It's tough being a bicycle maker in China these days. The streets are so crowded with cars that two-wheelers don't enjoy the exalted status they once did. Indeed, Shanghai and other cities have banned bikes from some thoroughfares. There's no shortage of competition, either: China was home to just a half-dozen bike builders in the 1980s but has 300 today. All that didn't stop Sha Yunshu from taking over Flying Pigeon Bicycle Co., one of China's most storied -- and troubled -- brands. "I thought if I had new ideas and could produce good-quality bicycles, I could save the company," says General Manager Sha.
In the early 1980s, Flying Pigeon was the country's biggest bike builder, and its 20-kilo black one-speed models were the pride of hero workers nationwide. There was a multiyear waiting list to get one, and even then you needed good guanxi, or connections -- not to mention about four months' wages for most workers. In 1986, at the zenith of its prosperity, Flying Pigeon sold 3 million bikes, all of them black. "In the planned economy, Flying Pigeon's market was guaranteed by Chairman Mao," says Sha, a 30-year veteran of the company.
Adam Smith has been less indulgent. When China started developing a market economy, Flying Pigeon failed to adapt, and its fortunes soured. As other companies moved toward ever-more variations of racing, road, and mountain bikes, Flying Pigeon soldiered on with its overweight, single-gear model. Sales plummeted like a wounded bird, to just 200,000 bikes in 1998.
Under Sha's leadership, Flying Pigeon is taking wing again. The company last year sold some 1.2 million bikes, Sha says, and this year he expects to sell 1.5 million. Revenues are projected to grow to almost $50 million, up more than 30% from last year. Sha declines to say how profitable the company is. Next year construction will start on a new, $1.2 million factory to make bikes under contract for foreign brands. Sha already has one such deal, with Japan's Maruishi Cycle Industries, and is hoping to sign more soon.
Sha's first step after taking over in 1998 was to shut down Flying Pigeon's old factory in central Tianjin and move to new digs in an industrial zone on the city's periphery. He left behind most of the 7,000 employees -- a number that had changed little even as sales fell by more than 90%. Starting anew with a staff of just 300, Sha emphasized good workmanship, and today as much as three-quarters of each worker's salary of roughly $250 a month depends on productivity and quality. Flying Pigeon "has really been gaining momentum," says Antony Lo, president of Taipei-based Giant Group, the biggest bikemaker in China.
The era of basic black is gone for good, too. Flying Pigeon bikes now come in 300 models and many colors, and the company even advertises. Its bikes are sold in more outlets, including supermarkets. And Sha has instituted a monthly meeting to discuss how production should be shifted to meet demand. "In the planned economy, people didn't care whether we sold our products," he says. "Nobody tracked sales."
Some loose spokes remain. Although Sha sells a few bikes for as much as $1,200, the vast majority are at the bottom end of the market, averaging just $35. Sha, though, says he's working to raise quality so he can boost prices. And then there are those pesky Shanghai regulations restricting bikes. There, too, Sha says he's not concerned. Even though he has given up his own Flying Pigeon for the comfort of a Honda Accord, Sha is confident that the bike business has legs. Many Chinese still cycle, even if two-wheelers are no longer basic transportation. "More and more people will use bikes for leisure, not commuting," Sha says. If he has his way, they'll be doing both on their Flying Pigeons.
By David Rocks in Tianjin, with Chen Wu in Hong Kong