Manufacturers face flat tire when sales bubble bursts

Bicycle manufacturers were quick to cash in on China's booming bike-sharing industry after going through lean times.

But the ban rolled out by 12 major cities in the country on new cycles will hit domestic companies in the pocket, driving a new round of restructuring in the sector.

"It is clear that there's a bottle neck in market demands and manufacturers should have taken that into account at the very beginning," said Guo Jinzhi, chairwoman of the Beijing Electric Bicycle Industry Association.

"As some manufacturers focus mainly on producing shared bikes and expand their production capacities without practical plans, the ban will definitely slow down their growth," she added.

In July, the Ministry of Transport reported that China had more than 16 million shared-bikes, which posed serious challenges for local governments, such as traffic chaos and safety concerns.

In August, Beijing called a halt on new dockless cycles, joining 12 other Chinese cities.

"The new ban is a warning to the bike manufacturers," Guo said. "Actually the emerging bike-sharing sector may slow down the manufacturers' transformation and upgrading process."

Cycle manufacturers and workshops have expanded their operations to cope with this renaissance in the industry.

But the fallout from the ban is likely to hit them hard and wreck growth targets.

"Now they must learn the lessons," Guo said. "The key is to better meet consumers' needs and to adapt to a changing environment."

Back in the 1980s, China was known as the "Kingdom of Bicycles" as they were crucial to daily life. More than 30 years later, bike-sharing has made pedal power cool again.

Last year, one of the big boys in the sector, Ofo Inc, linked up with Tianjin Flying Pigeon Cycle Development Co, an iconic Chinese brand.

Then in January, rival Mobike Technology Co Ltd signed an exclusive deal with Foxconn Technology Group, aiming to double its annual bicycle production capacity to more than 10 million machines.

Finally, in May, Ofo teamed up with leading bike manufacturer Shanghai Phoenix Bicycle Co Ltd to produce five million cycles.

Statistics from China Bicycle Association showed that more than 80 million bikes are produced in China every year.

More than 20 million machines were sold domestically, which was nearly the equivalent of the total orders placed by Mobike and Ofo in 2017.

"As bike-sharing has already interrupted the previous sales and marketing system, the ban will have a big impact on the manufacturing industry," said Mo, the marketing manager at Flying Pigeon, who only gave his surname.

"Bike sharing companies will place less orders than before," Mo added. "And it will be difficult for manufacturers to (reboot) their former sales system. Both their earnings and profits will decrease."

Mo does not expect the manufacturing resurgence to last long.

In the end, traditional bicycle manufacturers will have to go through a transformation if they are to survive.

"Bike manufactures should add Internet Plus strategy and high-tech elements to provide more services and meet consumers' increasing needs for sport and entertainment," Mo said.