Pinkbike's henhouse was
rattled last week after we picked up a recent news story from
BikeEurope about the US government's latest proposal to levy a ten to 25-percent duty on over six thousand more Chinese imports, including bicycles and frames. Washington's latest escalation of this country's tit-for-tat trade war with the world's largest Walmart was reportedly in retaliation to Beijing's campaign to use any means (legal or otherwise) to acquire sensitive information from US corporate and military sources in exchange for domestic manufacturing. The new levy and expanded list of affected goods came on the heels of a 25-percent tariff on 50 billion dollars worth of exports that the US slapped on China for blowing off those negotiations last month. Total exports affected could total 200 billion USD annually.
Mountain Bikes Will be Affected
The US mountain bike industry, which relies heavily on Chinese imports, dodged the bullet in the first round of tariffs, suffering only collateral damage. Duties affected things like hubs, spokes, bearings, cable housings, inner tubes, and geared hubs. (eMTBs were included on that list as well.)
Mountain bikes, however, were spared from those first rounds, but if the latest proposal is ratified, complete mountain bikes and frames imported from China will face a similar fate. The news spurred a hailstorm in the comment section, but there were some salient questions and statements peppered in there that deserved to be addressed.
How much will the tariffs affect the cost of mountain bikes in the US? How will import duties affect US bicycle makers? Are tariffs on Chinese imports necessary to boost the bicycle business in the US? Are bike brands selfishly raising prices to cash in on tariff fever? What does Washington have to gain by imposing stiff tariffs on this country's largest trading partner? I'm paraphrasing, but those were the most valid concerns voiced in the Pinkbike popcorn gallery.
(From left) AJ Ariss, Andrew Herrick, Chris Cocalis, and Will Montague.
Industry Insiders Weigh in To shed some light on those questions, I reached out to some key players in the US bike industry. Understandably, some chose not to respond, so here's my shout-out to the brave souls who did.
AJ Ariss, the product and marketing manager for Reynolds Cycling weighs in from the perspective of a US carbon wheel manufacturer that also has factories in Taiwan.
Chris Cocalis, founder and CEO of Pivot Cycles, imports frames from China and components from Taiwan, then assembles his bicycles in the USA.
Will Montague, Guerrilla Gravity's co-founder and president, answers from the perspective of a US-based bicycle manufacturer that has been growing its range of aluminum-framed dual-suspension bikes for five years running. And,
Andrew Herrick, who has a wealth of experience in both the component and bicycle side of the sport, including US and Asia-based manufacturing.
Are the proposed tariffs real or simply a threat?
AJ Ariss: They are certainly a “real threat.” President Trump has demonstrated that he is serious about being disruptive to trade with China. In the USA, over ten million bikes are imported annually from China. We do remain hopeful that, like many of his threats, this turns out to be more of a negotiation tactic that results in movement toward a compromise, without having to resort to punitive tariffs, which, if enforced, will likely lead to increased prices for consumers. We are a small industry, caught up in a political fight and that is certainly unfortunate.
Andrew Herrick: If you can predict what the US government is going to do, you could make a ton of money, probably even more than being a cycling editor. Nothing would shock me - although as soon as the administration figured out their soybean tariffs were really bad for US farmers, they didn't pull back the tariffs, but instead, offered the farmers subsidies. So, yes, it could actually happen and it could be devastating to bike companies and really crappy for our customers. If anyone in Canada wants to adopt me, my bags are packed...
Chris Cocalis: It’s a strong possibility and a real threat. It will affect US customers, but even more so, it may damage our ability to assemble here in the US and grow our US manufacturing/assembly operation (really, the opposite of the tariff's stated intention).
Will Montague: From our vantage point, it seems to be a mix of action and threats. The first round of tariffs has already gone into effect, so it's certainly not all a bluff. However, whether or not the latest round of threats is realized is yet to be seen, but we don't think that the full gamut of proposed tariffs will be implemented.
2018 Bicycle Exports to the USA: Ranked by Country China ($874,947,166),
Taiwan ($390,072,304),
Cambodia ($24,044,413), and
Indonesia ($11,314,776)
Source How will this affect the US mountain bike industry as a whole?
Andrew Herrick: As you and I have discussed many times when we've had our "coffee talks" and "drinking about it," we are in the luxury goods business. Even bikes that we may see as "entry-level" (at $1000, for example), a mountain bike is a luxury or special purchase for 99% of our customers. Furthermore, we are in the innovation business and, as consumers, we are hard-wired to expect innovation to be deflationary by its very nature.
With the current state of retail, not just in bikes, yes, it's going to hurt. Bike companies, distributors, and retailers are seeing eroding margins and they cannot raise prices. Again, consumers expect this year's technology and spec to be less expensive next year. If the price goes up, then the consumer understandably shies away. If the margins continue to get eroded, then companies will lose money and they also will shy away from buying inventory to service the market.
What we need is a healthy value chain and we don't have that now. I don't see how a 10 to 25-percent increase in cost is going to be good for anyone, especially now. I think that Pinkbike readers understand this very well. Bike riders love their bikes and the companies that make them. They want to see them succeed, and the same can be said for their favorite local retailer. It's tough times for them now - the worst time I can think of for rising costs.
Will Montague: The biggest concern we have about the tariffs, in relation to our company, is at more of a macro level: What happens if the tariffs trigger inflation for everyday household goods and thereby limit discretionary income for recreational items, like mountain bikes? Or even if this isn't realized, what's the systemic effect of shaken consumer confidence and the spending habits thereby affected? And could that drive changes in the real estate market, further compounding the economic severity?
Luckily, our customers are unlikely to see any price increases. Our costs aren't scheduled to be affected because of our in-house frame production and primarily Taiwan-sourced build kit components. From what we've read, the tariffs are aimed exclusively at China. We don't currently import any of our components from China.
Tariffs on Bicycles Imported from China: EU vs USA EU = 48.5% (anti-dumping tariff)
SourceUSA = 11% (current), plus the proposed increases = 21% to 36%
What does a 10% or a 25% tariff translate to at the retail level say, for a $5000 bike?
Chris Cocalis: As it doesn’t affect all parts, and it doesn’t affect anything from Taiwan and several other countries, I estimate the effect [for a theoretical $5000 Pivot] could be an additional $300 to $750, plus sales tax on that.
