Stats With Latz | Where was your bike made?

Welcome to part two of this bicycle industry series. After starting with the Australian bicycle industry in part one, I’ll now look at the global bicycle industry.

If you’ve found your way here without reading the first installment of Stats with Latz, stop here and check out part one. We’ll be waiting for you when you get back.

Stats With Latz | Inside the Bicycle Industry with Phil Latz

A Brief History

Most of the key elements of today’s bicycles including the pneumatic tyre, ‘double diamond’ frame, chain drive and even e-Bikes had already been invented by the late 19th century. Yes – there was a fully functional e-Bike built in 1897!

Early bicycles were expensive and initially, manufacturing was done close to the wealthiest markets, mainly in the USA, UK and Europe.

You could argue that the trend of expensive bicycles being manufactured close to an expensive market still rings true because now very few are produced outside of Asia — and when they are they cost a pretty penny. But the country of origin doesn’t necessarily mean better or worse quality.

Asia Takes Over

It’s hard to imagine now, but post-World War 2, Japan was a poor, low-wage country. It became the epicentre for cheap bicycle manufacture right through until the 1970s, when their increasing wealth pushed up wages. Apart from very few notable exceptions led by Shimano, the Japanese bicycle export market all but died within a decade.

Next it was Taiwan’s turn. 30 years ago Taiwan was exporting over 10 million bicycles per year, but the average unit value was under $150 FOB (‘free on board’, which is the price the manufacturer sells for before any taxes or freight)

Within Taiwan, most bikes and parts are made in the compact Taichung region, and it’s not uncommon when visiting to see a truckload of unpainted frames heading to a painter in one direction and perhaps a truckload of components heading to a factory in the other.

While Taiwan is often seen as the epicentre of bicycle manufacturing, the web of where things are made has been expanding through Asia for some time.

Unlike Japan, when Taiwan gradually became a highly developed, high-wage country, the resourceful Taiwanese bicycle industry owners (who are often closely interconnected via family ties, close business partnerships, and less formal networks) worked together to transform their industry to high-quality, high-end manufacturing.

Even though today the actual volumes of bicycles exported from Tawain are ‘only’ 1.324 million analogue bikes plus 687,000 e-Bikes, the average unit values are many times higher at $1,583 and $2,718 FOB respectively. These amounts would translate to about $3,000 and $5,000 at retail prices.

These numbers were for 2023, which saw a brutal a brutal post-Covid downturn of 30.43% compared to 2022 on total export values. Including parts and accessories, Taiwan’s bicycle exports still totalled $6.6 billion in 2023, even in their toughest year, with most factories working just three or four-day weeks.

The folks who own the factories in Taiwan have built up subsidiaries in lower-wage countries with different production capabilities.

Meanwhile the Taiwanese have also invested huge amounts into building new bicycle factories in lower-wage countries, first in China, then later as Chinese wages also grew rapidly, into lower-wage countries such as Vietnam. They control the manufacture of far more bikes from these countries combined than they make within Taiwan.

There’s a term for describing factories in China as either ‘China China’ or ‘Taiwan China’. Typically a Taiwan China factory, that is, one owned and managed remotely by Taiwanese owners, will have better standards and produce higher quality products for export.

Shimano also migrated to cheaper countries. I have visited Shimano’s headquarters and factory in Japan, where the highest-end components are made in a spotless, robot-intensive, highly automated factory. Later I visited Shimano China where I saw the same types of robots and factory production systems, right down to floor paint markings. The main difference was that they were making huge volumes of Shimano’s lower-end groupsets in a country with far lower wages. Shimano also has factories in the Philippines, Malaysia and Indonesia, Europe and elsewhere. It’s an extremely profitable company with deep cash reserves.

Where Is My Bike Made?

That’s a surprisingly difficult question to answer. Bicycles have a complex supply ecosystem. The frame may be made in one country, the components in 10 others and then it’s assembled somewhere else.

Only a minority of bike brands actually come from a factory bearing the same brand name on the factory gate. For example, I’ve visited Giant’s original Taiwan factory multiple times over the years and seen not just Giants, but other brands including Trek and Colnago on the production line.

There are A LOT of bikes that don’t have Merida or Giant written on the down tube that were made in Merida or Giant factories.

In fact, Giant is a key manufacturing partner for Trek. Meanwhile the number two Taiwanese bicycle manufacturer, Merida, not only is a key manufacturing partner of Specialized, it’s one of the two biggest owners of Specialized, alongside founder Mike Sinyard.

I remember visiting Giro’s headquarters in California many years ago and a manager there complaining to me, “off the record,” that the quality of their USA-made helmets was significantly worse than the Chinese-made counterparts.

Many ‘European’ or ‘American’ brands are quite sensitive about the fact that their bikes are often made in Asia. But they shouldn’t be. I think consumers are getting used to the idea that the country of origin is less important than the design and quality control — after all everything from iPhones to Teslas are made in China now.

Many famous mountain bike brands are made by contract manufacturers whose names you’ve never heard of. The same goes for components.

I remember visiting a factory that specialised in making high-end alloy handlebars and stems. In their product finishing area, I saw a rack of pad printers. These are used to print logos onto complex curved shapes such as bars and stems. Amongst that rack of printing pads were the logos of perhaps 25 different bar and stem brands including most of the best-known high-end component brands.

Bicycle manufacturing requires an ecosystem of specialists, making everything from suspension seals through to painting. These ecosystems are typically centred around a small part of each country, such as “Bike Valley” in Portugal or around Shenzhen in southern China.

