, showing four college students cycling from Beijing to Tianjin. They took pictures under Tianjin’s iconic scenic spot—— the Tianjin Eye, with the words “Beijing Institute of Technology” prominently visible on their bicycles under dim lights. Their appearance on social media consequently sparked a new wave of enthusiasm for “city cycling (Cityride),” which has been seen as a driver of mid-to-high-end bicycle sales. As the world’s leading bicycle manufacturing and exporting country, China has been committed to the mid-to-high-end bicycle sector.

According to the latest data from the Chinese Bicycle Association, China manufactured 12.15 million bicycles priced above 1000 RMB in 2023, with an annual increase of 15.1%. Bicycles in this price range accounted for 24.9% of total production, increased by 4.3 percentage points from the previous year. However, the mid-to-high-end market still faces challenges, such as the inadequate supply of key technologies and lack of brand strength among domestic companies, which hinders China’s entry into the high-end market. These challenges might be just the tip of the iceberg for China’s large but weak manufacturing sector.

“Quality upgrade, Shimano moves”.

The bicycle has been a witness to China’s development. In the early 20th century, bicycles, sewing machines, and watches were called the “three big items” and were one of the shining stars in the Chinese manufacturing industry. At its peak, the export data were impressive, and bicycles even became national gifts. However, as the industrial tide surged, people’s modes of transportation underwent fundamental changes. The popularization of automobiles and other means of transportation caused the bicycle market to shrink rapidly. To this day, bicycles have become a beneficial complement to urban transportation systems.

Besides, the pandemic led to a boom in the bicycle industry, especially in the third quarter of 2020. The total value of exports of Chinese bicycles, at that time, reached 1.1 billion USD, the first time since 1995 that the industry’s quarterly export value exceeded 100 million USD. However, as the pandemic restrictions were lifted, the industry’s overall growth started decelerating. Due to various factors, the volume of Chinese bicycle exports drastically decreased compared to the previous three calendar years. According to data from the Chinese Bicycle Association, the number of Chinese bicycles being exported drastically fell to 41.74 million in 2022, decreasing by 39.6% year-on-year. The export value also dropped by 28.8%. In 2023, China exported 39.65 million bicycles, down 3.8% year-on-year, with an export value of 2571.6 million USD, down 28.9% year-on-year.

For the bicycle industry, the “sudden come and go” enthusiasm in the market is not uncommon. Previously, the advent of shared bicycles also triggered a global frenzy. However, it also gave the industry a “cold shower” when the capital became more rational and the previously bustling market gradually stabilized. Fortunately, entering 2024, the trending data has revitalized the industry once again. From January 2024 to February 2024, Chinese bicycle exports reached 7.24 million units, increased by 43.1% year-on-year; the export value was 460.0 million USD, increased by 6.0% year-on-year. This resurgence is closely linked to the expansion of the market size of global bicycles. Associated data has demonstrated that the global bicycle market is expected to grow at a compound annual growth rate (CAGR) of 4.20% from 2024 to 2029, increasing from 56.16 billion USD to 69 billion USD. And one of the main drivers of this growth is the widespread adoption and promotion of low-carbon globalization. In Europe, Southeast Asia, Africa, and North America, bicycles are gradually becoming a new choice for transportation due to the popularity of environmental concepts and issues like urban traffic congestion.

The most interesting case is the EU market, which is an important export destination for China. Recently, to achieve the 2050 carbon neutrality target, the European Commission (EU) proposed to reduce emissions by 90% by the year 2040 by reducing reliance on fossil fuels and implementing a controversial pesticide law. This move triggered protests from farmers in multiple member countries, including France, Germany, Belgium, Poland, and Italy.

As the conflict in the EU becomes more acute, Chinese bicycles quietly emerge, bringing a warm greeting to the EU market with an innovative stance. Without a doubt, with wings of innovation, Chinese companies are eager to carve out a share of the global high-end market since no one wants to earn hard money at the low point of the “smile curve.” According to QY Research, in 2023, the global high-end road bicycle market was approximately 31.9 billion RMB and was expected to reach 51.1 billion RMB by 2030, with a CAGR of 7.3% from 2024 to 2030. The demand for high-quality bicycle products is increasing. Simultaneously, the demand for high-end road and mountain bikes continues to grow, with Chinese companies attempting to strengthen brand shaping and enhance competitiveness through intelligent transformation and technological innovation.

However, the path to enter the high-end market is long and arduous. It is known that even though Europe is the largest global market for bicycles now, the French market successfully attracts 47% of cyclists in the high-end market, followed by popular countries and regions such as the US and the UK, with their cyclist population accounting for 40% and 13%, respectively. Their sales volumes are equally impressive( 55% and 62% respectively). The Netherlands and Germany have mature bicycle industries, hosting many global mid-to-high-end cycling brands. Nonetheless, most of the high-end brands are concentrated in other Western countries, such as France’s LOOK, Italy’s Bianchi, the USA’s Trek, and Canada’s Cervélo.
China possesses well-known cycling brands like Giant and Merida from Taiwan, China. However, in recent years, Chinese mainland enterprises like Reap, SEKA, and Camp have emerged, which are gradually gaining recognition in overseas markets. But, they are still struggling to break the monopoly of foreign companies. According to media reports, the annual demand for gearshifts for bicycles that are priced above 1000 RMB in China is about 8 million sets, with 95% of the market share controlled by Shimano from Japan and SRAM from the US, with Shimano holding the dominant position.

