Bonnie Tu X Young Liu: Giant Group looks forward to thriving for another 50 years

Giant Group Chairperson Bonnie Tu (left) and CEO Young Liu.

   Giant Group, the global leader in bicycle manufacture, celebrates its 50th anniversary this year. Bonnie Tu, chairperson of the Company, and Young Liu, CEO, emphasized in an exclusive interview with this newspaper that Taiwan is known as the kingdom of bicycles, and is irreplaceable in terms of output value, technology and innovation, and the development of the bicycle industry is quite worth looking forward to, and the Giant Group looks forward to “thriving for another 50 years”. Giant will achieve this goal through three growth engines, including electric bicycles (E-bikes), two new factories in Hungary and Vietnam, and the promotion of indoor cycling, and Giant is confident that the proportion of E-bikes will soar to 50% in the next five years, leading Giant to continue to reach the peak of its operation.

   Catalyzed by the epidemic, the bicycle industry showed a booming development in the past three years, inventory also hit a record low, dealers in various countries rushed to purchase bicycle, Giant Group got hands full of orders and was in full capacity production, huge profit of more than one time of share capital was earned annually for two consecutive years of 2020 and 2021, huge profit of nearly one time of share capital was earned in the first half of 2022, and the revenue continued hit record high in the first three quarters!

   However, Young Liu also quickly saw the problem. With the mitigation of the epidemic and the improvement of sea transportation container shortage, coupled with the Russian-Ukrainian war triggering high inflation, the consumptive power was weakened, the bicycle industry has also experienced phenomena such as order adjustments and increased inventories.

   Young Liu further said that at present, the market volume of traditional bicycles is flat, returning to the norm before the epidemic (namely 2019), but the output value of E-bikes continues to increase; the inventory level of low- and medium-priced bicycles has indeed increased, especially in the US market, which had a high base in the last year, and the consumption power has seriously declined in the past two months, the consumption power of the European market is also declining, and the problem of long supply chain and shortage of materials still exists. However, Giant has the ability to digest inventory, and E-bike is still growing, the mainland market is still growing, and there are many growth engines that will be launched one by one by Giant depending on market changes.

   E-bikes made by in mainland factories got U.S. tariff exemption

   Speaking of the US market, Bonnie Tu revealed that because there are too many global E-bike orders, it is really impossible for Giant to meet demand, so some E-bikes are produced in mainland factories and then exported to the United States, and in the past few years, E-bikes are produced in mainland factories have been subject to a high tariff of 25% as per the US Section 301, but the Giant’s E-bikes are still sold in the United States. Now, exemption from high tariff is granted to E-bikes and child bicycle as per the US Section 301, the Giant E-bike can be sold at a reduced price in the US market, and will be more internationally competitive, she emphasized that the Giant operation will not fluctuate with the macro-economy, and Giant always looks for opportunities in the past 50 years, grow and obtain better competitiveness in each new opportunity.

   Bonnie Tu said, for example, when the emergence of shared bicycles in the mainland hit Taiwan's bicycle industry hard, Giant decided to expand the business operation in the European market, preemptively made invest in Hungary to set up a factory, and now invest in Vietnam to set up a factory. The Hungarian factory realizes short supply chain and is close to the European market. In-advance arrangement in the Vietnamese factory is mainly based on the judgment that after 2025, Vietnamese bicycles exported to Europe can be granted with zero tariff preference, and this will continue to improve the market competitiveness of Giant.

   Giant recovered the production capacity in three months after the lockdown due to the epidemic in mainland

   Young Liu also added that during the epidemic, many cities in mainland China implemented the lockdown which is an unforeseen situation. For example, when the epidemic just broke out in February 2020, the Giant Kunshan plant could not produce for a whole month, but when the situation stabilized, it took only a few months to recover the production capacity; in April this year, after the experience in the mainland Kunshan plant which was forced to suspend work for one month due to the epidemic lockdown, Giant recovered production capacity within three months by methods such as overtime work and shift adjustment, and its revenue in the third quarter continued to hit a new high of year-on-year growth.

