China’s bicycle industry is taking several steps to prop up sales and sustain financial viability in the months ahead. Since Global Sources last covered the sector in October 2008, overseas demand weakened at a faster pace, as reflected by export volume declining at double-digit rates during November and December. This culminated in a total drop of 4 percent for the year 2008.
Aggregate sales, however, rose 18 percent to $2.6 billion, primarily as a result of higher prices. The growth also reflected a better sales mix, with more midrange and upscale units estimated to have been shipped overseas.
Despite the industry’s positive sales performance, concerns about softening demand are mounting, with some companies reporting 70 percent fewer orders in the past six months. In January, year-on-year comparisons of customs statistics show export volume and value declining 34 and 12 percent, respectively.
As consumers continue to remain frugal amid the economic slowdown, several suppliers have started reducing prices to stimulate buyer interest. Companies are generally reluctant to compete solely on price, however, as they do not want to engage in a price war that may prompt certain markets to initiate anti-dumping investigations. Further, most cannot afford major cuts without risking profitability, since labor-related expenses and additional testing fees keep margins slim despite lower raw material costs.
Amid this business environment, the following are some of the key trends we see in China’s bicycle industry.
• Suppliers will continue shifting to the mid range and high end. In line with this, they will enhance their design capability and quality management systems by investing in additional training for key personnel.
• Efforts toward product differentiation will range from simple changes in aesthetics to improved practicality, ergonomics and safety. Heightened environmental awareness will also be reflected in several releases.
• In terms of geographic market, suppliers will continue to expand their reach beyond North America and the EU. Many are exploring Eastern Europe, the Middle East, South and Central America, and Africa for growth opportunities.
• Most companies will also widen target segments. Besides creating units for cycling enthusiasts, several are developing models for students and office workers who live in urban areas.
• Export sales are expected to return to a growth track in the next 12months. A few suppliers are expecting the increase to exceed 20 percent.
The above is extracted from the Executive Summary of China Sourcing Report: Bicycle
To learn more about this report, visit: http://www.chinasourcingreports.com/csr/bicycles
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