Two years ago a wave of order cancellations threw the bicycle industry’s supply chains off balance. The Taiwanese bicycle industry, in particular, has been hit hard. The Show Daily reached out to various companies in Taiwan to find out how they are doing and whether they have noticed
any signs of recovery.
Important: The statements in this article were gathered in August 2024 for Taichung Bike Week. Find new statements in the Taipei Cycle 2025 Show Daily magazines.
There’s no question that last five years have been a rollercoaster ride for the bicycle industry, marked by the bullwhip effect due to the pandemic-related demand boom-and-bust, and escalating conflict in the Near East resulting in rapidly rising costs for energy and transport, stoking inflation, crushing consumer sentiment and profoundly impacting the supply chain. The big question keeping the bicycle industry on its toes now is when the tide will turn, demand will get back up, and orders will come back in. While current export statistics from the Taiwan Bicycle Association (TBA) paint a somewhat bleak picture, there are slight glimmers of hope, according to industry players the SHOW DAILY spoke to in the lead-up Taichung Bike Week 2024, such as normalizing markets, improving stock levels and certain high-end sectors driving growth.
Let’s start with the TBA export numbers. From January to August, the value of exported e-bikes is down 47.8 percent compared to the same period last year (2024: $479.9 million, 2023: $919.5 million). For regular bicycles, the drop is around 60 percent (2024: $3.8 million, 2023: $9.6 million). As for components, exports are down 26.5 percent compared to the previous year (2024: $19.9 million, 2023: $27.1 million). This is especially striking given that the crisis had already left significant marks on Taiwan’s export figures in Q3 and Q4 of 2024.
Despite the negative export data, there are positive signs on the horizon for Taiwan’s bicycle industry. As Taiwan’s biggest bicycle manufacturer, the Giant Group has just seen its July turnover beat last year’s number by 16.6 percent, flipping a nagging downward trend. “Looking forward to the second half of the year, inventory adjustments in the European and American markets will return to normal, and the cycling trend in the Chinese market will continue to drive performance growth. The group’s operations can be expected to gradually improve,” said Giant Group’s PR Specialist Irene Chen. TRP’s Marketing Director Otis Chen also points at China as the market that shows the biggest growth right now. Indeed, Taiwan’s exports to China are currently the rock in the storm. Although the export value of complete bicycles is down 19.9 percent compared to the same period last year from January to August, the high-revenue road bike sector is up 27.2 percent year-on-year, a clear sign of the road bike boom in China. Additionally, component exports to China have increased by 22.9 percent.
Apart from these encouraging figures, the development of inventory levels also gives hope. The TBA has observed significant improvements in stock levels across many sectors, said Jack Lin, President of Armor Manufacturing Corporation and Member of the Board of Directors of TBA. “Inventory rotation is progressing well considering the situation, and the time that goods spend in storage has improved significantly. Furthermore, positive signals from the global economy, such as falling interest rates and recovering stock markets, give us reason to be hopeful,” he said.
Unsurprisingly, SRAM Asia’s General Manager Bob Chen also points out overstock as the main challenge: “Business has normalized, but we still feel the impact of the inventory correction in the first half of 2024 compared to the first half of 2023. The most challenging part of the correction may be behind us, and there are many positive signs. High-end drop-bar bikes are performing the best right now.” This observation is shared by Claudio Marra, Managing Director at FSA: “As inventory levels are going down month by month, we expect next year to be more consistent. So far, this year has been much better than 2023 for FSA, with the mid- to high-end segment for road and gravel bikes doing particularly well.”
Tern’s Team Leader Josh Hon points out that inventory levels are not a force of nature but the consequence of human decisions: “For Tern, 2024 is up modestly over 2023 thus far. But importantly, it’s uneven and quite region-specific. We’ve seen that regions that were the most optimistic during the COVID-19 boom also ordered the most and tended to react more slowly to the slowdown. Now they are left with more inventory to work through. By contrast, some regions that were more conservative during the COVID-19 boom didn’t have too much extra inventory, and now they are back to normal and, in fact, back to growth.”