Today, it can be said that the high-end status of the bicycle industry depends on Shimano’s products; once equipped with Shimano gearshifts, the price immediately increased by several notches. In the mid-to-high-end market, most profits are consumed by Shimano, only leaving slim margins for Chinese companies. Its dominance even led to a sarcastic saying in the industry— “Quality upgrade, Shimano moves.” Taking Shanghai Phoenix as an example, its quarterly net profit was once as low as 9,6300 RMB. At that time, this net profit could not even afford a Hermes bicycle, which is priced over 100,000 RMB.

Chinese companies can change this situation by utilizing two strategies: upgrading or going overseas. Companies face numerous difficulties on their evolution journey, with the first challenge of meeting the needs of high-end customers. Chinese companies are indeed making significant efforts to master customer psychology and understand user needs. Some leading companies “furiously spend hundreds of millions of RMB” on purchasing research data, hoping that high-end new products can make riders “fall in love at first sight, and pay at the second.” Indeed, grasping the needs of high-end users is always the key to unlocking the market, but it is just one of them.

High-end bicycle companies should learn from new energy vehicles.

When discussing high-end user needs, companies should first think about the question “Which aspect should I start with.” A high-end bicycle has a minimum price of 8 thousand to 10 thousand RMB, and the consumer group that can afford it often utilizes bicycles to exercise, relax, and decompress. The mid-to-high-income group became more enthusiastic about outdoor activities, especially during the post-pandemic period. The concept of “maintaining health” is deeply ingrained in people’s minds. In a market survey, “exercise to maintain health” became the main reason for individuals to participate in cycling activities. With the original “transportation” disappearing of high-end consumers, they are now more focused on “enjoying the scenery,” “decompressing and relieving,” “ doing mental training,” “participating in competitions,” and other factors.

The change in cycling purposes has triggered a change in the needs of high-end market users. Quality and materials, after-sales service in bike shops, brand, design, and color, and price are still the most important factors for most users to consider when purchasing cycling products. An interesting finding is that riders of different ages possess distinctive demand characteristics. Under the age of 30, color, design, price, and other factors will account for a large proportion when riders purchasing bicycles, especially female riders. Some beginners will directly equate the brand with quality. Compared with them, the demands of the experienced riders are clearer. For them, brand image and reputation are the primary considerations, quality and material will also be carefully considered.

After “furiously spending millions of RMB,” Chinese companies have become more aware that even possessing the “key”, brand remains to be a hurdle. China is a big country in terms of bicycle production, but not a strong one in terms of its competitiveness in the global market. Even though Chinese bicycle exports account for 60% of the global market, a majority of them are OEM and ODM, and it’s always difficult to circumvent the patent monopolies of Japan and the US. Besides, there are restrictions on the export of processes and materials to China, and the low concentration of the industrial chain and the incomplete development of the supply chain make the situation even worse. In other words, the industrial chain can’t sustain the workers, and the supply chain can’t guarantee precision.

The road ahead for high-end brands is tough, but efforts persist. In 2023, the blueprint for the country’s first domestically produced electronic road gearshift, the eRX Disc, was released, which was an important step for Chinese domestic brands, even though there is still a long way to go to reach international giants. Since 2021, Phoenix and Forever, two major brands, have been reviving “old brands,” launching many affordably priced e-bikes covering mountain bikes, city bikes, touring bikes, folding bikes, and other types. Besides, domestic new brands constantly emerge, with DJI initiating the “EB” E-bike project, preparing to enter the overseas high-end E-bike market. Extreme and XDS have jointly developed a new model. Just like a catfish in a group of sardines, Chinese enterprises hope to bring differentiated products to the industry, pushing the Chinese bicycle industry to surprise the world.

On this journey, New Energy Vehicle brands can provide some references.

In the traditional automotive sector, Chinese brands were “beaten” without a fight, but China has achieved a breakthrough when shifting to New Energy Vehicles. The rise of brands like BYD has given China a voice worldwide, allowing it to discuss profit distribution. The same applies to the bicycle industry’s brand building. Rome was not built in a day, and similarly, brand building requires patience and confidence in the market, especially when creating world-tier brands, which is not an overnight task and, like New Energy Vehicles, requires the courage to “break and establish.” “Break”, that is, breaking various barriers, rules, and regulations that hinder the enterprise development and the flow of production factors; If enterprises pay all their efforts on “going through procedures”, how can they settle down to focus on products, quality, and technology? The answer is “establish”, that is, establishing rules that are conducive to enterprise development and clarifying “what needs to be done and what can be done”. We often say that our country has a super-large market advantage, but the problem of the Chinese manufacturing sector being “big but not strong” is still quite prominent. Looking at the bicycle industry, the domestic foundation could be more robust, and it has long been at the bottom of the value chain, which results in low production and operational efficiency. Even the industry structure could be more reasonable, though quality issues are still prominent.

Breakthrough is a need for the industry and associated enterprises. Although the challenges are numerous for Chinese brands, it is not a dead end. As we all know, the development of the bicycle industry depends on the cycling population, and there is enormous potential for growth in the number of people who are participating in cycling. According to data from the General Administration of Sport of China, only 0.4% of the total population participates in cycling sports, and the sales share of sports bicycles is only 6%.

Additionally, cycling culture is becoming increasingly popular in China, with domestic Cityride and other cycling activities continuing to attain popularity and the influence of some boutique events is increasing, such as the Yuxi Grand Fondo Cycling Festival, which attracted more than 20 million viewers and over 200 million viewers through media coverage. Data shows that with the global increase in environmental protection awareness, a seventy-billion market provides a new growth point for the Chinese bicycle industry. Indeed, influenced by the national “dual carbon” policy, the resurgence of China’s bicycle market is inevitable, with the market size expected to expand to 265.67 billion RMB by 2027.

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Lin Jie
Editor, ValuePlanet
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