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Shimano, the world’s largest bicycle parts maker, will use its new plant in Singapore as a hub for exploring south-east Asia’s high-potential market for sports bikes, the company’s chair and chief executive Yozo Shimano said.
“Our Singapore plant is controlling our major overseas factories,” he told Nikkei Asia in an exclusive interview, adding that as demand for bicycles increased in Asia and Latin America, its Singapore plant, which mainly makes midrange components, would become even more important.
The plant went online in 2023, replacing an old one established in 1973. Investing ¥25bn ($165mn), Shimano renewed the facilities to increase efficiency.
The company was founded in 1921 by ironworker Shozaburo Shimano in the industrial city of Sakai, just south of Osaka.
It develops and manufactures a wide range of parts, such as gears, transmissions, brakes and wheels, mainly for sports bikes including road and mountain bikes, with an estimated global share of 85 per cent.
Shimano has factories in Japan, Singapore, Indonesia, Malaysia, the Philippines, China and the Czech Republic. In co-ordination with the factories in neighbouring counties, the Singapore plant focuses on midrange products, which account for 70 per cent of the company’s production volume.
This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.
The chair, who served as the company’s fifth president until 2021, said the Singapore plant had been playing a key decision-making role in the company’s global operations. It identifies overseas facilities that need investment and passes on suggestions to the head office in Japan, he said. The company will continue to invest about ¥40bn annually in facilities and equipment for medium- to long-term growth, 60 per cent of which will be spent overseas, including in Singapore.
Europe and North America are the largest markets for sports bikes, but Shimano is betting on growth in south-east Asia, where most people once viewed sports bikes as luxuries.
“In countries like Vietnam, bicycles are first and foremost a means of transportation, but as the economy develops, demand for sports bikes will also increase,” he said. He expects roughly 20 per cent of the company’s products will serve end users in south-east Asia in the medium to long term.
The company is accelerating its efforts to promote sports bikes in south-east Asia by holding bicycle competitions in co-operation with bicycle makers and local agencies. It has been operating a museum, Shimano Cycling World, in Singapore since 2014 to foster cycling culture.
But Shimano’s road ahead seems more bumpy than smooth, and taking it requires being well-equipped.
During the Covid-19 pandemic, Shimano’s performance was buoyed by a surge in demand for outdoor gear. Net sales and income reached record highs of ¥628.9bn and ¥128.1bn in 2022, a great leap from the ¥363.2bn and ¥51.8bn in 2019.
“We had anticipated that there would eventually be a slump,” said the chair. In 2023, net sales and income fell to ¥474.3bn and ¥61.1bn as demand declined after the pandemic. The company is now seeking ways to revive its performance.
“At the time when demand was surging, we had to prioritise increasing production and postpone other projects for medium- and long-term growth that we had begun,” he said. Now the company has resumed one of those projects: increasing in-house manufacturing to shorten delivery times.
According to Shimano, the company currently outsources about 50 per cent of its parts for the company’s flagship parts series, Dura-Ace, to subcontractors. “We make products by combining other companies’ excellent technologies and expertise. We cannot make all of them by ourselves,” he said. “[But] the supply chain for bicycles is long, and manufacturing takes time . . . We will be able to shorten the lead time by bringing what we can do in-house to some extent.”
The company plans to increase its in-house production ratio to approximately 70 per cent for Dura-Ace in the next few years and improve production efficiency by utilising digital and other technologies, with an annual investment of ¥15bn. “We should be able to improve profit margins,” he added.
The competition in the market has increased as e-bikes — sports bikes powered by lightweight batteries — become popular and new manufacturers enter the market. “We will be able to take advantage of our many years of experience as a bicycle parts manufacturer and our knowledge of bicycles,” Shimano said.
A version of this article was first published by Nikkei Asia on March 6. ©2024 Nikkei Inc. All rights reserved.