Andrew Herrick: If everyone maintains their already diminished profit margins, and the tariff was only ten percent; that bike would retail at $5600 almost exactly. Then in most states, there is a ten-percent sales tax, so that's an additional $60 in tax. So, a $5,000 bike leaves the store at $650 more than it does now. That is outrageous for the rider and will drive more consumers to hold off their purchase for another year or by a used bike on the ever-growing secondary market. If you follow that through a 12-month cycle, that means all companies will have to lower their purchases now, or the close-out market next summer will be quite large. This hurts everyone, as we have proven in the past three years.
Reynolds manufactures its top-drawer Blacklabel wheels, (like this DH wheelset) in its Utah factory. Reynolds also has a factory in Taiwan, which is a requirement for any component maker that hopes to supply OEM manufacturers there.
How will the tariffs enacted last month, or the new tariffs proposed more recently, affect Reynolds and its retail customers?
AJ Ariss: Fortunately, Reynolds' country of origin for our wheels is not China, as much of the work performed and value is added in Taiwan. As such, our wheel business should not be directly impacted. However, since we source components other than rims, there will likely be some impact on our component costs. The metal tariffs will have a direct impact on us when and if those go into effect, as we source raw aluminum from the EU to produce our tooling here in the US. Reynolds will take every step necessary to mitigate the impact of these tariffs prior to considering passing on the impact to our customers.
Bike brands are already shifting production from China to other Pacific Rim countries to avoid stiff EU tariffs. Can suppliers in countries like Taiwan, Vietnam, Cambodia, and Indonesia ramp up to absorb a Chinese exodus?
Chris Cocalis: In some areas it is possible and in some areas it is not. If you have a low to mid-end product, then maybe it’s a bit easier. When you’ve worked with your manufacturing partners for many years and have stable and very high quality production, running to the next lowest price option is not a great idea. It can be done, but it takes time to do it correctly and sometimes the actual cost is not worth the savings on paper.
Like Pivot, some high-end brands that import Chinese frames assemble their bikes in the US. Most enthusiast level components are made in Taiwan, so complete bikes assembled there with Chinese-made frames do not incur the new tariffs. Could a potential, $300 plus retail price increase for Chinese frames imported to the US provide a disincentive to move those assembly jobs to Taiwan?
Chris Cocalis: There is already a duty in place on complete bikes [11%, including Taiwan], which is higher than the duties currently paid on [Chinese made] frames and some components. Other components, like brakes, shocks and complete wheels, have a higher, 10% duty at present. So, if an additional 10% tariff (or 25%, which is now what [US Customs] are now talking about revising to) were to go into effect, it could certainly be an incentive for companies to shift their production elsewhere. It is much more than just the additional $300 (or $750 if this latest increase goes to 25%). US bike assembly is done by very few companies currently, because it’s generally less expensive to build the bikes elsewhere. This is just icing on the cake [for US assemblers].
Is Washington protecting US businesses? Are they forcing bike buyers to shoulder the cost of punishing China?
Andrew Herrick: As for forcing bike buyers to shoulder the cost of punishing China, that is exactly what will happen. I don't know who in the US is being protected by these tariffs - the spirit of tariffs is to protect the domestic production, a practice that dates back hundreds of years.
To find the highest quality of a manufacturing process, you follow of the labor pool. Carbon fiber production of bikes and components requires a massive amount of man-hours. Fifteen or twenty years ago, China was the source of a large labor force, so it was the natural place to start making mass production carbon. Now, they have 20 years of experience and the best capability to make it.
US Bicycle Imports vs. Exports: Not Much Trade to Protect Rated on a scale from one to ten, what is the viability of producing mountain bikes and components in the US?
Chris Cocalis: For carbon, I would give it a 3. Now that we have a nice 25% tariff on steel and aluminum, that makes the ability to manufacture our tooling even less competitive. And, for alloy frame manufacturing? Basically, that puts the US out of the game.
AJ Ariss: Today, Reynolds does produce limited production runs in our Salt Lake City factory. Industry Nine, our exclusive Blacklabel hub supplier, makes all their hubs in the US, and we source ALL our raw carbon fiber from California. Consumers also now expect quicker delivery and more customization options. The long lead time from Asia poses several challenges, so you either have to stock a significant inventory in many variants, stock inventory in a flexible state, or produce it locally. In the end, we think production in the US can make a lot of sense.
However, for us the biggest problem with US production is that all the bicycle assembly factories are found in Asia. Until a significant quantity of bike assembly moves to the US, it is unlikely for US production to increase. With the industry in its current state, we’d say 3 on a scale of 1 to 10. Assembly of bicycles is still primarily a hand operation and this is likely to remain in countries where the availability of inexpensive labor can be found. For this to change, major component manufacturers would have to invest in component factories in the US in tandem with major frame manufacturers to not only manufacture, but automate and streamline assembly.
Will Montague: For a new operation: 10. For an existing operation: 3. From our analysis, the cost benefits of manufacturing in Asia have diminished, as the primary initial benefit of manufacturing there was low labor costs. With rising labor costs, freight costs, and the introduction of new technologies (in software, machines, and materials) there is a blue ocean of opportunity to break with the status quo of an Asian supply chain that, (in our industry) is typically slow, inventory intensive, and not integrated into product design. It's difficult to change, though, because so much has already been established there and the costs of moving a factory are prohibitive. Additionally, most companies in the bike industry are branding, distribution, and (occasionally) design houses - not manufacturers.
Andrew Herrick: Unfortunately, except for very special products that are in the very high end of the price spectrum, such as Enve wheel sets and Chris King headsets, handmade frame-builder artisans - companies that we should all be proud of in our industry - there's no supply chain in the US. In your question, I assume you mean manufacturing in the pure sense, not just assembly. In that case, the viability, as a business case, is close to zero.
We don't have to be sad about that - we are truly a global family in the industry. No need for nationalism here. We can all share in the process of designing, building, marketing, selling and servicing bikes. The best companies in our industry are companies like SRAM that have great people in the US, great people in China and Taiwan, great people in Germany and other countries and they all work together in the common language of bicycles. How cool is that? Sorry to get off on a tangent, but I am very proud that bikes mean freedom for everyone in every place, for every race, boys and girls, men and women, all with a common thread. We are truly a global family and that will be the lasting legacy of the bicycle in all of its forms. And to that I say, "amen."
