Bicycle manufacturing has many stages. The final assembler is your local bike shop — we take bikes that are shipped in boxes partially assembled and do the final build and tune up. We get those boxed bikes shipped to us from three U.S. design companies that do virtually all their manufacturing and boxing in Asia (Specialized, Cannondale, Kona) and a Spanish company from the Basque region (Orbea), which boxes bikes in Spain. Bike parts are largely made in Asia. In particular, Taiwan is a key maker of high-end carbon bike frames and other parts. The top groupset makers (shifting and braking components) are are a Japanese company Shimano, which manufactures in Asia, and SRAM ,a U.S. company that also manufactures in Asia. Almost every partsmaker, in turn, uses materials or components made in China. It’s more complex that this, of course, and I’m sure there are things I’ve missed, but I think that’s a fair overview.
Trek, another large U.S. company that manufactures in Asia, just announced a 10% price increase, across the board. Cannondale has informed us they will likely have a similar across the board increase. Specialized has given us a heads up that “tariff surcharges” will likely start in May. It looks like Kona will have a similar charge. We haven’t heard from Orbea yet. Even bikes that are mostly manufactured in the U.S. will eventually see price increases, as component costs rise.
These price increases suck. The outdoor sports business was already in a recession. Since bikes and kayaks are durable goods, lasting many years, we in post-pandemic buying lull. People bought outdoor gear like crazy during the first two years of the pandemic, and those bikes and boats won’t need to be replaced or upgraded for several years more.
But the impact will be fairly gradual. The graphic at the top shows shipments from Asia arriving in Los Angeles. They surged as manufacturers raced to get supplies before the tariffs, and are now plummeting. So we’re well stocked on some items. And the outdoor sports recession means lots of manufacturers still have pretty full warehouses already, and may still need to have discounts on some overstocked items.
And shortages are already starting. It’s already very hard to order 24” kids bikes. Other shortages will begin to emerge pretty soon.
At our two shops, we are devoted to helping people get active and get outside. Our business will be OK in the short run, since we don’t have any debt, but other shops will close. As will some bicycle and parts makers. We don’t expect any profit this year, just like 2023 and 2024, but we will be able to pay the bills. Our biggest business concern is that consumers get overextended to the point where we have a deep recession. On the one hand, when times are toughest, more people bike to work. But with fewer working in the first place…
For additional reading, Paul Krugman has a great substack today, always recommended for economic news: paulkrugman.substack.com/… Krugman emphasizes how bad economic policy could bring about Trump’s political decline. A silver lining in a recession, I guess.
Likewise, CNBC and other sources are picking up on overstretched consumers — with more people using buy now pay later apps for groceries (!)
GDPnow will update on Tuesday — It’s still showing about Zero growth in the first quarter. I’ll try to compile some additional economic news and readings tomorrow.
