The Indonesian Bicycle Market The Indonesian Bicycle

Exhibitions
The Indonesian
Bicycle Market
Text & Photos: Editorial Dept.
W
ith a population of 244
million, Indonesia is the
fourth most populous country in
the world. The average population growth rate is 1.06% annually, and due to absence of population control policy, there are
a great number of young people
in Indonesia. The majority of
the population is concentrated in
urban areas, and forms the largest driver of consumer demand,
which creates extensive business
opportunities for the country’s
domestic market.
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The ASEAN Effect
The ASEAN+1 and
ASEAN+3 economic communities give the Southeast Asian
region an economic potential
similar to that of the European
Union. This economic bloc has
a population of more than 600
million – over two billion when
the ten main ASEAN nations are
combined with China, Japan,
and Korea to create ASEAN+3 –
and has become a stepping stone
into the markets of Africa and,
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through West Asia, into the Islamic world as well. Because of
this, the Southeast Asian market
has attracted a lot of attention
from overseas and Taiwanese
firms in recent years. Many overseas and Taiwanese companies
have been turning to Southeast
Asian countries such as Vietnam,
Cambodia, and Indonesia to
place their orders due to the EU’s
anti-dumping duties on Chinese
bicycle firms.
Besides being the largest
economy in Southeast Asia, In-
Exhibitions
▲With a population of 244 million, the Indonesian bicycle market is booming.
▲Indonesia is the largest economy in Southeast Asia with enormous opportunities. Prosperous
Jl. Jenderal Sudirman is in the heart of downtown Jakarta.
Steady Economic Growth
donesia also possesses financial
and political stability, a growing middle class, and abundant
natural resources, which are key
factors contributing to the country’s economic growth. Additionally, Indonesia’s relatively calm
democratic politics during the
last five years, massive domestic
market, and explosive economic
growth have all contributed to the
positive structural transformation
of the Indonesian economy.
I n d o n e s i a ’s e c o n o m i c
growth rate in 2011 was 6.5%,
higher than in 2010, and 6.23%
in 2012, placing Indonesia second place worldwide, trailing
only China, in terms of economic
growth. The country’s vast domestic demand is the major force
that enables Indonesia to continuously maintain an economic
growth rate in excess of 6% annually. Thanks to its growing
middle class, Indonesia has a
powerful household consumption
rate. Sixty percent of Indonesia’s
GDP comes from domestic conwww.biketaiwan.com
sumption – the US, Brazil, and
India are the only three countries
worldwide that are on a par with
Indonesia in this respect.
The middle class is the
major consumer group in Indonesia. At present, the middle class
population numbers around 40
million, and accounts for 16% of
the total population. Per-capita
income grew from US$2,172 in
2008 to US$3,495 in 2011.The
growing number of job opportunities and higher wages are the
chief reasons for the steadily expansion of the Indonesian middle
class in recent years.
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Exhibitions
▲ Ethnic diversity is one of the most distinctive features of Indonesia.
▲ Indonesia has the world’s largest Islamic population. Indonesia and Malaysia are the most prominent Muslim countries in ASEAN, and Malaysia has
become a center of Islamic finance in recent years.
The National Monument (Monas) is an
important sight in Jakarta.
Mainly Mountain Bikes
Mountain bikes are currently the leading type of bicycle
sold in the Indonesian market.
According to data provided by
several local Indonesian bicycle
firms, mountain bikes account
for approximately 70% of whole
bicycles sold in Indonesia. It’s
worth noting that Indonesian
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mountain bike riders have recently
captured numerous
honors in Asian
mountain bike competitions and the
World Cup downhill
competition. The
popularity of mountain bikes has not yet
abated, and the average unit price
of a mountain bike in Indonesia
is currently around US$300.
In the wake of rising income and an ever-expanding
middle class, Indonesia’s road
bike market has also been growing: road bikes account for nearly
20% of bicycle sold in Indonesia,
with an average unit price of
approximately US$650. Most
road bikes are sold in the greater
Jakarta area. The remaining 10%
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of bikes sold in the Indonesian
market consist of city bikes and
fixed gear bikes. While fixed gear
bikes were exceptionally popular
in the recent past, the impact of
SNI enforcement pushed importers to lower prices in the face
of great inventory pressure, and
many stopped importing fixies
after their inventories had decreased. As a result, while great
numbers of young people ride
fixed gear bikes in Jakarta, they
have become very hard to find in
bike shops.
SNI Affects Import Sales
Bicycle sales in Indonesia
have shown great momentum
in the last few years. According
to numerous local agents, sales
have risen by over 15% almost
Exhibitions
▲All completed bikes on the
Indonesian market must have an
SNI sticker before they can be sold.
every year since 2010. However,
following the implementation of
the mandatory Standard National
Indonesia (SNI) system, some
importers have culled brands
with relatively poor sales, which
has slightly reduced the sales of
foreign brands in the country.
