Where Your Next Bike Might Come From

In a couple of earlier posts (See here and here, I examined some of the ways in which the new tariffs on Chinese goods could affect cyclists and the bike business here in the US.

Some American bike firms, like Brooklyn Bicycle Company, are deciding whether to absorb the price increases or pass them on to customers.  Others, like Detroit Bikes and BCA, are calling for even higher tariffs and extending them to all imported bikes.  

Trek and Kent--two bike companies rarely mentioned in the same breath, let alone the same blog post!--are contemplating yet another strategy which, really, shouldn't come as much of a surprise.

Trek is, arguably, the most prestigious mass-market American bike brand.  (Specialized and Cannondale are probably Trek's chief competitors for this title.)  Their highest-priced bikes are still made here, albeit with imported components.  The rest of their bikes are made by sub-contractors that include Giant, which also sells its bikes under its own name.

Kent's offerings, in contrast, are at the bottom of the market and found, not in bike shops, but in big-box stores like Walmart and internet retailers.  Some are sold, under license, bearing the Jeep, Cadillac and GMC brands.  Although some of its bikes are assembled in South Carolina, their frames are made in China and Taiwan and assembled with components made in those countries.

So...Is Trek returning to its roots by returning its manufacturing to the US?  Well...no.  You're not going to see a revival of those nice lugged steel frames they made in Wisconsin during the '70's and '80's.

Likewise, Kent isn't going to build a factory in Parsippany, New Jersey (the location of its headquarters), or anywhere else in the good ol' You-Ess-Of-Ay!

No, they are not going to do what El Cheeto Grande told all of those laid-off blue-collar workers in Ohio and Michigan and Pennsylvania companies would do in the face of tariffs.  Instead of making their wares in the country Trump thinks he can Make Great Again, they are talking about shifting their production to a country that isn't getting a tariff wall built around it.

If you are European, what I am about to say next will come as no surprise:  That country is Cambodia.  

The Southeast Asian kingdom is already the biggest supplier of bicycles to European Union countries.  Most of the country's bike factories are in the north, near Vietnam--which some have called "the EU's China." If you buy, say, a backpack or jacket in Europe, it's more likely than not to have been made in Vietnam, just as the new bike is likely to be from Cambodia.

It will be interesting to see whether other American bike companies make similar moves.  If anything, wages in Cambodia, Vietnam and other countries in the region are lower than they are in China. And some Cambodian bikes are already coming into the US--though, in far smaller numbers than bikes from China or Taiwan.

What's He Protecting?

The moment anyone with power uses the word "protect", I reach for my trusty frame pump.  Not only does it get my tires up to pressure in a pinch, it's great for swatting away stray dogs and other threats and nuisances.

You see, I've come to realize that any powerful person who thinks he or she can "protect" anyone or anything he or she hasn't met is delusional or lying.

And so it is with El Cheeto Grande.   He's passed another round of tariffs because he's, once again, got his knickers in a twist over China.  

Of course, the tariffs will not "protect" American industries because...well, they don't exist anymore, if indeed they ever did.  

(Besides, all you have to do is look at Smoot-Hawley to realize that tariffs almost never have their intended consequences.  But that would be the subject of, not just another post, but another blog--or a book!)

To wit:  Back in the Clinton administration, I tried to put together an all-American bike.  Of course, I did it on paper.  Frames and forks weren't hard to find, though they were almost always more expensive than imports.  Ditto for the Chris King headset, as great as it is. Yankee-made handlebars, stems and seatposts were available, but they were mainly "boutique" items.  

The other components, on the other hand, were a lot more difficult to find.  Sun was making its rims, and Wheelsmith its spokes, in the USA.  And there were a number of small companies fabricating hubs here in the USA, such as Phil Wood and Chris King.  They, of course, cost far more than even Dura Ace or Record stuff, but at least they kept my exercise going.

That is, until I tried to find tires.  To my knowledge, none have been made here since Carlisle ceased production, apparently some time in the early '80's.  Goodyear, Firestone and other rubber companies had exited the non-motorized trade long before that.

OK, I thought:  The tires are just one part (or two components, depending on how you look at it.). Surely, I could make the rest of the bike into a Yankee Doodle Dandy.

Then I tried to put together a drivetrain.  Mind you, this was during the days when it seemed every 25-year-old in California or Colorado who had access to a lathe was turning out lightweight (and very expensive) cranksets and derailleurs in a rainbow of colors.  I thought cassettes would be my next hurdle but, as it turned out, some company--in Massachusetts, I think--was making titanium bits--including cassettes.  