Analysis: Follow the Money Tariffs are blunt instruments. The federal government is attempting to punish China by raising prices at home until Americans have had enough and stop buying Chinese goods. It's clear many industry leaders are skeptical that US tariffs on imported Chinese bicycles and components will help US bicycle brands. So, what's the motivation? Reportedly, the President tasked US Customs last month to
assemble a list of an additional 200 billion dollars worth of Chinese exports. There are 6,031 items on that list (it must have been a Herculean task) and bicycles were simply low-hanging fruit.
Combined revenue from the new tariffs will be significant. The Feds plan to pocket over
450 billion dollars annually. That represents a massive tax burden, but because it is paid by corporate entities and then passed down indirectly through increased retail prices, many will not recognize it as such. To bring that down to earth, it's close to $1400 for every man, woman and child living in the US. That's a lot of money to spend in hopes that China will quiver in her boots for a few months. And while US citizens shoulder that burden by paying higher prices on just about everything, Washington gets to go on a spending spree. Economists concur that the Fed should raise taxes when the economy is strong (which it is) in order to pay down debt-spending incurred during recessions. One can only hope that the national debt is high on Washington's shopping list.
Forecast for the Mountain Bike Industry: Better Than Expectations The trade war between China and the US will inflict some casualties, but some good may come to US mountain bike brands as well. On the one hand, the timing for a substantial price increase for bikes and components could not be more disruptive.
Customer-direct brands like Commencal and YT have helped to drive prices down and set the industry on a new course of high value/high performance bike design. In response, consumer confidence is ramping up and riders who felt they had been priced out of the high-end market are again shopping for new bikes. You don't need a crystal ball to predict how adding $300 to $800 to the MSRP of a new bike will change that dynamic.
On the flip side, artificially supported prices could actually encourage some made-in-the-USA efforts. Alchemy Bicycles is ramping up its carbon bicycle production. Ibis has soft-launched in-house production of its small-sized carbon Ripley LS frames, and at least two other "conspicuous" brands are secretly working towards limited US production. There is also the possibility that Washington could be pushed into offering startup bicycle manufacturing ventures subsidies in the form of low-interest loans and tax breaks as a way of mitigating the damage that tariffs may inflict on the industry.
Further evidence that US bike makers can weather this storm and emerge profitable comes from the EU. European Union countries levy astounding anti-dumping and import tariffs against China and neighboring Asian manufacturers, yet somehow, European bike brands are surviving quite well. Flawed though it may be, the US economy is robust. History suggests that it won't take too long to get this tariff thing sorted.
- RC
Why can’t the consumer I.e. the free market, make the call whether Americans buy American-made goods?
You ride a Santa Cruz according to your profile. Where was it made?
Because Intense paintjobs make up for the sketchy alignment issues durrrrr
Oh and that "US quality" doesn't really exist anymore. When you get rid of entire industries, you lose the capability to make said products and it becomes too expensive to start again.
“Canadian bike shops have a record year selling bikes to Americans”
www.counterpunch.org/2018/08/07/can-freedom-and-capitalism-co-exist
@mitochris: The "free market" as an impartial distributor, assuring goods and resources are put to their highest use, is a myth.
The concept of tariffs being a good thing is based on false assumptions. It assumes that people don’t necessarily want or need cheaper goods, and/or it assumes that there are suppliers in the US that can fill the void left by Chinese suppliers cut out by the tariffs. Neither of those things are true, and anyone who believes that US suppliers can turn around and deliver affordable, quality goods while paying their employees adequately is flat wrong, especially when tariffs on raw materials are adding to the pain. Companies like GG are awesome, but will get hit by raw materials costs, and ultimately none of their bikes can be considered in the realm of “affordable” for a rider looking to enter the sport, or for an enthusiast who can’t justify a $3k bike.
Riders with the disposable income can, and should, speak with their wallets and buy quality, durable components made here in the USA. Durability means less need to buy new stuff, and ultimately is less of a burden on the environment relative to cheap, less durable goods. If you have the means, pay attention to “Made in _____” labels. Sadly, for the vast majority of riders that have added to the immense growth in mountain biking over the last decade, the lower end of the market is becoming inescapably less affordable due to protectionist policies without accompanying improvements in quality.
This industry better start making some real changes if they want me buy something off of the showroom floor. Especially for the amount of $$$ they are asking. I've been around for far too long...
www.cnbc.com/2018/06/09/reuters-america-factbox-import-tariffs-eu-versus-united-states.html
Not in Whistler you certainly won’t. The bike stores there don’t exactly cater for the average Canadian wallet. It’s a playground for the well heeled and for foreign money.
Yes, you need tariffs to protect the environment and workers, although straight out bans would be better, but not to make better quality products.
There are many Americans who buy the fossil fuel line of BS hook line and sinker, but not the majority.
There are still places in Europe where the labour cost is even lower than in China, and a ton of bicycles being assembled there every year.
Yes, Duty on Bicycles from China is 48.5%, HOWEVER, certain factories have preferential rates as long as you provide supporting 'anti-dumping' documentation on import.
Check out this page for some more info. www.trade-tariff.service.gov.uk/trade-tariff/commodities/8712003090?country=CN&day=8&month=8&year=2018#import
Essentially, only a handful of bikes will be imported to the EU at 48.5% - there's also a whole heap of tricks that Bike manufacturers will use to avoid this, such as shipping bikes incomplete to classify them as 'parts' which is a much lower duty rate.
an economic standpoint. The EU tariffs are anti-dumping tariffs. China’s environmental standards are abysmal. The EU can comfortably do that because they have the manufacturing base, the labor talent, (they protect their workers by actually paying them living wages and providing health care) and they also have environmental standards. All of these things, yet their economy does very well. This is the polar opposite of what is pushed in this country: Elimination of worker protection, and environmental standards, and then everything will be fine. Uuuumm... I guess if what you want is a third world model.
makes little difference to UK consumer
brexit passed beacuse some people here believed the lies of a few millionaire conmen
@DaveJube sadly no, I wish we had a good option. Hope and Formula are standout Europe examples of good options. I’m not preaching ‘Merica or bust, I’m mostly generalizing around places producing cheap parts with poor labor practices. Europe, Japan, and some other places make rad stuff at high standards too, but supporting US manufacturing is a good thing to make sure we still have a bike industry that isn’t entirely at the mercy of wonky trade policies.