As many as 50% of all bicycles
sold in Indonesia in the past were
imports, and Chinese bicycles accounted for most of those.
SNI regulations require importers to submit imported bicycles for inspection, and this policy has ensured that low-priced
bicycles imported from China
(which are even more inexpensive than locally-made models)
are almost totally unprofitable.
This government non-tariff trade
▲Indonesian importers were greatly impacted by the implementation
of SNI. Importer Bike Colony had a booth at the recent Inabike
show.
barrier both protects the local
bicycle industry and stabilizes local market prices, preventing cutthroat price competition. At the
same time, since high-end and
mid-range bicycles have stable
prices and remain relatively profitable, the SNI policy has encouraged the Indonesian bicycle industry to upgrade. Since the parts
and accessories used on bikes
for sale on the domestic market
or for export to the European
Union are relatively high priced,
the Indonesian bicycle market
is gradually shifting from entrylevel bikes to mid- and high-end
models.
The SNI system is a tall
barrier designed to keep imported
bicycles out of the Indonesian
▲A growing middle class means more motorcycles and cars
on the road.
market. This anti-competitive
move comes at a certain cost,
however: consumers will have to
pay more to purchase bicycles,
and some consumers will be deterred by the higher price tags on
bikes. Sales of imported bicycles
took a definite hit following the
implementation of SNI, and local industry personnel feel that
import sales growth during 2012
was roughly 5%, which was
somewhat off from 2010 and
2011.
Nevertheless, overall sales
in Indonesia continued to rise
in 2012, reaching 6.5-7 million
bicycles according to analysis of
sales statistics provided by various firms. Indonesia’s three leading bicycle companies accounted
urrent per-capita monthly income
C
for Indonesian workers is around
US$220-230. Chin Haur employees
are hard at work on a production line.
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There is a large income disparity in
Indonesia, and it is common to see
many poor people on the streets.
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Exhibitions
▲From left to right: Kenda president Yin-Ming Yang, Lu Hai Holding president ▲Kevin Yeh (left), the eldest son of Ling-Yun Yeh, has
Jin-Lu Wu, Lu Hai Holding Indonesian consultant Zhong-Lie Chiu, and Giant already started working independently and participating in
and Kenda’s Indonesian agent Ling-Yun Yeh.
the family business. At right is Indonesia Giant direct store
manager Kun-Lung Zeng.
▲Road bike sales have increased in recent
years. Pictured is a UCC road bike.
for one-third of these sales, while
imported bikes accounted for
roughly 4.0 million units. It is
worth noting, however, that sales
have begun to stagnate in the
greater Jakarta area, even while
sales are still growing in other
parts of the country. It is still not
known whether this presages a nationwide cooling in bicycle sales.
Import Tariffs
▲MTBs are the best-selling category in
Indonesian market. Merida mountain bikes
are very popular.
▲Many consumers were looking for deals
at the Inabike show, so a number of local
exhibitors sold their products directly from
their booths.
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Indonesia’s import tariffs
on bicycles and bicycle parts and
accessories are not necessarily
high, and the tariff on unpowered two-wheeled bicycles and
other bicycles is 15%. The tariff
on racing bicycles is an evenlower 10%, as is the tariff on
most bicycle parts and accessories. However, an additional 10%
value-added tax is added to the
prices of imported products. Furthermore, under the SNI system,
which constitutes a non-tariff
trade barrier, all bicycles sold
on the market must bear an SNI
approval sticker (while SNI approval is currently not needed for
parts and accessories, this may
change in the future).
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In view of these measures,
as well as all the time-consuming
paperwork that must be done,
there are still significant barriers
to the sale of imported bicycles
in Indonesia. An additional consequence is that some relatively
widely-dispersed stores have no
means of selling imported bikes,
and cannot implement marketing
strategies aimed at customers or
dealers as their counterparts in
China or Malaysia can.
Indonesian Bicycle Manufacturers
The majority of bicycle
firms in Indonesia are assembly
companies, and the parts needed
by these companies mostly come
from China, Taiwan, and other
areas. Of these, China supplies
the greatest quantity of parts
and bicycles to Indonesia, but
unit prices are rather low and
the exports mostly consist of
starter models. In contrast, most
bicycles with high unit prices are
imported from Taiwan. Taiwan is
Indonesia’s third most important
source of imported bicycles. Indonesia imports roughly 4-5 mil-
Exhibitions
lion bikes annually.
The three major bicycle
manufacturers in Indonesia are
Insera Sena (Polygon), United
Bike, and Wim Cycle. In addition to making their own branded
bikes and selling them on the
domestic market, these three
major bicycle firms also export
their bikes to the EU and China.