   Young Liu also mentioned that the Giant Group has three major growth engines, including E-bike, which is expected to show double-digit growth every year in the next 3～5 years; the Vietnam plant under preparation and the newly added Hungarian plant, the production efficiency of the two factories will continue to rise in the future, and will provide great growth momentum, in which the Hungarian plant will be invested in three phases, the planned maximum annual production capacity can reach 1 million units, the first-phase production capacity is about 300,000 units, the plant has contributed 100 million euros of revenue in the last year, it is expected that the plant will contribute higher revenue in this year, investment benefits have risen year by year.

   As for the investment in Vietnam, Giant has injected 20 million US dollars to set up a Vietnamese subsidiary, and directly purchased land and factory buildings to quickly bring the factory into production. Young Liu said that the initial planned production capacity of the Vietnamese plant is 300,000 units, it is expected that the production capacity will be maintained at this level for at least 3～5 years, and Giant plans to purchase another 100,000 square meters of land in the new industrial zone, and invest in new factory in the future according to market demand.

   High-end bicycle New growth momentum

   Giant Group has set up production bases around the world to spread investment risks. Young Liu is quite proud to say that Giant is good at factory operation, “our factories are never short of orders, and it is always up to us to select OEM customers”. Giant is one of the largest bicycle OEMs in the world, and possesses innovative research, development and production capabilities, and it understands the market well, but Giant has never been in pursuit of quantities, and instead, it wants to make high-value-added products.

   “If it isn’t bright in the east, it’ll be bright in the west”, Young Liu said, in 2016 when shared bicycle was popular in mainland, the Taiwanese bicycle manufacturers were generally affected. But with the popularity of E-bike in Europe, high-end bicycles and E-bikes with high gross margin have become a new driving force for Giant’s operational growth. In the first half of this year, E-bike accounted for 28% of the group's revenue. In the future, the development of road bicycle will be combined with lightweight electric bicycle, E-Cargo electric bicycle and other markets, “Giant has seen the future of E-bike which is expected to account for 50% of the group's revenue in the future, “within five years, this will definitely come true!”

   Young Liu also observed that in the past, bicycles were ridden during the day and outdoors, “but during the epidemic, we saw many people riding bicycle at home, which is a new opportunity for growth of Giant, bicycles have become a suitable indoor and outdoor sports method, indoor cycling market will be one of the growth engines that Giant will make efforts to explore in the future.

   However, the Giant faces more problems than just peer competition. Bonnie Tu said, since the beginning of 2018, many of the original non-bicycle industry consortiums in Europe, the most typically companies in the automotive industry, began to look into the bicycle market. In the face of these consortiums with huge capital and influence scrambling to buy factories and channels with huge investment, and enter the bicycle industry through diversified merging strategy, you have to say that it is a big challenge. Therefore, Giant has conducted self-examination of the past operation. Giant tried to grasp the opportunities the market offers in the past, but in order to win in the next 50 years, Giant has to make a shift to find out and fill the blank of market”.

   Giant is open-minded and willing to cooperate with the electronics industry

   But Bonnie Tu also admitted that what Giant lacks the most is the electronic technology, bicycles have entered the electronic IoT industry, great changes will occur in core component in the future, many Taiwanese electronics enterprises want to get a piece of the pie. “There are indeed many electronics companies that are willing to cooperate with Giant to develop this market together”. She stressed that if the electronics industry wants to take this road, it will be difficult to catch up, and Giant is willing to open up the mind and open up the opportunity for cross-industry cooperation, Giant welcomes electronics companies who are interested in cooperation to discuss with Giant.

   Bonnie Tu said emotionally that King Liu, the founder of the Giant Group, is a giant, he has brought Taiwan's bicycle industry on the world stage, especially in terms of manufacturing, and the Giant still maintains this production mode at present. After taking over the post of chairperson, despite the setbacks, she made efforts in three directions, including transformation of manufacturing towards short supply chain and closer to market, letting consumers lead the Company's direction, and digital transformation. These three directions are being implemented step by step.

   Young Liu said confidently that no matter in terms of output volume, output value, technology, innovation or others, Taiwan's bicycle industry is irreplaceable in the world, the mainland and Vietnam are the manufacturing base of the bicycle industry, but they are dominated by Taiwanese companies; global bicycle components are also in the hands of Taiwan businessmen, and those who set up factories in Europe are also Taiwanese companies; any creative products in the world will eventually be produced in Taiwan, “Taiwan is the kingdom of bicycles, in the next 10 years, I can't see who can catch up with us!”