Trump thinks Americans are dummies, he's proven right!
BC has massive provincial sales taxes, go to Alberta next time and save close to 10%
Sounds like Guerilla would have a go, sounds like Pivot wouldn’t unless they were forced by rules. I get they have invested heavily in getting quality production sorted and would be personally quite upsetting for Cocalis to see such a huge amount of work go down the drain. Trek is already doing it at scale which is why there Bikes are cheaper than Pivot.
Apparently there is now a suggested bill in the works that would tax the use of fossil fuel. The gained revenue would go directly back to the taxpayer but the idea is that an increased price on products would deter people to buy it in the first place.
This + government having no clue how to make it work has stalled inward investment & led to GDP growth going from fastest to slowest in the G7. Manufacturing sector has just gone int recession despite low £ in theory helping exports. (Trumps tarif war has spooked markets & is a factor in this too, cheers)
We were promised easiest deal in history- but exit negotiations have seen UK gov concede on every point so far. The 2 most prominent Brexit supporting MPs have resigned from cabinet having failed to come up with any plan. Cost of preparation so far is in the £bns & several large EU bodies have already left the UK. Numbers of doctors & nurses coming from EU to UK have dropped as NHS endures worst staffing crisis in history.
All of this means that the government is paralysed, Brexit is consuming 100% of the governments focus, so theyre completely unable to deal with the real issues the country faces.
The public & both main parties are completely divided on how to make Brexit work.
The real problem is that no one has a plan for something this complex & politicians as usual wont be honest & admit this.
So basically its chaos & no one has a clue what comes next.
In summary, I am not a fan.
Ontario gets hosed big time! they have HST of 13% for everything!
Try to get an anodizing shop opened in the US- you pretty much can't because of the same environmental rules. They just dump their effluent into the river.
Then look at the software they're using. It's often pirated which means stolen.
I can go on and on because I actually spend time there in actual factories making all kinds of stuff.
And nobody complained when the ski boots I designed weren't competitive in the EU because of 23% tariffs.
Or any footwear into the EU because of protectionism in Montebelluna.
The trade war might be poorly thought out and poorly targeted, but the rest of the world is taking it in the shorts from Chinese made goods.
Tariffs are a bad idea too, as it only raises the bottom line and no one benefits. The money doesn't go to reinvent US Industry. It goes to the governments which they will blow the money on high cost of governing anyways.
Bottom line it all starts and ends with the man you see in a mirror. It's a question of "want and need".
I can ride and have fun on 5 year old bike purchased 2nd hand. But I WANT a new 15K bike. Which next year I will pay 18K.
One thing I learned a long time ago. “There isn’t price cap on Hobbies” People will pay shit load of money to treat themselves.
The positive outcome on this is that if the components will got up this might start some innovation. It will motivate some smart local hands-on guy or Engineer to start making local made products.
Like we seen in recent years.
I said all this knowing I will get down voted into oblivion and called who knows what type of names.
The US and every other country out there devalues their currency. It’s a race to the bottom and those that aren’t politically connected (receiving the freshly printed currencies) are the big losers.
So you're cool with all those harmful manufacturing processes and the risk they put people at and the environmental fall out? Gotcha. What do you produce so I can not buy whatever it is?
m.youtube.com/watch?v=RHE0b2Cp_iE#searching
Not perfect, and really not adequate, but if you want to compete at all, you have to make some stuff in China.
And, you did buy a computer to write that - the electronics industry in China is bigger and worse by several orders of magnitude.
Fundamentally though, you're right, so try to buy things made in countries with rules.
If environment and workers rights were at the centre of this, then they would have collected all their allies and together forced China and other candidates to change.
But these things are not in this government’s interest.
Just in case I will translate it for you. I don’t wrote it to davec113 personally, this attitude is alll over this place. You take all the economical benefits of overseas loans and production, consciously or not, yet you cut yourself from it like you weren’t and point finger at them for being the bad guys. You are ears deep in your own shit yet you talk about others. Then you add it’s the governments fault. Never yours. It’s theothers
Are you sure, you are not talking about USA? The rest of the world thinks so...
Lazyness is a component of efficiency, it leads to reaching for low hanging fruits. It's fine, it's good, you can't feed populations by using exclusively a high horse to pick up stuff from top of the tree. It's like a law of physics. Organisms, among them humans, simply act this way. Same goes for expansion, there is not a single organism that ever existed on this planet and possibly in all of the universe, that does not seek expansion in variety of ways (leftie snowflakes don't get it, but nobody is perfect, I don't get calculus or knitting) Production in Asia, not just in China, but in Asia in general has been the low hanging fruit for all sectors of Western economy including finance. People ar moving from villages to cities, work in factories and in those cities gather more and more own capital in various forms, which increases their standard of living. And that increases apetite for more things to own and higher standard, better social security. this inevitably increases their wages and prices of products they produce. The reality is those prices will keep going up, Asia will stop being the low hanging fruit and we in the West will have to deal with the fact that we cannot afford as many toys as we used to. I underline it TOYS. We whine here about pricing of stupid mountain bikes. My grand parents, two generations away, worried about having something to eat, not being killed in the war, my parents at my age, worried if I will be able to get any bike and any toy for christmas. Two generations apart:
Oh God! Waffen SS is in town - VS - Oh God! Minion SS is 50$
So please, take increase of pricing of fancy bikes, cars, electronics with a bit of distance. Your necessities, food, homes are often produced in your own country. Cheer up.
Now another thing to consider, reality of manufacturing in the West that so many want to bring back. Westeners taken collectively, are whiny, comfortable bitches. If you will now open a factory and think people will line up to work in it, you are f*cking kidding yourself. Perhaps immigrants who have nothing. Forget that a white dude on social welfare will come to work in a factory for pennies. You can count on immigrant women, who care about the future of their kids, but their men, just like most Western unemployed males, will be more likely to check out last football match with beer in their hand and whine on injustice going on in this country. Try to find dedicated, motivated workforce like in Asia, in numbers necessary to run a large scale production of anything. Good freaking luck.