According to Eurostat, Indonesia
exported 550,432 bikes to the EU
in 2010. Beginning on June 5,
bikes exported from Indonesia,
Malaysia, Sri Lanka, and Tunisia to the EU had to pay an antidumping duty of 48.5%. The
three major bicycle makers were
exempted from this duty, but
Fuji-ta stopped its bicycle production in Indonesia in the face
of this stiff anti-dumping penalty.
Distributors, Dealers, &
Agents
The three major manufacturers also sell high-end foreign
brands through their own distribution channels. Insera Sena
sells Dahon, Kona, Marlin, and
Tern; United Bike sells Specialized, with an average unit price
of US$700 and above; and Wim
Cycle sells Cove. Other brands
not sold by these three leading
companies include BMC, Giant, Merida, Pinarello, and Trek,
which are marketed by importers
or agents. According to an agent
in Jakarta who represents Giant,
Kenda, and SRAM, bicycle sales
in Indonesia have begun to slip
over the past five years. After
various major brands entered the
▲United Bike president Andrew Mulyadi.
Indonesian market, hoping to
take advantage of the country’s
huge population, price-cutting
competition set in, which gave
importers less room for survival.
Giant bicycles sell for
roughly US$800-US$1,500, and
the company currently has more
than 30 employees in Indonesia.
Established in 1992, Pacific is
the Indonesian agent for China’s
Phoenix bicycles. Foreign brands
as Specialized, Giant, and Merida
are favorites of Indonesian consumers and have sold well, but
SNI has had a significant negative impact on imports.
▲United Bike's impressive office building.
▲United Bike GM Arifin Tedja is primarily responsible for
managing the domestic sales for Specialized. His wife (left)
loves traveling. She is not only a famous painter, but also a
guiding force for United Bike.
▲United Bike not only produces bikes in Indonesia but also
in Ningbo China. A rare opportunity for these three busy
brothers to get together. From left to right; Henry Chen, Der
Lian Chen, and Andrew Chen.
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Exhibitions
Marwi president Patrick Pai (left) and Chin Haur president J. C. Lin (right) have more than
20 years of investment experience in Indonesia.
▲Taiwanese and Indonesian bicycle industry executives exchanged opinions and took photos
together at the show.
Founded in 2009, Bike
Colony is the Indonesian agent
for Merida, Bianchi, BBB, and
Schwinn. According to store
manager Harry Apriyanto Noor,
the implementation of the SNI
system has made it difficult to do
business. Sales are still growing,
but are nowhere near as good as
in the past. Manager Doddy of
EuroCycle, the main Indonesian
agent for the brands Lapierre and
Wilier, noted that while SNI presented problems in the beginning,
such obstacles can be overcome
by brands that are determined
to sell their bikes in the Indonesian market. As a result, Doddy
has ensured that all the products
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he represents pass certification. Also, folding bikes sold by
Happy MTB – which has been in
existence for 20 years and represents high-end brands Velo and
Maxxis – are very popular among
consumers.
Taiwanese Manufacturers
Marwi – which has been in
Indonesia for 21 years – and Chin
Haur are the leading Taiwanese bicycle firms in Indonesia.
According to Marwi President
Patrick Pai, a plant in Indonesia provides good access to the
Southeast Asian market, and particularly the ASEAN countries.
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Pai notes that the average salary
in Indonesia is roughly equivalent
to NT$7,500 (US$250), which
is bearable for manufacturers.
In addition, there is a plentiful
supply of young workers. These
conditions are indeed highly attractive to companies manufacturing labor-intensive products.
Furthermore, unlike in China,
which has implemented a population-control policy and has an
aging population, Indonesia has
a young consumer base. As a result, Indonesia has a consistently
high level of consumer demand.
However, Pai also reminds the
industry that while monthly salaries in Indonesia were equivalent
to NT$1,000 (US$33) 21 years
ago, they have now risen to the
equivalent of NT$7,500, more
than seven times as high as 21
years ago. But of course salaries
must increase if consumption
is to rise, and Indonesia’s most
attractive feature is its strong domestic demand.
Because local materials
have uncertain quality, Marwi
must import its raw materials
from Taiwan, China, or other
areas. According to Pai, assembling bicycles in Indonesia for
export is a difficult line of business. The value of the Indonesian
rupiah has been stable during the
last few years, so export profits
have not necessarily been very
good. In contrast, as long as
quality is good, there are many
opportunities to sell bicycles in
the domestic market. But in view
of restrictions on sales volume
and the many imitation products
on the market, firms should look
Exhibitions
to the ASEAN countries if they want
to establish a solid niche. Companies interested in establishing a plant
or investing in Indonesia, says Pai,
should therefore take a well-integrated
approach. Because Indonesia’s licensing and tax systems are complex and
tedious, it inevitably takes a fairly
lengthy amount of time to apply for
new company documentation and
complete other procedures. And because civil service personnel receive
low salaries, there is an ingrained
culture of gift-giving, which should be
factored into any business strategy.
