TOKYO/OSAKA, JAPAN — Shimano’s showroom in Osaka is a temple to the technology that has helped the business become a household name in the cycling world. A bicycle weighing only 7 kg and equipped with high-quality components may be readily lifted with one hand. Shimano employees point off products like the Dura-Ace line, which was created in 1973 for professional road racing and is on display again in this year’s Tour de France, which concludes this weekend in Paris. The showroom is linked to the frenzied activity at Shimano’s factory, which is only a short distance away, just as Shimano’s components are designed to work as a package. Hundreds of workers are working nonstop to produce parts to meet burgeoning global demand amid a meteoric rise in cycling’s popularity. At Shimano’s 15 manufacturing facilities throughout the world, the sight is similar. “At the present, there is no manufacturing that is not fully operational,” stated Taizo Shimano, president of the corporation. These are exciting but stressful times for Taizo Shimano, who is the sixth member of his family to oversee the corporation, which is celebrating its centennial this year.
Shimano Cycling World will open a new plant in Singapore in 2022, according to the firm.
(Photo courtesy of Weixiang Lim)
Shimano’s sales and profits have skyrocketed since the coronavirus outbreak broke out, as newcomers flock to two wheels, some looking for a convenient way to exercise during lockdowns, and others choosing to ride to work rather than confront congested public transportation.
Shimano’s net income in 2020 was 63 billion yen ($574 million), up 22.5 percent from the year before. The business expects net income to increase to 79 billion yen in fiscal 2021. Its market valuation surpassed that of Nissan, a Japanese automaker, last year. It is now worth 2.5 trillion yen. However, Shimano faces a difficulty in keeping up with the seemingly insatiable demand for its parts as a result of the cycling mania. “We sincerely regret the shortage of supplies… [Bicycle manufacturers] chastise us “In a recent interview with Nikkei Asia, Taizo Shimano stated. Demand has “exploded,” he said, and he expects the trend to continue at least through next year. The company is churning out components at breakneck speed. Shimano predicts a 50% increase in production this year compared to 2019. To expand capacity and efficiency, it is investing 13 billion yen in home factories in Osaka and Yamaguchi Prefecture. It’s also expanding in Singapore, the company’s first international manufacturing facility, which opened nearly five decades ago. Bicycle transmissions and other components will be produced at a new 20 billion yen plant in the city-state. The facility is expected to be operational by the end of 2022, following construction delays caused by COVID-19 constraints. It was scheduled to be finished in 2020.
In Singapore, there’s a Shimano factory: For nearly five decades, the company has been producing bicycle parts in the city-state. (Shimano provided the image.)
Taizo Shimano isn’t sure if pandemic-related demand will continue to climb after 2023. However, he believes the bicycle industry has legs in the medium to long term, owing to increased global environmental awareness and growing health consciousness among Asia’s middle class. He stated, “A growing number of people are concerned about [their] health.” What is certain is that Shimano will not face a major competitor to its position as the world’s leading supplier of bicycle parts any time soon, albeit it must now demonstrate that it can grab the next burgeoning market segment: e-bikes powered by lightweight batteries.
Shimano parts are used by 17 of the 23 teams competing in this year’s Tour de France, which is widely regarded as the world’s best cycling race. According to Reuters
Shozaburo Shimano established Shimano as an iron works in Sakai, a city near Osaka renowned as the “city of iron,” in 1921.
Shimano began developing bicycle freewheels, a ratchet mechanism in the rear hub that allows for coasting, a year after its founding.
Cold-forging technique, which includes pressing and shaping metal at room temperature, is a fundamental to the company’s success.
It’s complicated and high-tech, but it also allows for precise processing.
