THE CONVENIENT CYCLIST

Bike tariffs and you

Global supply chains are nothing new; I remember marveling at how the components on my US-made 1979 Schwinn Varsity 10-speed came from 9 countries around the world, from Japan to Belgium.

So what country was my bike “from”? It’s no longer an academic question.

It’s tempting to think of tariffs as something in the political sphere, affecting governments and multinational supply chains, not ordinary folks like you and me. But the latest round of US tariffs, announced in August, makes that mental separation no longer possible.

The entire bike industry is about to be hit with a major price increase that will affect nearly everyone looking for a bike.

How big and connected is the US bike market?

 

Consumers in the US bought $6.1 billion in bikes and components in 2014, according to the National Bicycle Dealers’ Association. Of the 17.8 million bikes sold in the US, 66 percent came from China and 27.5% came from Taiwan. So if you’ve bought a bike in the past few years, there’s a 93.5% chance that your bike came from one of these two countries.

That last 6.5%? Even those bikes often have components from China or Taiwan.

These statistics do not include the massive new e-bike market that has surged over the last three years, fueled by developments and worldwide supply chains that span Asia, Europe, and the US.

Tap the brakes on all that e-bike progress.

 

With the 25% tariffs on Chinese e-bikes and components recently announced, all models of e-bikes can be expected to jump in price by 25%, adding hundreds or thousands of dollars to the purchase price you pay. And it’s not just bikes from China, either. The least expensive US-made e-bikes are priced that way because of components from China, so the entire new market of e-bikes is about to slow way down.

Even e-bikes designed in the US aren’t immune to price increases.

And you know who’s heavily  dependent on e-bikes? Tour companies with different rider skills. And bike-sharing companies. Here in the Seattle, with its numerous steep hills, rentable e-bikes from several brightly covered fleets are everywhere. But if the cost of inventory goes up by 25%, either the hourly rental price goes up or the companies exit the market.

Now there’s also a new 25% tariff proposal (up from the recently announced 10% tariff) all bikes and components of all types from China. If these proposed tariffs go through, global manufacturing behemoths like Trek and Giant will be sorting this overhead out over the next couple of years, sending work to their other factories in Taiwan and Germany.

Is there a quality difference between bikes from Taiwan and China?

 

Often, yes. Taiwan is a country that has a sophisticated technology base, numerous international R&D headquarters, and solid protections against intellectual property theft. Tooling and per-unit costs can be 30% higher than in China, but accompanied by well-established quality controls.

With Taiwainese manufacturing, you know what you’re getting.

China has become a manufacturing behemoth, with a wide range of production experiences that vary by manufacturer. IP protection is not well established, and in-country, local representation is essential for ongoing quality control. Companies have many stories of their Chinese manufacturer contractor making duplicate molds and then creating forfeit copies of the contracted goods that may or may not have the original name. For this reason, quality of bikes made in China is dependent upon the level of oversight throughout production and  distribution.

A tariff on bikes from China will reduce the supply of low-cost bikes and frames from China, but will not create a market of US-built bikes. Most likely, as bikes generally increase in cost, the proportion of Taiwanese bikes will increase as supply lines shift.

How will Chinese tariffs affect CHANGE bikes?

 

CHANGE bikes are designed and built by Changebike, LTD in Taiwan. Right now, they are not affected by tariffs against China, so the prices of bikes from Flatbike are expected to remain the same. Since the Chinese tariffs are allegedly in response to lax intellectual property protection, they should not overflow into tariffs against Taiwan.

China and Taiwan are separate. Except sometimes. Is that clear?

But this stability is far from guaranteed. China (officially the People’s Republic of China) and Taiwan (officially the Republic of China) have a complicated relationship. All that separates bikes from Taiwan from getting the same Chinese bike tariffs is the US definition of Taiwan’s separation. China sees this differently, as One China. CHANGE bikes, like all bikes from Taiwan, are at risk of a political change that increases their costs as well.

What you can do.

Even now, there are ways to take charge…

Dealing with uncertainty is stressful. And a quarter billion dollars in new bike tariffs under discussion, these are certainly unsure times. But there are two things you can do to help with stress:

  1. Express your opinion. The industry trade group People for Bikes, that represents the biking experience in communities across the US, has created a form for expressing your opinion about bike-related tariffs.
  2. Beat the clock. While nobody can predict future tariff actions, we do know the cost of CHANGE bikes today. If you’re thinking about getting a CHANGE bike sometime but waiting for the right moment, now is certainly a good time!

Bob

Bob Forgrave,
President, Flatbike

Biking made easier.

425-985-6219

 

 

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