Eight speeds were the standard at that time.  If you remember anything about Shimano's 8-speed equipment, you knew that not everything was interchangeable between gruppos.  Namely, a Dura Ace hub would take only Dura Ace cassettes--not Ultegra, 105 or any other.  Turned out, the titanium cassette was made only for Dura Ace--which, I supposed, made sense, given what Dura Ace and titanium equipment cost.

(Aside:  Shimano's 9-speed stuff was interchangeable.  So Dura Ace hubs could take Ultegra cassettes, which weighed a bit more but cost about half as much.  And the standard 9-speed Dura Ace cassette was made of titanium, which pre-empted aftermarket stuff.)

But there were no chains made stateside.  Back in the day, the baloon-tired coaster brake bikes had American chains; however, as far as I know, no derailleur-compatible chain has ever been made here.  Nor were any pedals, save for the rubber-block variety found on said wide-tire "bombers".

Oh--and there were no American-made saddles.

Today it would be even more difficult to put together an all- (or even mostly-) American machine.  And almost very few bike accessories are made here.  Yet they are all subject to tariffs.

And it's all but impossible to find some items made anywhere besides China.  Almost anything electronic--lights, computers and the like--come from Cathay.  

So do helmets.  Interestingly, they have been exempted from tariffs.  It's ironic when you realize that one of the rationales for the tariffs is to protect against intellectual property theft--and nearly all helmets are designed in the US!

Of course, bicycles are far from the only things to be affected by the tariffs.  I'm not sure I'd want to be a farmer who raises corn, soybeans or hogs right about now.  But I have yet to hear anyone explain how any job or industry will be "protected" in this country.  

What--If Anything--Wii This Trade War Cost Us?

I passed the only economics course I took as an undergraduate by promising the professor that he would never, ever see me again if he gave me credit for the class.  If I were to fail, I warned him, I would be forced to take the class again and he might get stuck with me for another semester.

It worked.

Well, all right. It didn't quite go that way.  I passed the class, but I didn't make any such promises or threats.  I think the prof, though, realized that I had absolutely no talent for the subject to which he devoted his life and I wanted to return to school the following semester.  In short, he seemed to feel pity for me, and might've added, oh, a point or two to my final grade.

Anyway...The point of this is that I should not, under any circumstances, be mistaken for an economist.  And, no, I didn't play one on TV. (How does one play an economist on TV?)  So, take anything that resembles economic or business forecasting on this blog with a large bottle of frame prep solution.

As you all know, El Cheeto Grande is proposing tariffs on Chinese imports.  They are in retaliation for similar fees China imposed on imports from the US--which, in turn, were a reaction to earlier tariffs Trumpf slapped on Chinese goods.

The difference between the first and second round of Trump Tariff Punch is that the later round includes a greater number of products than the first, from which consumer goods were mainly absent and, instead, included farm products and basic materials such as steel.

Although details of the second round haven't been made public, some folks who know more than I know say that simply because the second round encompasses about twice as much of what the US imports from China (by monetary value), it's likely to include consumer goods.

As to which consumer goods might be affected:  No one has said outright that bicycles will be in the crosshairs, but it's hard to imagine that they won't be.  The tariffs might even include "bike-related imports", as more than one article put it.  

So, even if you don't buy a Chinese-made bike, there's a good chance that some of the accessories or parts you hang on it will have that tax levied on it.  For example, of my six bikes, four are British (Mercian), one American (Trek) and the other Japanese (Fuji).  I don't have any Chinese parts on them, and about the only accessories from China I use are the rack, lights and handlebar wrap on the Fuji. So, if I were to buy those things today, I wouldn't be affected much, if at all.  

But in spite of my efforts to buy from companies based and operating in countries where workers are paid decently and are guaranteed some basic human rights and protections, I find that I am not "innocent", if you will.  Turns out, my Giro helmets are made in the land of Leninist Capitalism.  So are my riding glasses, gloves and a few other things I use while riding.

What gets taxed, of course, will depend on how the categories of taxed goods are defined.  If there's a group called "bicycle-related goods", or something similar, watch out!  On the other hand, the law might specify certain categories of bicycles defined by price point or wheel size, as is done in places where there is a sales tax on new bicycle sales.  Naturally, none of us would like that tax, but at least you have a clearer idea of what will and won't be taxed.

