Giant Manufacturing Co (巨大機械) saw the writing on the wall early on.
The world’s biggest bicycle maker started moving production of US-bound orders out of its Chinese facilities to Taiwan as soon as it heard US President Donald Trump threaten tariff action in September last year.
“When Trump announced the plan of 25 percent tariffs, we took it seriously,” Giant chairwoman Bonnie Tu (杜綉珍) said in an interview at the company’s headquarters in Taichung. “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 nations.
“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 last year and shifted most US orders out of the nation.
Giant announced in July last year that it was setting up a factory in Hungary “as moving production close to your market is a trend.”
The company has one plant in Taiwan and one in the Netherlands, and still has five remaining in China.
The Taiwanese site is working double shifts to keep up with the relocated orders.
The company said it is also 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 is a metaphor for viewing the world as a level playing field for companies and trade. “The concept is no longer affordable in every place.”
Giant shares on Monday soared 9.8 percent, their biggest gain ever, after the company said it expects a quarter of its revenue this year to come from e-bikes. The shares retreated 3.5 percent in Taipei trading yesterday.
The company’s willingness to quickly steer orders away from China — long regarded as the world’s low-cost workshop — has been noticed by investors and analysts.
The shares, which do not carry a single sell rating from brokerages tracked by Bloomberg, have climbed more than 70 percent this year to the highest level since 2015.
Giant’s global brand awareness and flexible manufacturing are key to avoiding tariff risks, Daiwa Capital Markets Inc wrote in a report on June 5.
Tariffs are adding US$100 on average to the price of bicycles made in China and exported to the US, compared with those made in zero-tariff areas, Tu said, explaining the rationale for the switch to the Taiwanese site.
However, the switch 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 US-China trade war.”
That is why Giant is open to reverting production to its Chinese plants if the US and China are able to hammer out a trade deal.
If the US “decides to remove the 25 percent tariff, we will move the production back to China right away,” Tu said.
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