The lucrative end of the business cycle

Among the thousands of visitors to the event was Wang Zhihao, manager of a company that transports iron.

"To go cycling around mountains in the outskirts of Beijing every weekend has become part of my life," says Wang, who went to Jinbao Place to choose a new bike.

"Bike enthusiasts like me often discuss the qualities and prices of the top bike brands in the amateurs' forums online."

Inspecting one of the latest Cervelos, Wang says: "A bike priced at 50,000 yuan is enough for me, not necessarily a foreign brand bike."

Most of the bikes on display had just gone on the market, and one of the most prominent of the high-tech features was the use of aerospace materials.

The cheapest bike was 10,000 yuan and the most expensive 300,000 yuan, enough to by a basic BMW car and still have change left.

A back-of-the-envelope calculation shows that if a bike with a carbon fiber frame priced at 150,000 yuan weighs about 5 kilograms, it costs 30 yuan a gram, almost five times the price of silver.

"Most of our bikes are carbon fiber bikes," says Shannon Bufton, general manager of Serk, the distributor of Swift Carbon in China. "The cheapest one costs 15,500 yuan, so it's really high-end bicycles, targeting those who want really good manufacturing quality, design, and materials."

Since entering the Chinese market two years ago, the international brand Swift Carbon has enjoyed sales growth of 50 percent each year.

"We are targeting a 20 percent to 30 percent growth in 2012," Bufton says.

As Chinese cities become more congested, authorities have clamped down, as with restrictions of car purchases in the capital.

In March, the National Development and Reform Commission raised fuel prices for the second time this year. Prices rose 600 yuan a metric ton, the biggest rise since June 2009. And as summer approaches, more people are joining the cycling crowd.

"The top three biggest markets for Swift Carbon now are the United Kingdom, Spain and Canada," says Mark Blewett, founder of Swift Carbon.

"China now is perhaps our smallest market, but it has the potential of becoming the highest, though it will take at least eight to 10 years."

Blewett says Swift targets those serious bike amateurs who are looking for something different. "They may not want to ride a Specialized or Trek like everyone else."

Asked whether Serk has plans to expand to second- or third-tier cities, Bufton says: "The strategy is to first build the brand strongly here in Beijing, because Beijing is a leading market, and consumers in other cities are looking at what is happening in Beijing."

Companies like Serk are also investing a lot to cultivate potential consumers, the wealthy cyclists. "We are opening up a concept store, cafe and bar shop, combining bike culture, interesting design with recreational lifestyle," Bufton says.

The bike industry culture is still in its infancy, and there is a process of people changing the way they think, Huang says.

"For a long time Chinese have believed cycling is the preserve of the poor and the rich drive cars."

Blewett cites the example of someone who has made a lot of money having no hesitation about buying a million-yuan Porsche.

"But he'll probably think it's amazing to spend 20,000 yuan on a carbon fiber bike. People will find it worthwhile buying a healthy, beautiful but expensive toy. It just takes time."

xiaoxiangyi@chinadaily.com.cn