Fri. Oct 18th, 2019

How does the US-China trade war influence your mountain bike hobby?

Could trade tensions lead to higher global mountain bike prices?

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Most of the world’s bicycle and cycling components are produced in concentration between China and Taiwan. Road bikes. Kids bikes. Mountain bikes. They are all built in the Far East.

The current trade tension between the U.S. and China is
pressuring that global bicycle supply chain and forcing manufacturers to
consider geographic alternatives.

Giant is not only a popular mountain bike brand in South
Africa, it also happens to be the world’s largest producer of bicycles. The Taiwanese
industrial powerhouse started off as a contract manufacturer for American
brand, Schwinn, before realising that it could absorb marketing functions and
service customers with its own brand.

As the world’s largest bicycling brand, Giant is uniquely
aware of any impact that sourcing and supply chain tariffs would have on its
global customer distribution.

The company’s new reality is that China cannot be a single source location for bicycle frames or components anymore. With the U.S. trade tariffs adding roughly R1400 to each frame produced in China, there is a new reality for Giant, its rivals and the global cycling community at large.

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The cost of finding neutral production nodes

Alternative locations, which sit outside the discomfort of the current U.S./China trade war, are now being activated to reinforce the global cycling supply chain.

For Giant, the move has been simple: it has taken some of its Chinese bicycle production and shifted it to locations not at strain with the U.S., which remains where many of its high-end customers are.

Curiously, the bicycle frame volumes that Giant once sourced
from China will now partly be serviced by a new factory, commissioned in
Hungary. Giant’s other global manufacturing sites are in the Netherlands and
its home market of Taiwan.

Considering its sales volumes and the presence of five
assembly facilities in China, Giant was more exposed to the simmering U.S/China
trade tensions than most.

Although South Africa enjoys healthy relations with China,
especially in terms of trade, the movement of production of out the People’s
Republic, to locations with stronger currencies, could risk a spate of price
escalations in the coming year or two.

For the bicycle industry, any move out of China will have severe scaling risks and adjustments in labour pricing.

The economies of scale which have held margins steady over the past decade have now been radically pressured by the trade tariffs.

At a time when global demand for mountain bike products are
escalating, especially in South Africa, the trade war has added an unpredictable
layer of risk management for cycling brands.

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