Much of the bitching in the US about the most trivial things these days is only possible because of the wonderful privileges we have here. Instead of smiling and feeling fortunate for the good things, we point fingers and send tweets from iphones over nonsense. Outrage is the social currency of our time.
There are going to be other examples too, both skilled (our health service) and unskilled, but I felt you made agood point that I wanted to reinforced.
(Oh, and please nobody use this as an excuse to discuss Brexit - it's all already been said before whichever side you fall...)
Cesar Rojo said the same, his way of running UNNO is the only way. He is not able to find 3000 people in Catalunya and possibly anywhere in Europe to mass produce bikes.
The world has never felt more volatile, and it’s sad to be honest.
Now this has all backfired, as the currency is heavily manipulated in order to wage industrial war against its manufacturing competitors.
Coincidentally, the flow on effect has also screwed the aspersions of a generation of youth (In free trade/non tariff operating countries like Australia). Buy allowing Chinese Government affiliates to buy domestic houses in foreign lands, with money still warm from the press (a form of international land banking/ currency cleaning). Thus creating massive house price inflation, and locking a local generation of youth out of home ownership.
Im not a Trump fan, but cheap “Free Trade” Chinese bikes for us Aussies has also unfortunately brought us unaffordable $1million average price houses. So who’s the real winner?
Think I’ll skip reading the comment section on this one.
The bike industry has been screwing us for years. And Chris Cocalis has been leading that charge.
So my 3500$ “beginner bike” with garbage parts is now going to cost 4000$. Whatever. I like bikes. The government can take their pound of flesh too. It’s all a toy right. I’ll still have fun, just on a crappier bike that will be obsolete faster.
actually it depends on where you look, at Specialized 6000 gets you a mid level bike in my eyes, but if you look elewhere there is far better options..
With 6000 I would buy a 1500 roadbike, a 3500 Cube Stereo/Radon Swoop/Nukeproof and still have 1000 for spare parts, upgrades + some weeks vacation in my van
6000+ usually ain't where you make a bargain, so you probably won't get the best value.. but then again it is a niche of a niche if you spend that much
Use to to be 6000$ got you top level suspension, top level parts and decent finishing bits. Now your 6000$ bike has all kinds of corners cut. Cheapo hubs, low level cassettes. Missing adjustments on suspension. The bike companies are nickel and dining us thinking we won’t notice. Look at a 6k Kona with NX cranks and base level brakes. Or an X01 transition for 6 grand with a GX cassette. Or look at the spec of a 5010 C. So many corners cut on it.
Death by a thousand cuts.
Tl;dr: hate the game, don't have the player.
T: Imposes tariffs on foreign goods which the government will see about $450 Billion a year from tariff fees and more from increased pre-tax cost of goods from consumes.
Me: Ah...I see what you did there.
The world is far more interconnected than it was even 20 years ago, trying to turn back the clock to older economic models is just pissing in the wind (just like Brexit)
His domestic economic policy seems no smarter, tax cuts without raising public services (infact the opposite) are foolhardy in the extreme, & jobs growth is great (although at the exact same trajectory as it was under Obama) BUT the deficit is soaring, with extra tax cuts this is a timebomb for America.
His tarifs have already raised the price of domestic steel & aluminium.
While there may be a short term boost to American manufacturers, long term this model is unsustainable.
Chinese manufactruers are going nowhere but Trumps moves could easily see American ones pushed out of business.
Well that's an "interesting" take on a complex subject. Popcorn popped
RC did well to limit comments and let industry in the trenches speak to the point that everyone loses in a trade war.
Other than cryptography I can't speak to military technology as that's outside my expertise. You'll appreciate that most people in that field won't talk about it.
Anyhow there are many catalysts for this latest escalation of the trade war. IP and milsec trade secrets theft is a small part of it
If people weren't driven by saving money everywhere on a new bike maybe we'd see something manufactured in North America still. Although Devinci seems to be making it work with their alloy bikes, kudos to them.
The value of a used bike is driven by the used bike market. Its not the bike manufacturer's fault that the value of a bicycle drops after it is used. A bike is something that wears and has a finite lifespan.
Has the price of manufacturing frames gone up? Why? Or has the price of components going up? Bike companies are struggling...is SRAM struggling? Has the industry just been reshuffled so that the big component manufacturers are now reaping most of the profits, at the expense of the LBS and frame makers? Or is it just way way more expensive to make a GX cassette than a 10 speed Shimano cassette?
Or are the prices going up to pay for marketing?
5000$ back then got you something one step below an S-Works. It had top tier parts and needed nothing. Now 5000$ gets you a mix of GX and NX (the equivalent level of X7 or X5 back then) Yea, it’s a better bike and has a dropper on it, but in the hierarchy of bikes, the 5000$ bike is one step above beginner level whereas 10 years ago it was near the top.
Muricans? What about u whining for?? You are richest country of the West and this is the problem for you?? (for comparison, im working like industry engineer, making 3D models, R+D, and i have salary like Canadian cleaning lady!! so keep Calm!)
Actually, I think my math is faulty. The frame might be US made, but the rest of the componentry won't be. My head is hurting.
LoL
Sorry, but maybe I am the idiot you referenced.
Tell me how many of Alex Jones's urbal supplements do you pop before you go down the 4chan rabbit hole to plumb the depths for your special super secret not reported by the media? Where you are super special cuz you know stuff the sheep don't know.
Want to increase profits? SIMPLE. Reduce your MSRP so that more people buy your products. You know, volume sales...
Do you complain about a Shirt that costs maybe 2 USD in production costs 35 USD retail?
But you complain about a bike that costs 2000 USD in production, then gets sold for 2300 USD to a dealer and 3000 USD to you..
These numbers are totally made up, but a 5000 USD retail bike will never cost 1000 USD in production.
Fine, reduce prices to sell more volume. You first have to sufficiently increase volume merely to make the same level of profit you were before. You now need to sell even more volume to make more profit. What is the ideal relationship between volume and price that maximises profit? Chances are, they've figured that out and that price is exactly what you see.