Now, if this tariff were in the works during my youth, I would have scoffed:  "Well, I don't buy such crap bikes."  These days, though, it's hard to avoid buying Chinese unless you are shopping near the top of the price scale.  Some of those bikes and parts with familiar names you've long known may no longer be made in Europe or Japan or the USA--or even Taiwan.  They may be produced in Chinese factories.

My prediciton:  Some bikes and "bike-related products" will be affected.   But I think they will be a result of falling into larger categories of imports that are affected:  Somehow I don't think that the folks who are charged with turning El Huffy's Twitter storms into international trade law are thinking about bicycles in particular.  

Are Bike Share Programs Cutting Giant Down?

For most Americans, a "traffic jam" consists of throngs of cars and other motorized vehicles crawling or standing still on major streets or highways.  In many places, they are a regular feature of what is called--without irony--"rush hour": the times of day when most people are going to, or coming from, work or school.

Until two decades ago, Chinese cities also had traffic jams.  Instead of cars, though, their streets were lined with bicycles.  About the only way an American cyclist could experience anything like it without going to China was to participate in a large organized ride like the Five Borough Bike Tours, where there are sometimes "bottlenecks".

Then, as China became more prosperous, people who used to ride their bikes to work started to drive--to work, and just about everywhere else they could.  Now China was experiencing American-style traffic jams its their cities.

So, a few years ago, some Chinese went back to commuting and getting around by bicycle, as it is faster, especially in the central areas of many cities, than driving.  Once again, there are bikes all over Chinese streets.

It sounds like things should be really good for bicycle manufacturers, doesn't it?  I mean, can't you see Giant, which now makes most of its bicycles in China, just raking in the dough?  

Believe it or not, Giant's stock has more or less flatlined this year.  Its price is now just about the same as it was in December.  Two other major manufacturers, Zhonglou and Shanghai Phoenix, both experienced surges in late 2016 but are now worth less than they were at the beginning of this year.

Giant's listlessness, and the tumble the other two companies have taken, can be blamed to some extent on the China's economic slowdown, which is part of the reason why the Chinese are buying fewer bikes than they did in 2015 or 2014.  More to the point, though, is something that is causing bike sales to shrink in other parts of the world.

In China, as in much of the West, more and more people are riding bikes.  Yet fewer and fewer are buying them.  That doesn't make sense (I am really, really trying not to use the word "counterintutitve"!) until you realize that many new bike commuters and even recreational riders in Shanghai and Hangzhou, like their peers in Paris and London and New York, are riding bikes from share programs.  

Is this cutting Giant down to size?

According to industry analysts, one of the reasons manufacturers like Giant aren't benefiting from the growth of bike share programs is that their production and marketing have been oriented toward bike shop sales, which have been falling--in part because of share programs, and because the ones who have traditionally spent the most money in shops, namely bike enthusiasts, are doing much of their shopping on-line.  

What that means is that companies like Giant didn't, until recently, produce bikes with the apps and other accessories demanded by bike share programs.  Other, smaller manufacturers--including a few start-up companies--have stepped in to fill the gap.  For example, the bikes in New York's, Toronto's and Montreal's share programs are made by Quebec-based Devinci.  While the brand has a following, mainly for its mountain bikes, it is not nearly as well-known as Giant, whose website lists 25 dealers in the five boroughs of New York City, and as many in the surrounding metropolitan area.  Devinci's website, on the other hand, shows only one dealer in New York City (Brooklyn) and one other across the Hudson, in Bergen County, New Jersey.

One of the reasons why smaller companies can fill those voids is that they don't have as much invested in manufacturing facilities as the big companies.  As a result, they don't have to spend as much time or money re-tooling in order to meet changing demands.  As I have mentioned in earlier posts, one of the reasons Schwinn is now a shadow of its former self is that it was slow to adapt to the changing demands of cyclists.  One of the reasons for that was that Schwinn had so much invested in an aging factory and equipment that couldn't produce the lighter bikes adult cyclists wanted.  Paramounts were nice, but most people who took up cycling during the '70's Bike Boom were looking for something that was agile and functional, but wouldn't break the bank:  In other words, something like the Fuji S-10S or Nishiki International.

Could it be that bike-share programs will turn Giant, Specialized and other "giants" (pun intended) of the bike industry into dinosaurs--or Schwinns of the future?