Thursday, January 03, 2008

Bike production costs going up

I've been sitting on this story since September and now Bike Europe has broken the news: Bicycle production costs are going up significantly in China. The Bike Europe article notes that labor costs are increasing in China, along with other costs of doing business such as new pension requirements and new taxes.

Bike Europe mentions a six to seven percent increase in the cost of bike components, which just happens to match the seven percent drop of the value of the dollar against the Chinese yuan. Bike Europe also fails to mention the skyrocketing cost of raw materials used to build bikes, fuel shortages in China that make it increasingly difficult to manufacture product there, along with rapidly rising costs of energy and fuel. While the cost of transporting product from China to the rest of the world is still negligible, this is also increasing.

I expect more demand for bikes in the USA, Canada and Europe, especially for the low end bikes that are typically produced in mainland China. Some of these cost increases will be passed along to consumers, but the increased production cost of bikes will eat somewhat into profit margins.


Seamus Keogh said...

There was an article in the New York Times about wages in china going up as a result of factory owners not being able to find workers who will work for as cheap as they used to. With so many people moving to the cities to find work, the factories in rural areas are having to raise wages to attract workers.

it was in the august 29th issue.

As an American bicycle worker, I am glad to see wages raising in china. The movement of nearly all bicycle production to china is based on the falicy that there is a limitless impoverished mass in china that will work for slave wages, while this is still largely true, perhaps we are starting to see the bottom. Maybe this will help bicycle production in the united states, and give all of those out of work bicycle workers in ohio a new job in an old factory.

but maybe that is wishful thinking.

bother yam said...

Considering that the dollar is dropping in value compared to the yuan and the Euro, perhaps the Great American Bike Renaissance isn't too far behind. We've still got some people that have skills to fabricate here, so perhaps we can start building bikes for the rest of the world...