The bigger problem though is value and capital. It takes a certain amount of capital to produce a unit of output, in this case a bike. So if you increase volume, you need more capital to produce it. Capital has a cost. So, per above, if you push more volume to make the same amount of profit you were making before, you REDUCE VALUE. Even when you start producing more profit, it is not until you produce sufficiently more profit to cover your cost of capital that you could increase value and your proposition would make sense.
So, not so simple. I bet you they have put much more thought and effort into this.
If ROIC is greater than WACC you will create value, and if lower destroy it.
In the above example the equation is likely unsolvable, in that if reducing prices to increase volume fails to sufficiently grow profits, you will keep doubling down, requiring more and more capital and destroying more and more value. Hence why his proposition doesn't occur in reality.
I like my French-designed and Chinese-made bike.
www.politico.com/cartoons/2018/08/02/matt-wuerker-cartoons-august-2018-000069
The 'US labor prices are too high" is a wonderful NPR take from people who don't work in manufacturing. Get a skilled welder or two, and a properly thought out jigged assembly line and you can compete with anywhere, because labor becomes a small fraction of your overall costs, and skilled labor has a way of paying for itself with factory floor improvements and innovations.
That the bike industry still sucks at doing that doesn't mean it's not possible, it just means all the people who know how to do it go make a lot more money somewhere else.
They need to retool and need new avenues for their skills, but for the government to try and force the global market like this and getting in to a pissing match with their largest trading partners (China, Canada, Mexico), can only cause more harm than good. They might be able to bully Canada and Mexico, to an extent, but to think they can bully China is just arrogant and stupid.
Well, since they don't actually do any manufacturing themselves, yes their labor costs for manufacturing would indeed increase.
But your assertion that is is not feasible to move operations back to the US is absurd. If GG is competitive at a botique level, why on earth would you think that scaling up operations somehow leads to a per-unit cost growth? That is not how scaled manufacturing works.
Arrogance and stupidity is assuming the status quo is desirable or sustainable from both an environmental and financial standpoint. Why is manufacturing in east asia cheap? Because there's no safety or environmental rules.
Want to stop runaway greenhouse gasses? Stop buying cheap crap from countries that dump waste straight into the river and, despite a nice PR campaign, generate the majority of their power by burning coal.
The two biggest US based bike companies, Trek and Specialized, are both privately owned, try again.
Also, "WAAAA drumpf didn't have emissions in mind when he got into a trade fight, it's only a side effect of onshoring manufacturing!" Is the fact that it's Trump such a big obstacle to you that you want to continue to screw the environment harder just to score political points in a country you don't apparently live in? lol. Talk about cutting off your nose to spite your face.
I may not be American, but I'm also not an idiot and realise, decisions made by major trade partners, like the US, or even the EU tend to affect Canada, so I make it a habit to stay informed when it comes to things such as trade and copyright. I don't have a political point of view, I don't care who's in power as I consider all politicians to be inherently corrupt, and am not trying to score brownie points anywhere. I care about trade and copyright and tend follow those topics closely. I used to actually buy lots from the US, but much of what Trump is proposing and doing makes makes less and less feasible and that hurts American retailers, not me. I buy way more local or from CRC than I do from Jensen or Pricepoint now.
You keep repeating the same point that on-shoring manufacturing will increase costs and makes sense from a business perspective. As is pointed out in the interview and many times in these comments, there is at least one company that proves that is not necessarily the case. My American made aluminum GG frame cost me less than my imported Yeti aluminum frame (back when Yeti still made aluminum bikes), despite both being Colorado companies located a few miles from each other.
So no, this trade snafu does not have to hurt bike companies, only those who fail to adapt. That's the nature of business.
Happily, as a side effect, it will likely be much better for the environment.
Scale does matter though. GG is a small outfit that produces high end products in relatively limited numbers, being hand made, maybe a couple thousand a year. Specialised is one of the largest bike manufacturers in the world making bikes in all ranges and disciples from garbage bikes to ultra high end. They probably manufactures 100s of thousands of bikes per year, maybe millions. Giant's factory in Taiwan, which Trek uses, cranks out over 6 million bikes a year. Creating that kind of operation in the US would incur massive costs. It can't really be compared to the type of operation GG runs, it just doesn't scale. I'm not saying it can't be done and remain profitable, but profit margins would surely shrink, something large corporations typically frown upon. Now whether the tariffs or creating operations on US soil is more expensive is something only they can tell. My gut says they will leave it in China an raise the cost to match the tariff, which will ultimately be good for smaller companies, like GG, with the exception of the tariff Trump has placed on raw materials...that one will affect GG.
One thing that is for sure, bike manufacturers using Chinese plant are all likely looking at their options and Giant is probably considering a plant expansion.
Disclaimer: I haven't confirmed Specialised uses Chinese plants. I only picked them as an example of a large well known maker. They could be using Giant's plant in Taiwan, like Trek, and would be less affected.
How can you work in manufacturing and not know how economies of scale work?
You keep saying that scale decreases margins which implies higher per-unit costs. This flies in the face of literally every industrial advancement since production lines became a thing. There is nothing mysterious or artisan about building a bike frame, it's a consumer good. It absolutely scales, and scales extremely well.
The truth is you don't want to pay the full cost (not price). You WONT pay the full cost of domestically produced bikes. So I guess it's nut up and accept reality or start welding/molding your own.
Only two presidents have lost re-election since WWII, Jimmy Carter, who lost to Regan, one of the most adept and skillful politicians that the world had ever seen, and the first Bush who lost because billionaire Ross Perot spent a billion $$ of his own money to spoil that election.
For once I share your sentiment on this but I still won’t upvote you cause you really butthurt me the other day on another topic
Oh shiate, I’ve just sunk to Donald I don’t give a ducks twittering level ;-d
electrek.co/2018/07/20/europe-e-bike-china-dumping-tariffs
Wouldn’t miss it for the end if the world.
Oh...
have such a monopoly.
The Chinese bikes that cost more are either massively more advanced or just flat out using more expensive materials.
That said, both companies offer something that most do not, and both are worth the asking price.
