World’s Top Bicycle Maker Says the Era of ‘Made in China’ Is Over
Giant Manufacturing Co. saw the writing on the wall early on. The world’s biggest bicycle maker started moving production of U.S.-bound orders out of its China facilities to its home base in Taiwan as soon as it heard Donald Trump threaten tariff action in September.
“When Trump announced the plan of 25% tariffs, we took it seriously,” Chairwoman Bonnie Tu said in an interview at Giant’s Taichung City headquarters in Taiwan. “We started moving before he shut his mouth.”
Giant is part of a growing number of global firms that are pivoting production out of China in reaction to the increasingly hostile trade relations between the two superpowers. Intel Corp. this week became the latest to say it’s reviewing its global supply chain, while Li & Fung Ltd., the world’s largest supplier of consumer goods, said the trade war is spurring it to diversify away from China.
“Last year, I noticed that the era of Made In China and supplying globally is over,” Tu said. The maker of mountain and racing bicycles closed one plant in China at the end of 2018 and shifted most U.S. orders out of the country. Giant announced last July it is setting up a factory in Hungary “as moving production close to your market is a trend.”
Giant currently has one plant each in Taiwan and the Netherlands, and still has five remaining in China. The Taiwanese site will be working double shifts to keep up with the relocated orders. The company said it is seeking a partner in Southeast Asia.
“The world is no longer flat,” said Tu, borrowing from Thomas Friedman’s book “The World Is Flat,” whose title in a metaphor for viewing the world as a level playing field for companies and trade. “The concept is no longer affordable in every place.”
Li & Fung’s chief executive officer echoed Tu’s sentiments, saying China became the factory to the world because it is so efficient in producing goods. Sourcing became very easy, CEO Spencer Fung said in a presentation in Hong Kong on Monday.
“They just put all their eggs in the China basket because the Chinese are very capable,” said Fung. Now, “the trade war is basically forcing people to rethink their entire global sourcing strategy and to diversify away from China.”
Giant shares soared 9.8% on Monday for their biggest gain ever, after the company said it expects a quarter of its revenue this year to come from e-bikes. The stock fluctuated between gains and losses early Tuesday. Li & Fung jumped as much as 6.4%, the most in three months, in Hong Kong Tuesday.
Giant’s willingness to quickly steer orders away from the tariff-hit Asian nation -- long regarded as the world’s low-cost workshop -- has been noticed by investors and analysts. The stock, which doesn’t carry a single sell rating from brokerages tracked by Bloomberg, has climbed almost 80% this year to the highest level since 2015, after four straight years of declines.
Giant’s global brand awareness and flexible manufacturing are key to avoiding tariff risks, Daiwa analysts Helen Chien and Anita Li wrote in a June 5 report, in which they initiated coverage of Giant with an outperform rating.
Tariffs are adding $100 on average to the price of bicycles made in China and exported to the U.S., compared with those made in zero-tariff areas, Tu said, explaining the rationale for the switch to the Taiwanese site.
The switch, however, comes with higher costs for employee payouts, automation and no China-like economy of scale for suppliers. Tu declined to peg the relocation costs beyond saying the company’s “bottom line would be better without the U.S.-China trade war.”
That’s why Giant is open to reverting production to its Chinese plants if the U.S. and China are able to hammer out a trade deal. If America “decides to remove the 25% tariff, we will move the production back to China right away,” Tu said.
Why doesn't Giant make bikes in America? When the tariffs are lifted, then it will be the high cost of shipping the bikes. Just like most auto companies moved to the US, I really believe Giant will make that move. Actually they'll going to have to. All Trump has to say is "any Chinese company moving their production out of China will also meet the new tariffs". Case settle.More of an economics article, and I think one key phrase in there is "...and shifted most U.S. orders out of the country." So the headline is a bit off.
The driver was 27Sad news. Tunnels are bad, Old drivers can not see well, should they be punished for for eye sight, yes and their family should be sued for every thing they have.
It's subernice (sp) which keep these idiots on the road.
Now Japan has taken a new approach to renewing license after the age of 70. Google it if interested.
The driver was 27