China's Growing Influence: Coming for Bikes and Beyond

It seems like it’s not just the bicycle industry that’s trying to navigate through the long cold winter that is the post-pandemic – also the automobile industry, especially long storied brands, is facing its share of troubles.

The rise of Chinese EV manufacturers like BYD, NIO, and Xpeng have posed significant competitive challenges to the traditional European automobile industry, quickly reshaping market dynamics and putting a lot of pressure on the companies to adjust operations, product, and strategies.

Volkswagen (VW) is closing multiple German plants and cutting jobs to manage decreasing demand and intense price competition. BMW, fighting with rising costs and very disappointing Q3 2024 results, has also announced workforce reductions. At the same time, Bosch, the world’s largest auto parts supplier, plans to cut 7,000 jobs globally as EVs require fewer mechanical components, decreasing demand for its core products. These developments show how Chinese EV brands, with their affordability and advanced technology, are rewriting the competitive landscape, forcing European automakers into a race for survival in the electrification of the industry.?

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• BMW ruft in der Auto-Krise 1,5 Mio. Fahrzeuge zurück | Politik | BILD.de

It’s of course not only in the car industry that Chinese companies are reshaping the landscape – there are many examples:?

Shein in the fast-fashion clothing industry, putting H&M and Zara under pressure; Temu challenging Amazon and all other e-Commerce platforms; Tiktok swapped the young generation’s social media, DJI dominating the drone industry, Insta360 outcompeting GoPro. More and more Chinese products, brands, and apps are coming into our life, fueling consumption.?

But how about the bicycle industry ??

I have observed over the last few years how Chinese companies are expanding themselves, and I could see how they also apply the same logic and approach toward to bicycle markets, expanding reach, building product, and utilizing social media to garner attention,?

Firstly, we should keep in mind that China is the world's largest hub for smelting and refining minerals. After being extracted in other countries, a significant portion of minerals undergoes the refining process in China. This is because these industries are highly polluting, and local governments in China often turn a blind eye to any environmental concerns.During the Russia-Ukraine war, while the rest of the world sanctioned Russian crude oil, China was able to purchase it at discounted prices paying with RMB. So to speak, they have a good advantage on raw material cost. Furthermore, China's vast domestic market provides a substantial internal demand, which helps reduce production costs.

When it comes to consumer goods and consumer electronics, without tariff, China's manufacturing capabilities are arguably the most competitive in the world.

The strategies are simple:?

• Great Value for Money – Product and Marketing Strategy?

Shein might be the best example that’s seen in the wider public. In the bike industry, taking Aventon and Tenway as an example:?

1. They invested millions to buy online ads and get on top of search engines. Quickly, they gained the consumers’ eyeballs and built up the brand awareness – both companies got supported by significant capital
2. They have the most competitive prices. Both feature hub motor bikes at only USD1599, and 1399, going down to 899 and below. Surprisingly, they also have good designs. Usually their designs are heavily “inspired” by other popular brands. You could see Aventon had been “inspired” by Radpower; Tenway also offered “tribute” to Coboc, Riese & Muller, and Vanmoof.?
3. They have a strong supply chain to support them. The founder of Aventon is the second generation of a Chinese bike assembly factory called JaHong. Similarly, the founder of Tenway is also the second generation of a South China frame/assembly factory. They both have their own vertically integrated supply chain and manufacturing know-how. Plus, for E-kits they only work with Chinese suppliers. Aventon’s mid motor is from Gobao. The brand probably doesn’t mean anything to most people, but they are the biggest controller manufacturer for 2-wheels in China. Their annual production is about 15~20 million units per year, and they just started entering the complete E-bike drive unit system with Aventon being their first customer. The new Aventon mid-motor bike MSRP is USD2599. Needless to say, Bafang, Amanda, and ShengYi are all Chinese E-kit companies and I have worked with them all – super competitive prices, and all of them all have good experience in the market for many years so at least there are some guarantees for support.?

I have been talking to some Taiwanese drive unit companies, and even though TW is also known for electronics manufacturing, most new Taiwanese players from electronic companies, no matter how big their mother companies are, THEY DON’T GET IT. Development is slow and dated; price is super high and there is no global service networks.

Quick summary for Chinese companies successful formula: Big capital investment into marketing; Good design tribute (homage?) to other trendy brands; Super competitive pricing; and good supply chain management to support them.?

Sounds familiar, right? Compared to Shein and some other globally successful Chinese companies, this is exactly what they do. And, let’s face it – who doesn't like products with great value for money???

• Acquisition?

The Chinese bicycle industry has recently acquired a lot of European companies, ranging from bike assembly factories, distributors, and, eventually, even brands.?

Just to name a few, GoldenWheel from TienJing acquired some Eastern European assembly factories; Keeway acquired Mifa and its brands. Cycle Union was acquired by the Chinese (although the boss moved to Singapore and became Singaporean). United Wheel acquired Huffy a long time ago; the major shareholder of Kent International is also from China.?

