August 5, 2021

Japanese Shimano can’t keep up

Dashing centenary, the Japanese cycling equipment manufacturer Shimano wonders about the opportunity of an increase in its production capacities, while the purchases of bicycles explode. Its customers, such as the Taiwanese Giant, are struggling to meet demand, driven both by the Covid-19 health crisis and by growing concerns for the environment. They have to wait more than four hundred days between ordering and delivery of parts for bicycles (derailleurs, hydraulic brakes, or even wheels), electric or not, leaving the Osaka group’s factories.

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Shimano is refusing for the moment new investments in production, even if the component market “Is expected to reach $ 9.4 billion [7,7 milliards d’euros] in 2025, with an average annual growth rate of 6.1% between 2020 and 2025 ”, estimates the Industry ARC analysis center.

Fishing equipment

Shimano recalls that the commissioning of a factory would not intervene for two years. “The question is whether people who have started cycling because of the coronavirus will continue”, indicates the company. The group, which carries out 89% of its activity outside Japan, was also scalded by the explosion in 2017 of the Chinese bicycle sharing bubble, which led to the bankruptcy of multiple start-ups such as Ofo and Bluegogo, and by the development of scooters and other hoverboards or gyropods.

The company began by producing a freewheel sprocket, which was the sharpest part of bicycles at the time.

For now, supply tensions are more in the business of the company, which has about 65% of the global mid-to-high-end bicycle parts market. In the first quarter of 2021, Shimano recorded a 76% increase in sales of its bicycle parts. As those of parts for fishing equipment – a fifth of its activity – are also booming thanks to the Covid-19, turnover jumped 64.4% to 126.4 billion yen (944 million euros) over one year. Operating profit rose 157.3% to 32.5 billion yen (243 million euros). The group has accumulated 2.3 billion euros in cash, an amount equivalent to all of its investments over the past ten years.

A prosperous record, therefore, for the hundredth anniversary of a group created in 1921 by Shozaburo Shimano – great-grandfather of the current CEO, Taizo Shimano. The company started out by producing a freewheel sprocket – the sharpest part of bicycles at the time. In 1956, the group marketed its first derailleur.

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