The sudden changes in demand caused a major overstock issue and provoked some, at times, chaotic decisions within the bicycle industry as short-term cancellations of significant volumes that sent shockwaves up the supply chain. “At Tern, we put a high priority on being fair with our suppliers and responsible for orders that we have placed with them. The slowdown has been sudden and hard for all of us in the bike industry,” Hon reflects. ”But how a company works with their suppliers will determine the relationship’s future. We have seen and heard of customers not taking any responsibility for orders that they have made, and this will impact the relationship going forward–if there is one.”
More positive signals are coming from producer Yota Cycles: “There are promising indications that the worst of the economic crisis is behind us. Several key bicycle component suppliers have resumed production levels nearly matching those from before the pandemic, bringing more stability to the supply chain. Moreover, some Taiwanese bicycle manufacturers have reported a 15-percent rise in new orders during the first half of 2024 compared to the same period in 2023. This is a strong sign of a market demand recovery,” says Min Chou, who is responsible for the sales and overseas department at the Taichung-based firm. “As the supply chain within the Taiwanese bicycle industry gradually stabilizes, key component supplies, such as derailleurs and frames, are also improving. Suppliers are now approaching pre-pandemic production levels, providing a more stable support system for manufacturers.”
As the industry is caught between many lows and the first signs of positive news, Jeff Chen, General Manager of Joy Industrial, thinks that the future is still unpredictable. “Some companies are coming back in better control and management to lower their inventories and sell more bikes out, and some other companies are still struggling with plenty of inventories and still trying their best effort to sell their bikes. So, until now, we still see some ups and downs, good and bad news, every day. What we are still doing is focusing and working more closely with our customers, offering better products, and improving ourselves with lean management so we can be ready when the market is back in the coming year,” he says.
For context, a quick look back at how we go to this point. With the COVID-19 pandemic and the restrictions taken to limit its impact, demand for bicycles grew drastically, overwhelming the capacity of the global supply chains. All the more so as sea freight was impacted badly as well. Consequently, suppliers ramped up production and ran their factories at full capacity. However, due to the usual lead times, the supply chains couldn’t react as quickly as the demand for products changed. This phenomenon, known as the bullwhip effect, first led to a seller’s market with scarce goods, rising prices and long delivery times. Just when the pandemic-related restrictions were about to be lifted, Russia’s attack on Ukraine and the escalating conflict in the Near East provoked rapidly rising costs for energy and transport, stoking inflation and crushing consumer sentiment.
This second unforeseen event had an even more profound impact on the supply chains of the bicycle industry. The forecasts based on 2021 and 2022 had been overly optimistic, and due to the sudden decline in demand and hasty cancellations from large global brands, warehouses filled up quickly along the supply chain, adding to the operational costs of manufacturers. The resulting overstock provoked widespread discounting on what had become a buyer’s market, eating into the margins and eroding profits. In an effort to clean up the warehouses, factories have been running at a fraction of their capacity ever since, with management trying to keep their staff onboard. At the same time, some brands have been delaying the introduction of new products to the market, so retailers would get some additional time to sell off goods.
And though complete market recovery is the goal, if it were to happen too quickly, the industry may experience a reverse bullwhip effect: a rise in demand that the supply chain cannot cover and a return to a seller’s market with a lack of goods. While this would be good news for the margins and help selling off overstock, it also means that the bicycle industry is not cashing in on its full potential. At the same time, there is a real risk of companies being forced out of business due to a long stretch of reduced turnover and sales. This, again, would cause serious issues of all sorts for the supply chain.
Emotions aside, the bicycle industry needs to draw its lessons from what it has gone through in the past four years. As of now, its supply chains based on rough forecasts and bound to lead times are not designed for a quick reaction. For this reason, the bullwhip phenomenon will continue to disturb business unless the industry changes some of the ways it operates. The bicycle industry needs to get smarter and have real-time, sell-out data at hand, if necessary anonymized, to come to well-reasoned decisions rather than guesses based on experience and hope. With a few exceptions, namely strong D2C offerings like Canyon or Decathlon with its vertical integration, the industry currently lacks the sensors and data to prevent a repeat.