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Bonnie Tu, chairwoman of Giant, says e-bikes might soon account for a third of the group’s revenues. Photo: AFP

Taiwan’s bike makers bank on e-bikes to power them to the top in wake of US-China trade war

  • After years of shifting production to the mainland, the island’s manufacturers have been given a new lease of life
  • A surge in demand for e-bikes from Europe combined with US tariffs could help Taiwan regain its position as the number one producer of cycles

Set to a rhythmic soundtrack of clacking machinery, whirring drills and inflating tyres, bikes take shape at a factory run by Taiwan’s Giant, which is leading the island’s push to regain its crown as bike maker to the world.

And key to this push is demand for electronic two-wheelers from environmentally conscious European consumers, with surging exports providing support during the China-US trade war.

At an assembly line near the central city of Taichung, workers for Giant – the world’s biggest bike maker – build new electric bikes that boast visibly thicker frames to house rechargeable batteries.

“This is one of the biggest driving forces for the past five years,” explained Giant chairwoman Bonnie Tu, who said e-bikes now make up a fifth of the company’s group revenue.

“But I think for this year, maybe we’ll be able to reach about 30 per cent.”

A worker checks an e-bike at Giant’s plant in Taichung, Taiwan. Photo: AFP

The global e-bike market was valued at US$16.34 billion in 2017 but is expected to reach US$23.83 billion by 2025, according to Allied Market Research.

Taiwan’s exports of e-bikes jumped more than half last year with each unit costing more than US$1,300 on average, much more than standard bicycles, according to customs data.

Taiwan had for years been the world’s No 1 bike producer until the 1990s, when mainland China’s economic reforms saw firms take advantage of a vast, cheap labour force that absorbed virtually all output of the island’s bikes.

And while mainland factories continue to play a dominant role, Taiwan production is bouncing back. In the first quarter of 2019, e-bike exports from the island to Europe increased 135 per cent on-year while shipments to the US climbed 78 per cent.

Giant is the world’s biggest bike manufacturer and is finding e-bikes an increasingly important part of its business model. Photo: AFP

There are other increasingly compelling economic reasons to shift manufacturing away from the mainland.

In January the European Union introduced a series of anti-dumping measures after years of complaints that mainland Chinese-made e-bikes were saturating the market, sold for below production costs thanks to state subsidies.

Then there are the punitive US tariffs imposed as part of the trade war, which has battered many Taiwanese companies that assemble on the mainland.

That has led to an even more pronounced surge in exports from Taiwanese factories with firms across a range of industries increasingly willing to return home or look elsewhere for new factories.

“The shift was already kind of under way before Trump was elected, or people were talking about it anyway,” explained Shelley Rigger, an expert on Taiwan at Davidson College in North Carolina.

A worker at an e-bike factory in Changhua in Taiwan. Photo: AFP

Even before the trade war, Taiwanese companies were worried about increased labour costs on the mainland and the fact many of the incentives used to lure them had dried up, she said.

“They’re not getting special treatment as much and the cost benefit, they can find lower costs elsewhere. It’s been more sort of a diversification rather than a relocation,” she said.

The trade war has only added to concerns, with Taiwan among Asia’s most vulnerable economies given the mainland and Hong Kong account for 40 per cent of its exports.

The island’s bike industry is seen as a useful gauge of its economic trends because the major manufacturers so closely mimic its astonishing economic rise in the past few decades.

Like Taiwan itself, the bike manufacturers began at the bottom of the global supply chain, churning out low-quality parts and products.

But as skills and knowledge improved, they became some of the world’s best-known brands with Giant and Merida becoming global leaders.

Taiwanese President Tsai Ing-wen hails from a political party that is deeply sceptical of Beijing and favours being much less economically reliant on it, urging firms to return to the island.

Some have heeded her call. As of April, some 40 companies, including Giant, have committed to investing a combined US$6.7 billion and creating 21,200 jobs.

Taiwanese bike makers hope that demand for high-end products will help them regain their pre-eminent position. Photo: AFP

But the topic of relocation remains hugely controversial, with business owners fearful of being punished by the mainland and many asking Taipei not to reveal their names or details.

Still, Tu is adamant that Giant is committed to manufacturing in mainland China, which remains “a very important market”.

She portrays the recent opening of new assembly lines in Taiwan – and a factory in Hungary – as part of a need to be closer to consumers, saying “we are a global company”.

But she agreed the trade war had morphed from initial “jitters” to “a new reality”.

“I think I suddenly realised maybe it won’t go away,” she said. “I think the war is here. And we have got to have a long-term plan.”

This article appeared in the South China Morning Post print edition as: Taiwan e-bikes firm powers along profitable European route
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