Below is a article from bicycleretailer.com explaining some of the ongoing price increases going on currently.
A version of this article ran in the February issue of BRAIN.
(BRAIN) — A C-student in whatever class comes before Economics 101 could predict price increases in the industry in 2020, given the imbalance between supply and demand. And 2021 will likely see retail prices go up another 10-25%, experts say.
Through last September the average retail price of bike products was up 22%, compared to the same period in 2019, according to NPD Group.
2021 will likely see retail prices go up another 10-25%, experts say.
Some major suppliers held the line on pricing through the summer, but most implemented wholesale price increases and the fall and some upped them again around the turn of the year.
Exchange rates.
In the last year, the U.S. dollar has fallen 9% against both the Taiwan dollar and China’s renminbi, 5% to Japan’s yen and 10% to the Euro. While the U.S. industry hasn’t imported a lot of bikes or components from Europe in recent years, it does import European softgoods and e-bike motors.
Material costs.
Since the start of 2020, aluminum is up 15%, and rubber is up by 50% or more. Steel prices were up about 20% in 2020, and China Steel Corp., Taiwan’s biggest steel maker, announced another 9.5% price increase on Jan. 14.
Even corrugated cardboard is up 10% in the last year, with a sharp price increase in the commodity cost at the end of 2020.
Labor costs/shortages.
Taiwan has a shrinking population: in 2020, for the first time, the country’s annual deaths exceeded its annual births.
Suppliers of dealer-quality bikes depend on the nation for components, frame making, and bike assembly. Even bikes with frames made in China or Cambodia rely on Taiwanese components.
Due to the labor shortage Taiwan’s factories depend on guest workers from Thailand, Vietnam, Indonesia, and the Philippines. But coronavirus restrictions are curtailing labor migration and limiting factories’ abilities to increase production.
China, Vietnam and Cambodia also have labor shortages.
Suppliers said the the labor costs are hitting the factories and they are passing the cost on to bike companies.
Tariffs.
Since they were first imposed in 2018, the industry has slowly but surely gained exclusions from many of the new tariffs the Trump administration added to Chinese imports. Thanks to lobbying and exclusion requests coordinated by PeopleForBikes and other groups, kids bikes, e-bikes, helmets and other product categories earned exclusions from new tariffs of 7.5% to 25%. Importers were refunded the excess tariffs they already paid.
That all ended Jan. 1, when all those exclusions expired.
Now, most Chinese bikes, e-bikes, frames, tires and tubes are once again subject to the trade war’s 25% tariff, in addition to tariffs that pre-date the war. Previously exempt, now helmets, bike lights, wheels, handlebars and seatposts are again subject to an additional 15% tariff.
While President Joe Biden is expected to take a fresh approach to fighting the trade war, he is not expected to surrender, and the tariffs will likely stay in place for the time being.
Freight.
Whether by sea, land or air, moving products around has become slower and more expensive. Contract ocean freights, which are generally set for a one-year period, are up 40%. Spot container rates, which vary constantly depending on the availability of containers and demand, are about 2 ½ times the contract rate.
Even at the high rates, it’s still difficult to arrange for enough containers, importers said.
The ocean freight cost increases alone can add $15 to $25 per bike compared to a year ago.
The old rule of thumb is that a $1 increase in cost for an importer results in a $3 increase on the sales floor. So the freight cost increase alone might add $75 to a bike’s MSRP — bearable on a high-end bike, but a significant increase on the cost of a sub-$1,000 bread-and-butter model.
Domestic freight costs are also on the increase, with UPS and FedEx making it especially costly to ship large boxes, like bike boxes. Last June UPS added a $31 surcharge on large packages like bikes; in October it increased the surcharge to $50 for the holiday season and then lowered it back to $31 in January.
Across the board.
Most or all major brands increased retail bike prices by $30 to $100 per bike around the turn of the year. With demand high for virtually every kind of bike, some brands implemented the increases across the board, while others adjusted prices to the expected supply and demand of specific models and categories.
Dealers tell BRAIN they’ve seen increases from Specialized, Giant, Cannondale, Kona and other brands. In most cases, the price increases applied to inventory that dealers already had on order — but no dealers told BRAIN they would cancel their orders because of the increase.
Most brands increased the bike’s MSRP along with the wholesale price to maintain dealer margin.
In a normal year, the retail price increase might curtail sales, but few expect to see that this year, because few expect to see any decrease in consumer demand in 2021, as most of the factors that created the 2020 bike boom persist, and several suppliers told BRAIN they expect the bike shortages to last until at least the first quarter of 2022.