Besides, even if you pay 3k for a Scott Spark RC frameset, Scott makes them for $300-$400 each and that's probably what goes on the slip. Warranty, QC, marketing, markup, and services are not taxable.
Imported items tariff increases. Where does that money go? USA Bank Account
Additional import tariff cost is carried over to the consumer. Where does the percentage increase of sales tax go? State bank account.
Additional costs to consumer. Where does that money come from? Good question at the moment.
On the longer term
The USA states theoretically have more money due to higher sales taxes and then theoretically offer incentives or loans for manufacturing (maybe) to start up within their states. Manufacturing and sales of these goods generates taxes. Where do these taxes go? The state and USA Bank Accounts.
Where are the skilled and unskilled workers going to come from and while everything gets more expensive, when will stagnated wages go up?
My last new bike was a Canfield Balance. And because it was made in Taiwan, and not part of NAFTA, I had to pay $600 duty (tarrifs). I will be curious, and this had the potential to affect my next bike purchase (test riding a Rocky Mountain this weekend!)
I think the europoor tariffs already of 48% show the sky may not fall. Maybe the only thing that we are at risk of is not being able to own 5 new bikes, or trade up every season.
The environment may not mind that?
Some cool bikes can be had for cheap on your local classifieds, and learning to rebuild them can give you something to do in the offseason.
Noboby in Eu will buy an american (chinese made) product if is more expensive than now...
Example? 4200 euro for a Yeti frame in Italy... think about a 1000 euro more... hahahahaha is made of gold????
So USA must open a EU location (where the costs are lower) to built bikes... like many car manufacturers do... so no jobs advantages for USA... bingo!
So how is everyone doing? Are all you with your a*shole self-righteous, smug "my point of view is better than your point of view" and "my country is better than yours" Feeling better about yourselves now? I am talking to ALL the Americans, the Canadas, Brits, French etc. pissing on everyone eles for a tit-for-tat volley here. Anyone change their mind because they got burned?
Is China somehow a victim and purely innocent in all this? Should all Americans be stereotyped because is XYZ politician or XYZ Pinkbiker comments? 330+ million of us just as a reminder. Is Canda somehow better than the US becase their tariffs are different than ours or some smug dick points out a few negative points? Is pissing on Canada, Europe making the Americans feel like they are 'the man' in a burn contest? Is Europe somehow a perfect utopia and their approach to trade, trade barriers and tax a panacea the best fit for everyone regardless of opinion? Is the US better because we have either a Dem/Repub president and all that didn't vote for said Dem/Repub president or agree with their approach inferior? Is calling all whites bigots or all those who voted for Obama commies making everyone feel good about themselves? I am sure I missed some mud slinging points here.
Aren't we all here on this site for a common interested? Bikes!!! Don't we come here to escape all the 'real world' BS and somehow discuss those things that do come into our spectrum in a rational way and NOT fall into the same polarizing 'Us vs Them' circus the media (from all political perspectives) wants to trick us into? Do you feel like talking shit like a bunch of F***king school yard kids someone makes 'your' country better? Hoe far did we get in our discussions on an adult level? OR did you just come in to win a pissing contest? Anyone opinions change due to the drama?
EVERY country has issues. EVERY country has positives. Great politicians on both sides of the spectrum as well as loser scum politicians on both as well...regardless of a border of which side of the oceans you live on.
Some of us on the page need to grow the F**k up and calm down. Go ride your bikes!! 135, 142, 148, 157 rear hubs, 26", 27.6", 29" wheels, who cares?? We are 'adults' who ride expensive toys in mostly first world countries in the woods/mountains. Appreciate that for what it is and celebrate our (Pinkbike's worldwide audience) common MTB interests DESPITE all of our 'real world' differences and situations. THAT is what we are here for.
Unless everyone decides to veto Chinas choices with their wallet to push them to join the modern world, then political trade wars are what we are left with. I'm all for open markets but it only works well if we all live by the same rules. I'm against the one world government idea but in this case it would make good sense.
“Washington's latest escalation of this country's tit-for-tat trade war with the world's largest Walmart was reportedly in retaliation to Beijing's campaign to use any means (legal or otherwise) to acquire sensitive information from US corporate and military sources in exchange for domestic manufacturing. ”
If This is in fact the case then we should all be demanding that brands find alternative places to manufacture. it’s like paying the kid in the schoolyard that stole everyones lunch money to do your homework for you. You would be like screw that!
As for european brands, many do have some sort of fabrication or assembly within the EU, build in Taiwan or in SE Asia.
I know it's weird, it's difficult, but ...
)
Canada to stop trading? Yeah that would be great for your country. Ahh to see the world through your simple eyes.
Wash your mouth out! Ireland is holding tight to USA fruit (there’s the clue for you) monies away from the taxman.
So who are you really, hiding behind that Confederate flag? My guess is you are really in eastern Europe somewhere...maybe just outside of Moscow or St. Petersburg.
Southerner? Putin's sock puppet is more like it.
I'm also glad that almost every Canadian I've had the pleasure of meeting (both here, and while spending time in Canada) didn't act like arrogant cucks like you, and were genuinely good people.
No one country can build everything they need. We are all in this together and will work it out.
OMG, this is it for some US brands I guess... what a mess is creating your beloved orange ape fellows!
Cause you little bastads, you should be taxed at a high rate and donate your ride at the same time.
Did you know that rising rent is calculated as "Growth" in GDP figures? GDP doesn't always mean that everything is better for everyone. Late stage Capitalism benefits corporations, not the Kowalskis.
Anyone that knows the basics of politics knows that the growth you guys may be see'ing now are left over from the previous administration. Come back in 3-5 years an see how well drumpf is doing for (all) the american working people.
Personally, I dont want Brexit and Trump as a person repulses me but that doesnt mean all of his policies are terrible, however....
Are you not worried that the low unemployment, low taxes and high GDP has been artificially brought about by the decisions Trump has made and that any benefits will be very short-term? E.g. the trade 'war', without alternative USA made product (doesnt exist, nobody makes certain products outside of the far east anymore) will mean a sales drop for importing business or goods costing more for you as prices rise thus eroding your tax saving? Also what happens when in 3 years the government tax pot is much smaller than before because of the reductions in tax, will your infastructure be able to cope with that?
