Price increases in the bicycle market

In the past few months, we have seen all the major bicycle manufacturers raise their 2022 list prices, blaming first the rise in raw material prices, then the increasingly complex logistics after the Pandemic, and finally the ever-increasing demand for two-wheelers. Let us analyse the actual state of the bicycle market and the possible post-Covid evolution.

Why are raw materials increasing?

The Pandemic is leaving a whole series of complications and reshaping of global balances, the long-term effects of which will have to be studied. First of all, after years of non-existent inflation, there is talk again of price increases led by the rise in raw materials that are affecting all industrial sectors.

Which raw materials have increased?

The causes of the increase in production goods are diverse, and there is increasing talk of the 'Perfect Storm' that has hit the industrial market. In first place are energy goods, which increased by more than 105% in a single year, driving up production costs in several sectors. In second place are ferrous goods, which saw an increase of almost 75% between October 2020 and October 2021. These are goods widely used in the automotive and two-wheeler industries. On the third step of the podium, on the other hand, we find organic chemical goods, which saw an increase of more than 50%.

In the table below, you can see the raw materials that increased the most between 2020 and 2021.

With the start of the new year, the increases do not seem to be stopping, but we are seeing further increases, with energy prices marking +55% for electricity and +41.8% for the price of natural gas, already in the first days of 2022.

What are the repercussions on the bicycle market?

As we have seen, it was raw materials that influenced the prices of two-wheelers. In fact, energy, ferrous and plastic goods are all used in the production of bicycles. For example, the supplier Trek declared an increase of 27% for the procurement of aluminium while Elite, a leading component manufacturer, complains of an increase in the costs of metals and plastics between 40% and 60%.

The cost of the raw material for the production of a loom can nowadays exceed EUR 500 without considering labour, the price of energy used and machinery depreciation.

However, the price increase is not only driven by the rising cost of raw materials. Added to this are the transport costs. Most producers are located in Taiwan and travel with delivery times of between six and nine months, which continue to widen or narrow depending on the progress of restrictions imposed by the local government.

New regulations for transport during the Pandemic and delays in supply due to the restrictions thus increased shipping and procurement costs for all producers.

Thus, several suppliers returned to invest in their homeland with tyre manufacturer Vittoria and Bianchi starting production in plants on Italian soil at the expense of eastern factories.

To complicate the situation in the Italian market even more, there was the Bonus Bici, which led to an explosion in demand for bicycles (+17% muscle bikes +44% electric bikes in 2020) that completely emptied manufacturers' warehouses.

Finally, we find another problem related to the financial markets. Indeed, the Taiwanese dollar has seen a strong appreciation in the past two years against western currencies, leading to a further indirect increase in production costs.

Will the bicycle market be able to meet demand in 2022?

Several suppliers, in order to restart those oiled mechanisms that had managed to keep the bicycle market running until 2019, see the solution in the relocation of production.

As we have seen, one of these is Bianchi, which is investing almost 40 million euro for its new plant in the province of Bergamo. This obviously seems to be very good news for the Made in Italy two-wheeler industry, but will it also be good news for consumers?

In fact, manufacturers are asking for subsidiary support from the government to intervene on excessive labour costs and to support investments made in the country to create employment and added value. In fact, the costs of the 'Italian System' risk driving up the cost of producing bicycles, which would once again be passed on to the end consumer.

In addition to Bianchi, state intervention would make it possible to bring back many excellent Made in Italy products, which would benefit from a relocation of the production chain in the Belpaese, bringing back to Italy the bulk of a sector that until thirty years ago was entirely localised.

Source:prontobolletta.it

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