Within Taiwan, most bikes and parts are made in the compact Taichung region, and it’s not uncommon when visiting to see a truckload of unpainted frames heading to a painter in one direction and perhaps a truckload of components heading to a factory in the other.

Visiting SRAM’s main factory which is within this region and watching their goods inward dock in action shows how intertwined this ecosystem is. Last time I visited, they had separate docks for four trucks that were delivering everything from bearings to suspension seals. Each dock was tightly scheduled for the day in 15-minute intervals. If a supplier missed their delivery window, they were in trouble!

There are a heck of a lot of moving parts, specialised bits of equipment and talented hands that go into building bikes and bike parts. So it’s not really all that surprising that well-known brands contract that task out the experts that do the same thing for lots of their competitors, too.

The Empire Strikes Back

Due to multiple circumstances, not the least being ‘anti-dumping’ tariffs (Ed’s note: these are duties levied when a foreign company is selling something below the price at which it is being produced in the country of import), bicycle manufacturing and in particular assembly, was already starting to drift back to Europe.

But the supply shocks of Covid, not to mention grounded ships blocking the Suez Canal and pirates from Yemen or Somalia, have shown how vulnerable a long supply chain could be, so this trend is accelerating.

Managed to dig out good part of the bulbous thingy. It’s still stuck. #Evergiven #SuezCanal #Suez pic.twitter.com/zbeD59LA6V

— Guy With The Digger At Suez Canal (@SuezDiggerGuy) March 25, 2021

I think a key point to take away from all of this is that “Made in Asia” does not necessarily mean “low quality”, just like “Made in the USA” or elsewhere automatically mean better quality.

I remember visiting Giro’s headquarters in California many years ago and a manager there complaining to me, “off the record,” that the quality of their USA-made helmets was significantly worse than the Chinese-made counterparts.

In summary, if you’re buying a new bike in Australia that retails for under about $3,000 there’s a high chance it was made in China. If it’s over that, probably Taiwan or possibly Europe. But either way, it will include parts from multiple countries.

POC’s Nordic heritage has long been a part of its brand image, however the company is no longer owned by the Swedes.

Corporate Raiders

The biggest bicycle brand owner in the world today only bought their first bicycle company 13 years ago in 2011.

Turning our attention away from manufacturing to brands, the bicycle industry has transformed in just the past two decades from a “cottage industry” largely owned long-term by family companies to one where brands sell for big money to companies and countries that wouldn’t previously have dreamed of buying a bike business.

Oil-rich Middle Eastern corporations and sovereign wealth funds have been making significant investments into the bike industry. For example, the $75 billion, Bahrain based Investcorp bought the helmet and protective gear brand POC for over $100 million in 2015 and UAE based Chimera Investments bought Italian icon Colnago in 2020.

Car companies have also been buying up, like Porsche who have acquired high end e-Bike drive brand Fazua, MTB brand Greyp and more.

Then you have the $400 billion Walmart empire grandsons Steuart and Tom Walton, who are hardcore MTB enthusiasts buying Rapha apparel and Allied Cycle Works, not to mention spending big on mountain bike trails in Arkansas — putting Bentonville on the map.

Rapha for all its pomp and British-ness is owned by the heirs to the Walmart fortune.

Closer to home another cycling enthusiast is Scott Farquhar, who along with his Atlassian co-founder Mike Cannon-Brooks are about sixth and seventh on Australia’s rich list at about $19 billion each. Scott has made multiple cycling investments including a stake in niche high-end road, gravel and MTB manufacturer Factor Bikes.

The biggest bicycle brand owner in the world today only bought their first bicycle company 13 years ago in 2011.

Pon.Bike is part of Pon Holdings, a $15 billion, 16,000 staff company, mainly involved in the automotive industry along with industrial, agriculture and other sectors. But today it owns a wide range of global bicycle brands including Santa Cruz, Focus, Cervélo, GT, Cannondale, Mongoose and more.

The bicycle industry has certainly changed dramatically over the past couple of decades, and we haven’t even touched on e-Bike drive systems that have brought in automotive giants such as Bosch, Yamaha, Brose and others. Perhaps that will be a story for another day…

E-Bikes have brought a whole new suite of interests into the bike industry via the outfits who manufacture the drivesystems.

About The Author | Please meet Phil Latz

Phil Latz has had a lifetime involvement in many aspects of cycling. He started racing at age 10 and a decade later raced internationally including a season for a team based in France. In 1989 he and his wife co-founded Bicycling Australia magazine, which was followed by Mountain Biking Australia, Bicycling Trade, Bicycling YearBook, Triathlon Sports, Where to Ride Cycling Guidebooks, the Bicycling Australia Show, Where to Bike LLC (USA) and a range of other activities.

Phil sold the media business after 25 years and then focused upon advocacy, helping to set up We Ride Australia and co-founding World Bicycle Relief Australia. In 2019 he co-founded a new media company that now publishes The Latz Report newsletter, website and YearBook for the bicycle trade and the Micromobility Report newsletter, website, YearBook and podcast (launching mid 2024) which covers a wide range of topics related to e-mobility and infrastructure. In 2020 Phil established Latz Business Coaching, through which he coaches bicycle business owners across Australia and NZ.

Phil has co-founded two annual charity rides, has served on the board of Bicycle Industries Australia (BIA) and consulted to a wide range of cycling related organisations. Today, Phil is passionate about making Australia a better place for his grandkids to ride bikes. He still rides frequently and expects to have bicycle wheels fitted to his coffin.