European bicycle groups put brakes on reshoring as energy prices bite
Companies’ plans to move the manufacturing of bicycle components from Asia and China to Europe have largely been put on hold as surging energy costs hit the region.
Industry executives say companies have given up on moves to reshore, which had been prompted by lengthening order-to-delivery times, as energy prices have risen much higher on the continent than elsewhere.
Despite the war in Ukraine disrupting deliveries further, European groups say it is no longer realistic to source materials and components nearer to their factories and consumers to avoid supply chain bottlenecks.
“It would be a dream to buy most of the parts in Europe, but this is a big challenge,” said Bastian Roessler, chief executive of Cube Bikes, which produced more than 1mn bicycles last year.
“With the current challenges of a war and higher energy costs, it will be harder to do more sourcing in Europe.” the boss of the German manufacturer added.
His comments come as the bicycle industry struggles with lead times between ordering a component to its delivery rising to nearly two years for some parts compared with just a handful of months before the pandemic.
The Ukraine war has created more complications with transport groups forced to avoid Russian airspace and other routes that transit the vast country, such as the Trans-Siberian rail route, from Asia to Europe.
Manufacturers only had to wait three months for fork components before the pandemic, but now it is up to 18 months on average, according to data provided to the Financial Times by the World Bicycle Industry Association.
Lead times for other parts are just as long. A bicycle frame used to take three months before the pandemic, but today it takes 15 months, while delivery times for tyres have stretched from three to 12 months.
But with gas prices in Europe jumping seven-fold to €111 per megawatt hour as of Friday compared with the same time last year, decisions to reshore have largely been ditched.
Manuel Marsilio, general manager at the Confederation of the European Bicycle Industry, said high energy costs were inhibiting investment in Europe.
“It’s difficult to do it [invest] in a circumstance like this where the energy price is so big.”
However, he argued the long wait for components from China meant producers would still aim to shorten their supply chains in the long-term.
He sticks by projections that Europe would double the value of local component manufacturing to €6bn by 2025, helped by the presence of Germany’s Bosch, a vital supplier for bicycles with a motor.
Adding to the strains, the bicycle industry is also facing renewed supply chain threats from factory closures because of coronavirus lockdowns in Shenzhen and Shanghai.
As of Friday, more than 140 vessels were waiting outside of ports near Hong Kong and Shanghai, up by half on the start of the year, according to data from Kuehne+Nagel.
The bicycle industry is particularly vulnerable because of its reliance on a small number of large component producers — Japan’s Shimano, US-based SRAM and Italy’s Campagnolo — that have generally been cautious about over-investing to create new production capacity.
“The biggest challenge is we’re very reliant on Shimano or SRAM,” said Rob Gitelis, chief executive of Factor Bikes, a Taiwanese bicycle manufacturer backed by Tour de France winner Chris Froome.
“I speak to friends at Apple who have contingency plans upon contingency plans. We don’t have any of that in the bike industry.”
In addition, the conflict in Ukraine has created broader concerns over inflation, which could disrupt business and hit consumer demand further.
However, Roessler and others are confident the high-end of the industry, which manufactures performance bicycles and electric-powered machines, can weather the storms, particularly with rocketing fuel prices that could prompt people to ditch their cars.
“The second car is becoming an ebike,” Marsilio said.