The Inside Line –

It takes a steady hand to apply decals to frames.

made in Taiwan. The sign somewhat irritated Tseng, who The Inside Line – was involved in OEM manufacturing of aluminium parts for the motorcycle industry, so he decided to do something about this perceived lack of Taiwanese quality and went into business in 1972 making bikes for the US OEM market under the Merida Industry Co brand name. In 1988 Tseng took the bold decision to produce and market bikes under his own Merida brand. Testing the water with Scan- dinavia and mountain bikes, the company then spread slowly throughout Europe and China and is now expanding even more into Merida Australia and many other areas of the world Words and photos by Steve Thomas (but not in North America due to historical ack in the early 70s there was OEM client courtesy). a huge shift of direction within Merida has also acquired healthy stakes the bike manufacturing industry, in other bike brands around the world – namely the arrival of Taiwan as a with Specialized being the most notable. It’s only been during the past major and emerging force within Moving into the rapidly expanding high- Bthe bike-building world. end road bike market is something they are couple of years that Merida Production costs in the established US and heavily committed to. We dropped in to European factories had risen considerably, their Yuanlin HQ in Taiwan and spoke to has become a force to be and the Japanese bike building plants were VP William Jeng about all things Merida. rapidly starting to price themselves out of reckoned with in the road the game too. Taiwan was already heav- BA: What does the name Merida actually ily involved in OEM (original equipment mean? bike market, yet they just manufacturing) production for numerous WJ: Merida is a combination of three Japanese motorcycle, electronics and other Chinese characters; Me means beauty, Ri celebrated their 25th year industries, so stepping into the bike market has two meanings – convenience or prot, was an easy and natural step. and Da means arrival. So, Merida means producing bikes under their In 1971 Giant rst went into the bike that we are a company that can help you business and the rest, as they say, is history. reach where you are going, or reach the own name. Steve Thomas Giant went from manufacturing OEM for prot that you are aiming at. numerous major bike brands around the The pronunciation also made it easier to drops in on them to see what world to eventually braving the market in place the brand in the international market their own right and becoming one of the – as it worked in many languages and didn’t they’re all about. biggest bike brands in the world. It also sound Chinese. helped to put Taiwan at the forefront of the It was also a kind of statement and wish bike-building world. from the founder of the company to his Running almost parallel to Giant in many stakeholders. ways was their near geographical neighbour BA: Why did the company go into the Merida. Whilst visiting the USA, Ike Tseng bike business? came across a small bike shop with a sign WJ: Customers (OEM) always seemed to which stated a refusal to service any bikes be coming back for lower and lower prices,

60 Bicycling Australia March • April 2014 often months after agreements were made – and there just wasn’t room to make quality products any cheaper. The founder (Mr Tseng) saw that there was no real future in this and that the only way to be protable was to go into the market directly (eventually). His business was in aluminium and welding technology so it wasn’t big deal to move into bicycles. There was also a lot of opportunity at that time because the Japanese Yen was very strong and it was becoming expensive to produce bicycles there, which is why the industry moved to Taiwan in the early 1970s – so he took the opportunity. BA: Who were your rst major OEM clients? WJ: Initially we focused very much on Ra- leigh (who were a very strong brand at that time), making complete bikes for their global Merida staff cooperate at this brazing station. market, while Giant focused on Schwinn. It was the rst time that Raleigh had out- sourced manufacturing to another country, so we started with a few models, but we also sold Raleigh in Taiwan so actually im- ported high-end bikes from them too. Step by step we started producing higher end ogy and design of bikes, but we didn’t ond not to encroach on their sales territory bikes for them, which is the nature of OEM. really know about what the consumer – we stayed low-key. In some areas we did BA: In the early days of Taiwanese bike demanded, as we were a long way from regional advertising, but not internationally, manufacturing where did the expertise the marketplace, and we had no way to so they realised that we were not threaten- come from? reach the end user – we’d been building ing them. WJ: For us, most of that came from bikes inside our own ivory tower. BA: Did you lose a lot of OEM business Japan, as manufacturing shifted here people For long-term growth we knew that we by this? came with their expertise. We also had to needed to sell direct and nd this link, so we WJ: Not really, not by going direct. We buy a lot of Japanese technology – for weld- decided to have our own adventure. actually lost one of our big buyers in the ing and painting etc, so they had to come to We set about things in a very conserva- early 90s, but we were already a long way teach us. tive way, in Scandinavia. These are small down the line with our own brand by then. We also had people from Raleigh, but that countries and far from everything, and most That loss came about because of an histori- was more for technical checking. American manufacturers don’t really care cal con!ict between two major bike brands BA: How did you set about producing too much about them, so we started there in the US, one of which had just been taken and marketing your own brand bikes with- and step by step came down to Germany over by a rival company; they thought there out upsetting the OEM apple cart? and so on, it took a long time. would be a con!ict of interests as we were WJ: We started making Merida brand Two things we made sure of; rst to use making bikes for both, plus the new owners bikes for export in 1988. Since starting our own technology in development and not of the brand. out in 1972 we’d learned about technol- to copy from them (OEM clients), and sec- BA: Your own brand adventure started

Frame builders work secure a frame into a table jig.