The list goes on. If Chinese can acquire football clubs, why not bicycle companies? In fact just these two years many big brands were in acquisition talks with Chinese companies.

• China is trying to make its own Bicycle Supply Ecosystem?

Every time when I explained China to people from the Western world, I always had to remind them that China is arguably the most capitalistic society in the world. However, unlike the United States, it operates without the rule of law. Think other countries are the "Wild Wild West"? Look at the Chinese market—that's the real Wild Wild West. Yet, at the same time, China is an authoritarian state, where many business policies are dictated by the government.

This may sound contradictory, but if you understand China's history, it aligns perfectly with the logic of its commercial activities and government interventions dating back to thousand years ago, the Song, Yuan, Ming, and Qing dynasties. Understanding the government's direction and mindset is crucial. Often, you won’t learn about China's policies directly from newspapers or official statements. You need to "read between the lines," listen, observe, and sometimes even sense what’s in the air. Let me give you a hint: Xi Jinping’s speeches can be a valuable guide.

Currently, in China, the most critical factor is what Xi Jinping likes and supports. He has the power to dismantle an entire industry, like the private education sector, overnight, while simultaneously championing the growth of solar panels and electric vehicles. Fortunately, Xi Jinping likes bicycles(or people believe he likes bicycles), as they align with his vision of "health/sport " and "green mobility." This might explain why, despite having so many more lucrative opportunities, DJI chose to enter the bicycle drive unit market.

The core philosophy of China’s industrial policy is straightforward: "Self-reliance in manufacturing, free from reliance on foreign brands."

I believe China is working to establish its own bicycle ecosystem. They aim to cultivate domestic manufacturers to replace Shimano, SRAM, and even Bosch. In some cases, so-called "leading enterprises" are expected to shoulder the responsibility of supporting and developing the entire supply chain ecosystem. I recall someone mentioning that these leading companies often have government backing, but one of their key performance indicators is the ability to drive growth among related upstream component manufacturers.

Of course, industrial protection policies are not unique to China. However, the level of execution, determination, and resources available to support these policies is unmatched by most other countries (let’s not forget that? their policies can remain consistent over a long period because they don’t have to care about people). I see XDS as the most successful representative of this strategy.

In OEM manufacturing, they are virtually unbeatable. They outperformed Giant to secure Trek as a key client and are now Trek’s most important partner. I’ve also heard that several North American and European brands are collaborating with XDS. In recent years, with the rise of China’s domestic market, XDS quickly became the top-selling brand in the country. They strongly support local component brands, such as Li-twoo—China’s answer to Shimano—which has worked closely with XDS during this wave of growth.

Recently, XDS invested in acquiring the Astana Team. On the branding side, they have adopted a strategy similar to Specialized and its S-Works line: mid-to-low-end bikes are still sold under the XDS name, while high-end models are branded as X-Lab. They also sponsor the Chinese national team.

The industry is now speculating—what’s XDS’s next move? They’ve started expanding to international markets. Given their capabilities, I believe they can easily enter any market. Check below website:?

Pro Bike Singapore

Overall, it is not a bad thing for consumers. Consumers will have more choices and also, they could buy cheaper. However, for those of us already working in the bicycle industry, it raises important questions about what the impact will be on us??

1. Brands – we must keep being innovative, continue designing good bikes and not just buying off-the-shelf mold frames/bikes. Control the cost, buy smarter. The sourcing team should also be more open-minded to explore new suppliers and make sure you could stay competitive. The good thing about the bicycle industry is that bicycle brands usually have more personality. That's why Shein might hurt some big fast fashion brands, but won’t kill all (unfortunately, it seems people buy more clothes than bikes for whatever reason)?
2. I do see Chinese suppliers are putting more and more pressure on Taiwanese suppliers. From Assembly factories to parts. In the past a lot of Taiwanese thought we could still win on our quality and service. But, to be honest, not anymore. Unless you are companies like FSA, Tektro and KMC, who have already built their own “moat”, with other companies, I am not so sure. Taking Saddle/Grip as an example, I have seen more and more Chinese companies that could make pretty good saddles with very attractive costs. Just a few months ago my cousin showed me a Merida saddle which he bought in China and delivered to Kunshan. He showed me – the look was pretty identical to the Specialized Power Comp saddle, and the quality was surprisingly good. Most surprising was, he bought it from an authorized Merida online dealer for only RMB 45(USD 6.25),which? was cheaper than Velo OEM price… and yet, it included dealer margin, Merida margin, freight and finally VAT. You can find the Specialized Power Comp saddle USD139 online here in the USA.?
3. Or ….. Ask your broker to talk to Chinese investors??

Finally, Christmas is coming :?

You better Watch out, you better not cry, you better not pout, I’m telling you why, China brands are coming to town?

Merry Christmas