Bike Production Costs in China Rising Rapidly

BEIJING, China - The changing economic situation in China is stirring up the global bicycle industry. Currently price increases of 6 to 7% for components as well as bikes manufactured in China have already been announced.

More is in the pipeline as labour cost is year by year increasing with 30%. Even higher ups are expected for 2009 due to new regulations on pension funds.

New Chinese Taxes

Other factors that contribute to the rapidly rising production costs in China are higher prices for steel and plastics plus the cost of transport due to the increase of oil prices. The weakness of the US dollar is also a contributing factor. Next to all that, the Chinese government is said to have announced a new tax for foreign companies operating in the country. That tax is on money transfers out of China and consists of 10% on the remittance amounts.

The rapidly rising costs are reflected in changing payment terms as well as in shorter validity of quotations. Reports say that some suppliers are only confirming prices on an order-by-order base.

Giant Opens facility in Tianjin

Several parts and bike makers are heading towards the north of China attracted by low wages. The world biggest bike maker Giant recently announced to open a huge facility in the Tianjin region. Parts and bike maker in this province are mainly producing low end products and it is said that they increase their prices even up to some days before shipment. It is not unusual that goods are not shipped before the clients agree on new and higher prices.

Europeans bicycle manufacturers are currently enjoying a very favourable exchange rate EUR/US$. However, looking at the current happenings in China, it is said that other production locations are becoming more favourable. In particular Vietnam is named despite the fact that complete bicycles shipped from Vietnam to the European Union are taxed with a 34.5% dumping duty.