• www.bicyclingaustralia.com.au 61 around the same time as Giant’s did – how developed with your OEM clients? the global market, around 1.6 million did you get over the perceived lack of Tai- WJ: It seems to be all right; as I think we worldwide. About 30-40,000 of those are wanese quality in the west? are very different. For people who want to sold in Australia. WJ: The company founder was well buy a Porsche they would not want to look In this factory (Taiwan) we make around aware of this image from the start, and so much at a Toyota, and Merida happens 900,000. In Shenzhen (China) we produce very clearly positioned Merida as a mid- to to be that Toyota; we are about cost-ef- around 700,000 (50% for export), and high-end producer. We were also not a huge ciency – reliable and affordable. 700,000 in a factory in the north of China manufacturer like Giant, who have around Some of our partner brands are out there – these are mostly for the domestic Chinese twice our capacity; our facility is restricted like BMW and Porsche, whereas we are market. We have a new factory under con- and mostly our customers are quality Toyota. They are competing with others, but struction near Shanghai, which will produce branded names, so we had the quality set up we are competing with less exclusive, less around 300,000 bikes – mostly for the all along. niche brands. I think with careful brand po- domestic market. It was a wish and statement of the sitioning that we all do better and compli- BA: You also have a facility in Germany, founder that we were to be a quality brand. ment each other – I’m not saying that there what is that for? But he knew that it would be a long and has not been con!ict, especially in the early WJ: It’s a storage facility for our German hard task, but we stuck to that philosophy days, but that has to be managed. company (Merida Europe) and also an as- – even though it meant turning away some By working together we can all get more, sembly line for Merida and Centurion brand brands. We knew that if we went lower which we are learning year by year. It’s very electric bikes. end that the same would happen as it did important to keep our manufacturing tech- Many of our concepts and designs also with Japan, and by the early 90s the factory nologies separate too. come from Germany as they are closer would already have closed and production BA: How many bikes do you sell and to the marketplace, although we have 10 shifted to China. produce per year? designers here in Taiwan; they meet together BA: With Merida being a major and WJ: We sell roughly 1.1 million Merida to plan the next season’s range. Prototypes growing force in its own right, have tensions brand bikes in China and 0.5 million in are usually made in Taiwan, and then sent to the German team for testing before going to production. BA: Steel, aluminium and now carbon – We sell roughly 1.1 million Merida brand how has Merida managed this progression and trend in frame building? WJ: Merida was one of the pioneers of bikes in China and 0.5 million in the global aluminium welding, some 20 years ago. When steel and chromo shifted to alu- “market, around 1.6 million worldwide. About minium there were very few factories that knew how to weld aluminium tubes into a bicycle, so at that time we had a patent 30-40,000 of those are sold in Australia. called MATTS, now around 70% of our production is in aluminium. We were also one of the rst to produce in carbon bre; we had a bonded process, not a monocoque process, and we also bonded ” carbon bre with aluminium lugs. This was back in the mid 90s, but we were too early with the technology and the project failed. We were also not sure if carbon was just a trend, and so we focused on quality aluminium. We also experimented with mag- nesium aluminium, titanium, thermo plastic and other technologies. BA: What do you see as the material of the future for bike frames? WJ: Some small numbers of customers are still waiting for chromo and titanium frames, but titanium and its non-oxygen production environment is not easy for us, so we’ve focused on aluminium. >> page 64

All frames pass through numerous QC stations.

Vice President William Jeng This clock shows the number of seconds taken to build a full MTB took time out to on the current production line, a road bikes take two seconds less! talk with us.