▲Happy MTB represents brands such as Velo, Prologo, Cateye, Maxxis, and Ranking.
▲Marwi Group CEO Patrick Pai, Tony Chen, and Marwi GM James Huang.
▲Airbone president Ying-Che
Huang demonstrates one of his
company's pumps.
▲Bike Colony store head Ari.
▲Oyama president Eric Wang.
▲Trek was displayed by its agent at Inabike.
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Exhibitions
▲ Chin Haur has had a plant in Indonesia for many years. President J. C. Lin personally ▲Michael Tan, son of Happy MTB
led his team to greet the arrival of each guest at their Inabike booth.
president.
▲ Many Taiwanese bicycle manufacturers also came to visit the
Indonesian market. From left to right: Prowheel CEO Yu-Sheng
Gao, Guangzhou UCC product manager Wei-Quan Lin, Asama
Vietnam GM Paul Fang, Min Ta special assistant Wei-Ze Cheng,
and Chosen salesman Jia-Ying Hsu.
▲ Hsin Ta president T. C. Yang (left) and
sales manager Huang-Zhi Liu personally
introduced their products to customers.
▲Magura president Bernd Herrmann (left) and
sales manager Jimmy Hung (right).
▲Ghost has been on the Indonesia market for two years.
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BMU 2013 Autumn
▲From left to right: Asian cyclist Ben Liao, Marechal GM
Tinker Hung, Samox GM Chaur-Yuan Cheng, Bengal president
Jack Chen, Hi-Bike GM Danny Kuo, Rapid Horizon president
Jones Tien, and Samox associate manager Zhiyong Lai.
▲Genuine president Chun-Ling Yeh.
▲Han-Wen Chuang (left) and Fu-Xian Chuang (right) of
Teny Rim, whose products are sold directly to Indonesian
consumers.
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Exhibitions
▲Durmas president Wilson Chen (right) and international sales
manager Yin-Ru Chen.
▲A-Pro Tech Suspension Systems Division manager Ivan Lin (right)
is very optimistic about the potential of the Indonesian market.
▲Sepeda Kit is Trek's Indonesian ▲Olympic Pro sales manger Yuan-Yu ▲Ideation GM Florencia Lu (left) and sales manager
agent and currently has five dealers. Liao came from Vietnam specifically to Chaozong Fan.
study the Indonesia market.
▲This year marked the first time Pinco took part in Inabike. From
left to right: marketing manager Hugo Hu, Mei-shui Wu, and product ▲T-One sales manager Hope ▲This Airbone pump is lightweight
Liu.
and easy-to-use.
manager Wei-Chu Ye.
Aricle developed a
handlebar umbrella to
deal with the frequent
heavy afternoon rains
in Southeast Asia.
The distinctive
appearance of
United
Bike's
custom frame
attracted a lot
of attention.
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Exhibitions
▲From right to left: Co-Luck President Charlie Chen, Taya special
assistant to the GM Chung-Hsung Lin, and marketing director Ya-Fen
Wong.
▲Importer Butik Sepeda is Indonesia's local UCC
agent.Daniel is on the left.
▲Left to right: Taiwan Cheng Feng VP Chung-Zhe Lee, GM Zhong-Chia
Lee, and colleague Yong-Yu Lee.
▲Chien King GM Tony Liang and his wife have attended
Inabike three times.
Many companies employed
local Indonesian models to
show off their products.
Giant sells a
complete range of
frames and bikes
in Indonesia.
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▲Unite Creative sales manager Bo-Yuan Chen
(left) and Wei-Xun Lee (right), a second-generation
employee at Hsing Chang Horng, came to Indonesia
to actively expand the customer base. In the middle is
former Indonesian bike magazine editor Dewi Pratiwi.
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Exhibitions
▲This marked Shun Shing's second year
at the show, and manager Qi-Chun Hung is
eager to explore the emerging market.
▲Agogo GM Sen-Piao Lai.
▲Conviva GM Harry Zhao (left) brought the new brand Intreoid into
the Indonesia market.
▲Taioku production
Hung Hsu.
manager
Ming-
▲Cian Fa manger Scott Liao (right) hopes to increase
exposure opportunities for the Mars One brand. Nankon
sales associate Xin-Bin Su is at left.
▲EuroCycle is a local Indonesian importer. ▲La Bici VP Jack Lin (first from right) talked with
Pictured is boss Doddy Kolopaking.
customers at Inabike.
▲Hendra Mursalim is the Indonesian agent
for road bike brands such as cboardman
and Exitway.
▲Wim Cycle GM Chun-Chi Huang visited ▲Insera purchasing manager Yao-An Shih
the show on first day and attended a (left) visited the show on the first day with
dinner party hosted by Marwi.
his colleagues.
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