Shimano swiftly established itself as a leading producer in Japan, and under its fourth president, Yoshizo Shimano, the company began to gain international customers in the 1960s. Yoshizo, who died this year, was the company’s head of U.S. and European business, assisting the company’s upstart in breaking into a sector historically controlled by European manufacturers. Shimano’s greatest market, accounting for roughly 40% of company revenues, is now Europe. Outside of Japan, Shimano sold 88 percent of its products last year. Shimano was the first to coin the term “system components,” which refers to a group of bike parts such as gear shifters and brakes. Shimano’s global brand strength grew as a result, earning it the moniker “the Intel of bicycle components.” Shimano now controls over 80% of the worldwide bicycle drivetrain market: Shimano parts are used by 17 of the 23 teams competing in this year’s Tour de France. The corporation flourished around the world under the leadership of Yozo Shimano, who took over as president in 2001 and is currently the chairman. The hiring of Taizo Shimano, Yoshizo’s nephew and Yozo’s cousin, signals the company’s next step forward. As Shimano’s recent sales and profit results demonstrate, this is a perfect time for Taizo to take the reins. Before joining the family business, he received his education in the United States and worked in a bicycle shop in Germany. However, the company’s recent great performance has set a high standard. It will be difficult to meet escalating investor expectations. “There is a danger aspect,” said Satoshi Sakae, a Daiwa Securities analyst. “Bicycle demand after the pandemic is questionable.” Shimano, according to another analyst who did not want to be identified, “Yozo, the company’s previous president, is responsible for much of the stock price increase in 2020. “Taizo Shimano, speaking to Nikkei, identified two major growth areas. “China and India are two gigantic markets in Asia,” he remarked. He went on to say that the company will continue to focus on the Southeast Asian market, where cycling is increasingly being considered as a recreational activity rather than just a mode of transportation. According to Euromonitor International, China’s bicycle market is predicted to reach $16 billion in 2025, up 51.4 percent from 2020, while India’s is expected to increase 48 percent to $1.42 billion during the same year.
At Shimano Cycling World, a parent and son try out a bicycle. (Photo courtesy of Weixiang Lim)
“Urbanization, increased health consciousness, investments in bicycle infrastructure, and shifting commute habits following the pandemic are expected to boost bicycle demand [in Asia],” said Justinas Liuima, senior consultant at Euromonitor International. In fiscal 2020, Asia accounted for roughly 34% of Shimano’s overall revenue. Shimano’s sales in China were boosted by an earlier sports bike boom, although they peaked in 2014. Domestic consumption is rising again, despite the fact that it is still far from its peak, according to Taizo. He believes that demand for high-end bicycles will rebound. In India, where Shimano established a sales and distribution business in Bangalore in 2016, Taizo noted, “It would take some time” to expand the market, which is modest but growing. “I’ve frequently wondered if bike demand will develop in India, but it’s difficult,” he remarked. However, he added that some members of India’s middle class ride their bikes early in the morning to avoid the heat. Shimano’s new plant in Singapore will serve as a center for training staff and developing manufacturing technology for China and Southeast Asia, as well as a hub for production for the Asian market.
At Shimano Cycling World, a museum dedicated to the sport, people take part in an event.
(Photo courtesy of Weixiang Lim)
Shimano’s expansion strategy also includes expanding its position in the electric bike market. According to Daiwa’s analyst Sakae, e-bikes account for roughly 10% of Shimano’s income, but the business trails behind rivals such as Bosch, a German company best known for its car parts, which is strong in Europe. Shimano, a conventional bicycle component manufacturer, faces a difficulty with e-bikes since it must overcome new technical challenges such as moving from mechanical to electronic drivetrains. Batteries and motors must also work well with the parts. Shimano is also up against some stiff competition from newcomers. Taizo Shimano, who has worked in the industry for almost 30 years, is well aware of the challenges. “There are numerous players from the motor sector when it comes to e-bikes,” he remarked. “The way [the automobile industry] thinks about size is fundamentally different from how we think about it.” Bosch first introduced its electric bicycle system in 2009, and it now supplies parts to more than 70 bike brands across the world. In 2017, the German company entered the Japanese market, directly competing with Shimano. “Companies like Bosch have experience manufacturing electric motors, have worldwide supply chains in place, and can successfully compete with established bicycle component suppliers in the electric bicycle industry,” said Euromonitor consultant Liuima.
At the company’s headquarters in Osaka, Taizo Shimano speaks with Nikkei Asia. (Image courtesy of Takaki Kashiwabara)
“I believe that e-bikes will become a component of the societal infrastructure,” Taizo said. Electrified pedal power, according to the business, will become a common mode of transportation as global environmental concerns grow. It forecasts that once the market picks up speed, it will spread quickly and steadily. Shimano is vying for a larger share of this burgeoning industry./n
