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Expert Sees Bumpy Road Ahead for China's E-Bike Industry

In China's big cities like Shanghai, it's easy to spot motorcyclists. What few that there are stand out as they weave through streets near subway stations offering illegal taxi services, while others simply seem content to turn passers-by green with envy with their retro-style sidecar-equipped motorcycles favored mostly by expats or purring Harley-Davidsons. Their rarity is due in part to local government policies, which have either banned motorcycles or diminished their numbers because of safety and air-quality concerns. Another reason, however, is the stiff competition they face, and not just from the trusty bicycles for which China is renowned or the growing number of automobiles clogging the streets.

Electric bikes, or e-bikes, are pouring on to China's bicycle lanes and streets. While bicycle ownership in China is much higher, at 470 million, there's no denying the popularity of e-bikes, whose numbers have been growing steadily and now total 120 million. Annual e-bike sales jumped from 1.5 million in 2002 to four million in 2003, and recently hit 25.2 million a year.

But e-bikes may now be at a crossroad. Just like a host of other local industries, it's a highly fragmented, and thus inefficient, industry. It's also struggling to increase demand in new markets outside China, making it overly dependent on domestic sales -- 29.5 million e-bikes were manufactured in the country in 2010, of which 585,000 were for export, according to the China Bicycle Association (CBA), and Electric Bike Worldwide Reports (EBWR) says that of the roughly 29 million e-bikes sold worldwide, the U.S. and Europe accounted for only 80,000 and 1.02 million, respectively.

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