62 Bicycling Australia March • April 2014 << page 62 Carbon bre is very popular right now, duction then, so we put our resources where road bikes. and I don’t see anything to replace it in the we were strongest, in mountain biking. BA: Tell us about the Lampre team spon- near future, mainly because it’s easier to The Merida MTB team has been around sorship? work with and be stylish with when com- since 1998, but in 2003 we had a lot of ex- WJ: We saw that we only had a small pared to steel and aluminium. We are al- posure with bigger name riders, and in 2004 road bike market share, and there was huge ways researching new materials, but I don’t we won the Athens Olympic XC, which opportunity there, and that we needed to think that carbon bre will be replaced boosted the brand. sponsor a team. within the next decade. But, the road market has grown dramati- But, there are not many World Tour teams BA: Mountain biking was where Merida cally, while the MTB market has slowed available; just 18, and then Specialized have made its rst own brand impressions; the down. Guys like Lance Armstrong heated three, Giant are also there and then they road came a lot later. Where is the balance up the demand, so we realised we had to have to trust us, a new brand in this market- between road and MTB now? be there – we decided in around 2008-9 place. We started looking seriously to spon- WJ: Until ve years ago 80% of our to produce our rst team range bikes, and sor a team in 2011/12. I don’t think there production was aluminium mountain bikes. about three years on we realised that we are too many manufacturers in the world Road bikes were only about 10% of our pro- were ready, and the market was hungry for that can satisfy the needs of a big team. We supply four models of bike to Lampre, most of which we already had developed by 2009. The only one we were missing was something for Paris-Roubaix, but developing that was not so difcult, the most technically demanding to develop was the time trial bike. In development terms we were ready when we went into sponsorship, and in marketing terms we had to be ready. We had a very good name in the mountain bike market; we just had to make it in the road market. It’s interesting that many of the bikes in the World Tour actually come from Taiwanese and Asian factories. The riders and the team mechanics don’t know much about the bike industry, and nothing about Merida. They just want the bike to be strong, reliable, light, and to perform well and to be okay in the race. We had to get them to trust us; it was not about the money. One of the ﬁrst Raleigh bikes produced by Merida, for Raleigh USA. >> page 66

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UPCOMING EVENTS For more rides & details visit: www.audax.org.au/calendar WESTERN AUSTRALIA QUEENSLAND SOUTH AUSTRALIA TASMANIA VICTORIA NSW ACT MAR Bjorn Blasse APR April Animation MAR The Trial - Mixed MAR I’ll take the High MAR Bound for Baw MAR Wisemans Folly MAR Coastal Sojourn 300 Celebration 100 300 Terrain 100 Road 200 Baw Weekend 200/300 MAR Ruckin Rugb/ 2x100 MAR The Dirty APR Gran Turismo MAR The Old MAR Wuthering MAR Parkes n Ride Tacklin Tarago Weekend Dirt Super Series 200 Gawler Loops Heights to Bronte MAR Goldﬁelds Double Weekend 100 to 400/165 Series 70/35 to 600 200/300/400/600 2x100/200 Century Weekend 600 APR Monaro Meander 2x100/200 APR Copper Coast MAR Delightful Dover APR Black Crow 600 100/200 APR Scan the Wanderer 100 100 Kinglake Loop 120 APR Gran Turismo APR Monaro Mountain QR code to 600 APR St Marys Loop 600 APR Blackgate Saunter Super Series 200 Magic 160/200 to visit the APR Good Morning 50/100/150 to 600 APR Abercrombie Like us on Follow us at Audax Facebook @AudaxOz website Cygnet 100 GorgeousGor geo us 600 Audax Australia Cycling Club Inc., Association No. A0014462N ARBN 125 562 307 www.audax.org.au page 64 << than 5% of our annual marketing cost, so them come and knock our door asking to it’s really quite affordable for us. carry Merida bikes. Back in 2009/10 we had the bikes ready, BA: Your sponsorship of Lampre is still In Asia our sales mix had also changed but it would have been tough to convince fairly fresh, what noticeable returns have a lot due to this. In Taiwan alone our road the riders and mechanics to use Merida you seen so far? bike sales percentage has gone from 10 to when they can get bikes from other brands. WJ: The immediate direct impact is that 40% +, and it’s been the same in Japan and But, they often don’t know that many of the it has become a lot easier for us to push the Korea. It has also made the jerseys and ac- brands come from Asia, and that only a few high end bikes – not just road bikes, MTB cessories much easier to sell, so overall it’s manufacturers can satisfy their demands. too. For example our Italian distributor quite a good investment. We have around US$800 million annual told us a year ago that before our Lampre But for the rst year the dealers were turnover as a company. The materials for sponsorship they found it very hard to open not really ready with our high-end models, the bikes come from our own kitchen, and the door to specialist dealers as they said so it will be next year that we (hope- from our nancial statement you can see they had not seen the brand anywhere, and fully) really see a major increase in sales. that the cost of sponsoring the team is less would not work with us. Now many of Although worldwide bike sales are down, we have increased our market share, and are doing okay. At the moment we have a three-year com- mitment to Lampre with another two-year option. I think that we will be here for the long term. BA: Lampre have signed Chinese rider Xu Gang for 2014, and have always had an interest in the Asian market. Is there a co-interest between you in developing Asian riders? WJ: One of our hopes is that it will be an open platform for Asian riders to step up. Ultimately it’s the team’s decision on which riders they sign, but they know it is our wish to help Asian riders, and we are encouraging Japanese and other riders in this direction. The team sponsors are also very aware that Asia is a major emerging market and are targeting accordingly. We also feel it is part of our corporate and social responsibility to help local and Asian riders develop, not from a commercial angle, it’s part of our duty. The signed winning number plate from Athens 2004 Olympic MTB XC women’s winner Gunn Rita-Dahle.

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66 Bicycling Australia March • April 2014