Production relocation from China to Europe is one of the options for assemblers who are looking for new locations. But what are the most attractive countries in Asia at the moment for the relocation of production out of China? Is it Vietnam or do you see more activities in other countries?
At the moment Bangladesh and Sri Lanka are holding the biggest potential for investment by the bicycle industry. India might become very interesting in the future as well, but that will take some years. The implementation of a safety standard recently by India’s national government will certainly improve the quality of the ‘made in India’ bicycles and help to create the right conditions to increase the export in the future. We also don’t see much new developments in Indonesia and Thailand. The same goes for the free trade agreement between the EU and Vietnam. Regarding bicycle production for the European market the EU-Vietnam FTA does not play an important role as far as new investments in the bicycle industry are concerned. Of course you can see a relocation of production from China to Vietnam, but that only causes moderate growth in volume. The e-bike is the perfect storm for the Asian companies. This product category brings in much higher revenues compared with regular bicycles. This applies not only in Europe, but also in Asia. Therefore more and more Taiwanese but also Chinese companies open subsidiaries in Europe to benefit from the e-bike boom.
Speaking about Eastern Europe; there is a lot of activity in this region with new companies establishing factories in Romania, Bulgaria, Hungary and Poland while existing ones increasing their capacity. Do you think the e-bike production and component industry will eventually concentrate in one of those countries? Where do you expect the creation of a Bike Valley as in Portugal?
The existing factories are now busy changing their production lines from bicycles to e-bikes, However an e-bike takes at least 25 percent more time to assemble so if you want to keep up your production volumes, substantial investments in capacity and logistics are necessary. New companies are being established in all those countries in Eastern Europe and they select diverse locations for different reasons. We don’t see the added value of a ‘Bike Valley’ concept. Except for rim and wheel building lines the production of parts and accessories close to bicycle factories don’t bring a lot of advantages. Bicycle parts are so easy to transport that you don’t need to establish new factories in the vicinity of bicycle assemblers.
Is the production capacity for e-bikes in Europe growing by tens of percent in line with the market development?
The European industry is focusing on e-bikes. First and foremost we see investments in the transformation from bicycle to e-bike assembly and not particularly in the total number is units. Those who have arranged their e-bike production the most efficiently can reach a flow time of 90 seconds. But you can’t reach that without substantial investments in the production, including the robotization of some processes. Companies do anticipate on an increase in production volume in future as well but focus on efficiency first. Even the brands who only sourced their e-bikes so far are now considering to start assembling these themselves. The volumes have become too big to have everything built by one subcontractor so they have to subdivide their orders among a range of assemblers. As a result they lose flexibility and it makes quality control more complex. For them the best option is to open a factory themselves.