Bike prices predicted to fall in 2023 due to excess stock, but not across the board
Posted on in Business News , Cycles News
Predictions of a slowdown in demand for bikes may contribute to an industry-wide decrease in prices, with the Bicycle Association reporting UK bike sales down by a quarter against Covid levels.
The first half of 2022 saw market volume and value drop by 28% and 26% respectively, compared to the same period in 2021. The BA report says 2022 might be a “low water mark” of a post-Covid slump, with recovery likely to be slow and subdued by global and local market forces.
This dip in sales comes despite a sustained 33% increase in the number of people cycling compared to pre-pandemic levels, according to Department for Transport figures cited in the BA’s report.
This figure has cranked up to 39% since March, when fuel prices started to increase after the Russian invasion of Ukraine. This has led some to speculate that bike brands may have overestimated market demand, leading to a growing stockpile of bikes.
Interestingly, some cycling disciplines continue to see strong sales and, in some cases, growth.
The BA’s Market Data Service showed the average selling price (the average price of each bike sold, rather than the average asking price) increased by more than 40% between 2019 and 2022.
John Worthington, the head of insights at the BA, says demand among cycling hobbyists for higher-end carbon road or mountain bikes has contributed to this.
According to the Bicycle Association, the price of a bike with the same or similar spec has increased quite widely, from around 10% to over 40% depending on the discipline and other factors, between 2019 and 2022.
At the top end of that range, that means a bike priced at £1,000 in 2019 could now cost you £1,400.
In addition to Brexit and the long-tail effects of the pandemic, new factors have pushed up average bike prices over the period covered by the Bicycle Association data.
A weakened pound, which led to an increase in the cost of importing goods, directly impacted the UK cycling industry, which imports most of its goods.
According to a piece in Bike Radar, Brexit also continues to cause headaches for bike brands too.
It reports on how Fairlight, which manufactures many of its framesets in the EU, is still feeling the effects of Brexit. As early as 2021, brands increased prices for UK customers, citing Brexit as a key reason behind price hikes
Dominic Thomas, the co-founder of Fairlight, said increased transportation costs and additional admin caused by Brexit were key factors that forced the brand to increase prices of some of its models by 10 per cent in 2022.
“Post-Brexit, we should have been able to continue transporting our EU-manufactured frames in and out of the EU without incurring duty costs.
“In reality, despite filling in the required paperwork ‘to the T’, we were charged up to 100% duty for products that should be 0%.”
Globally, Russia’s war in Ukraine also contributed to rising energy costs, increasing the cost of manufacturing. The pandemic-prompted boom in cycling also played its part in keeping prices stubbornly high.
The number of bikes sold rose 27% between April and September 2020, with electric bike sales more than doubling. With enormous demand outstripping supply in some areas , there was little incentive for brands to cut prices, reducing the number of deals available to consumers.
Though lifted recently, China’s zero Covid policy put enormous strain on manufacturing and logistics across all sectors.
Mark Sutton, editor of Cycling Industry News, also highlights China’s rhetoric on bringing Taiwan under its control as a potential area of concern for 2023 and beyond.
Taiwan is a key manufacturing hub for the cycling industry. Any disruption to trade could especially “impact the electric bike industry quite severely given that Taiwan is a key electronics supplier to the world”.
Bike Radar says that, while it would be foolish to suggest everything is rosy on the geopolitical front, 2023 is, on the face of it, shaping up to be a less turbulent year for the cycling industry.
While the war in Ukraine continues to rumble on grimly, energy costs have largely normalised. A successful vaccine programme has seen us enter something of a ‘post-pandemic’ era in the West. Provided a snap general election doesn’t throw things off kilter, the political situation in the UK is also unlikely to cause another run on the pound.
Bike Radar asks if this more stable outlook could manifest itself in reduced prices for customers?
While the BA’s report shows ebike sales have plateaued, electric cargo bikes are up 37% to around 10,000 units sold between January and May 2022, compared to 12 months previous.
This shift in buying habits has contributed to excess stock, “particularly around entry-level/mid-tier”, says Worthington.
This sentiment is echoed by others.
Speaking to Bloomberg, Brompton CEO Will Butler-Adams claimed outright that “the industry has over-ordered on bikes”.
According to the Financial Times, Goldman Sachs issued a sell recommendation for Shimano stocks in October, predicting an “impending correction in component orders from bike-makers”.
Writing on Twitter, cycling journalist Carlton Reid also claims his sources are predicting excess stock will result in “carnage… worse than the BMX/MTB/road sector crashes of previous years”.
Worthington predicts retailers and brands will have to offer heavy discounts to shift inventory, creating “some downward pressure on average selling prices across the market as a whole”.
There are early indications that a great sell-off could be afoot, though no manufacturer has specified excess stock as the root cause behind this.
Canyon has reduced the prices for most of its bikes in the UK.
Aaron Budd from Canyon UK said “many aspects [influence] final pricing – e.g. raw materials, exchange rates, customs, and delivery charges, etc – and we constantly review them.
“In this case, it’s simply meant we can drop our pricing.”
Canyon also added this was a permanent price decrease, rather than a limited-time sale.
None of this is great news if you’re a retailer, but it does mean you could soon be able to find yourself a discount – or, at least, pricing closer to what we would have expected a few years ago.
So, will bike prices drop?
Bike Radar suggests that the price of top-end bikes is unlikely to drop in 2023, but we may see reductions in the mid-range. While any unforeseen global factors could throw things off course, the industry should see a short-term reduction in average bike prices.
If brands are sitting on piles of excess stock in the low to mid-range, there could be generous discounts on 2022 bikes, particularly as new models are released closer to the summer.