Realistically, radical views on either side are usually toxic but you are a long way from seeing the genuine, long term economic effects of Trump, one thing you will be sure of though is that the rich in the USA will be getting richer over the next few years and its you that will suffer if / when things slow down, not them.
This is some good news then!
www.cnbc.com/2018/08/09/handling-of-us-trade-dispute-causes-rift-in-chinese-leadership-source.html
The raw ingredients needed for manufacturing are going to raise in price; this doesn't help American businesses whatsoever, it just raises prices across the board. Tariffs are not what we need, people buying local and supporting local as they understand the repercussions would be the actual solution.
Of course someone's going to find a way to spin this as a positive...
How does any of this change my point of tariffs hurting the market that exists? You're drawing at strings rather than seeing the full picture here; this increase in import does not help the American market, which is what it was sold to the voting public as. That's disingenuous.
People need to stop saying what can and cannot be done, and we need to look at the real world for examples. We're definitely a consumer market, why not work on that and create jobs? The opposite as to what these tariffs will do.
Not only can it be competitive, it is competitive.
Sorry if I'm coming off as semantic, but I really do feel all of these niche details are what makes the debate. Cheers dude.
From recent comments in these forums, there is no overlap in the Venn diagram of Pinkbike users and supporters of Moscow Don. Let's keep it that way. Tweeter in Chief obviously doesn't ride bikes or give a rip about the outdoors.
Seems a but of hyperbole to bring race into this equation.
Ok, PB'ers I'm waiting for your thumbs down
If you want to see why the U.S. S going down the drain, have a look at the global education ranking.
The U.S. is all about providing the smallest value to the purchaser of goods and maximizing profits to the industries. Take dairy for example, heavily subsidized by the government yet still full of grown hormones and antibiotics.
But my main point is bringing either into this conversation is poisonous and only serves as a catalyst
With any luck, this nightmare will end this year and we'll get the reboot that we need.
Change is comin' Treasonous racists (and their supporters) are going out of style.
I don't need to lean one way or another to point out that people like you are a problem. Don't get all mad throwing a fit...
And you don't have to "envy people who have never met me".... since you've never met me. Give up.
Thanks to people like you, I have been driven to the other side and now I am a hardcore Trump supporter. Some call it "red pill moment" I had a few of those moments and now I really see the reality.
You say you are doing anything you can to mobilize others to your political preference. That is why I said what I said, thanks to people like you change will not happen in November. You are doing the opposite of what you are trying to accomplish and that would be OPENING peoples eyes. I know mine had been opened by now.
“Not long ago, we had a superb public school system, but now we trail most countries. In math, we’re 38th in the world among developed countries in terms of how 15 year-olds perform. And it’s getting worse, not better.”
- Professor F.H. Buckley
I'm sorry it's so "nationalist" of me to point out that you're a typical douche who is spouting off about stuff that you've only read about, since you don't live here. But nice try.
Thanks for the laugh.
I guess it's a fine way of thinking as long as you believe Jesus loves you and god will welcome you in paradise to thank you for being a slave your whole life.
Sorry if you don't like the facts I've read.
What I meant by democracy was that your democratic right to vote is largely pointless due to the political framework behind it.
Read the below and tell me how smart you are for fighting the blue collier, USA, USA! fight.
www.theatlantic.com/magazine/archive/2018/03/america-is-not-a-democracy/550931
m.youtube.com/watch?v=_7U5JVk_y7U
So how is everyone doing? Are all you with your a*shole self-righteous, smug "my point of view is better than your point of view" and "my country is better than yours" Feeling better about yourselves now? I am talking to ALL the Americans, the Canadas, Brits, French etc. pissing on everyone eles for a tit-for-tat volley here. Anyone change their mind because they got burned?
Is China somehow a victim and purely innocent in all this? Should all Americans be stereotyped because is XYZ politician or XYZ Pinkbiker comments? 330+ million of us just as a reminder. Is Canda somehow better than the US becase their tariffs are different than ours or some smug dick points out a few negative points? Is pissing on Canada, Europe making the Americans feel like they are 'the man' in a burn contest? Is Europe somehow a perfect utopia and their approach to trade, trade barriers and tax a panacea the best fit for everyone regardless of opinion? Is the US better because we have either a Dem/Repub president and all that didn't vote for said Dem/Repub president or agree with their approach inferior? Is calling all whites bigots or all those who voted for Obama commies making everyone feel good about themselves? I am sure I missed some mud slinging points here.
Aren't we all here on this site for a common interested? Bikes!!! Don't we come here to escape all the 'real world' BS and somehow discuss those things that do come into our spectrum in a rational way and NOT fall into the same polarizing 'Us vs Them' circus the media (from all political perspectives) wants to trick us into? Do you feel like talking shit like a bunch of F***king school yard kids someone makes 'your' country better? Hoe far did we get in our discussions on an adult level? OR did you just come in to win a pissing contest? Anyone opinions change due to the drama?
EVERY country has issues. EVERY country has positives. Great politicians on both sides of the spectrum as well as loser scum politicians on both as well...regardless of a border of which side of the oceans you live on.
Some of us on the page need to grow the F**k up and calm down. Go ride your bikes!! 135, 142, 148, 157 rear hubs, 26", 27.6", 29" wheels, who cares?? We are 'adults' who ride expensive toys in mostly first world countries in the woods/mountains. Appreciate that for what it is and celebrate our (Pinkbike's worldwide audience) common MTB interests DESPITE all of our 'real world' differences and situations. THAT is what we are here for.
The neg props system’s gonna implode my screen any second ...
Lmao
My point is not that the US is free of blame, but that it is not the great historical anomaly you make it out to be. It was lucky enough to have the world's largest intact economy after World War II, and it capitalized on the opportunity. Now, the world has caught up.
Where did you come up with that? The US economy is as large as the next 3 largest, combined (China, Japan, and Germany). We are China's biggest customer, by far, and Trump is forcing their hand with the threat of high tariffs...they cannot survive that and will need to negotiate. If any tariffs are put in place, they won't last long. Your post shows a shocking level of ignorance and anger. Let's stick to bikes; I can read idiotic comments on Yahoo! News.