Giant Manufacturing saw first half 2008 revenues grow 25.1% to reach US$618.7 million (€288.4 million), while net income climbed 14.5%. Giant spokesman Jeffrey Sheu was reported in the Taipei Times as being “rather upbeat about the bicycle industry’s sales growth in the long run.” Sheu believes “sales will grow at a faster pace if more and more countries attempt to restrict motor vehicles.”
However, Giant’s gross margin was heavily affected by rising raw material costs. Prices of aluminium and carbon fibre have been more stable recently. Yet, compared with three years ago, they have increased nearly three-fold. Alongside this, the appreciation of the New Taiwan dollar against the US dollar has impacted Giant’s profits.
Giant reported 910,000 bicycle unit exports from Taiwan last year. For 2008 the company expects to ship more than 1 million units, representing a gain of 10%. Giant’s average FOB price was US$340 (€213) in 2008. (Free On Board price, the price charged at the producing country’s port of loading.) The company expects to see a 10% FOB price increase on Taiwan-exported bicycles in 2008.
Meanwhile, William Jeng, Senior Vice President at Merida Industry Co, said that Merida aims to export between 780,000 and 800,000 bicycles in 2008, up from 755,000 last year and representing a projected gain of between 3% and 6%.
Merida’s average FOB price of Taiwan-exported units fell to (US$400) €251 in the first 7 months of 2008. This is slightly down on the US$410 (€257) FOB price in 2007, largely due to an “increasing export of medium to low priced bicycles,” Jeng added.
The Taiwan Bicycle Exporters’ Association (TBEA) reported that bicycle exports to the European Union rose by 11.8% year on year to 1.9 million units over the period January to June 2008. Reflecting a need to pass on increasing input costs, the export value to the EU surged by 27% to US$340.6 million (€213.8 million) during the first six months.
Giant and Merida represent two of the largest manufacturing facilities in Taiwan and are clearly optimistic about the market this year. However both companies have seen their share prices fall in recent months; clearly they are not immune to the global financial crisis. The challenge is ensuring that consumer demand in Europe matches the levels of increased output from Taiwan.
The challenge facing Giant specifically will be ensuring that future demand picks up in order to meet the investment in increased capacity. (Giant is reported to be investing in a new manufacturing facility to increase unit output.)
Whether the global bicycle industry and the triathlon industry specifically are able to battle the tough economic climate clearly remains the big unanswered question. A negative impact equivalent to that being seen in car dealerships is unlikely. Although the pace of sales within tri-retailers, as Europe enters the off-season, is expected to slow.
