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TAIPEI, Taiwan – Bikes will become more expensive. That’s what this year’s Taipei Int’l Cycle Show that closed its doors last Sunday was all about. It’s expected that retail prices for bicycles will rise between 8 and 10% this year.

Such price increases are inevitable due to components that have become considerably more expensive. Next to that, there’s also a lot of uncertainty about parts prices which is the result of a lack in raw materials like steel, butyl and rubber.

Currently there’s a shortage in butyl; even so much so that prices for this inner tube base material have gone up 42%! There’s talk about day-prices; stretched lead times and tube price increases of at least 15%. Prices for tyres are on the whole rising (per manufacturer) between 7 and 15%. At the Taipei Show some tyre suppliers said that they could hang a sign ‘Sold Out’ on their booth!

Clean air for Olympics

Adding to the current uncertainty on parts prices is the horror story on steel that was going around in Taipei. Here it was said that the current shortages are just the forerunner of things to come later this year when the Chinese steel mills are closing because of the Olympics.

As China wants to present itself to the world as a clean country, these mills will close four weeks before the start of the Olympics and won’t continue their operations only after the closing ceremony. The effect on the steel supply is not yet clear. However, the market is already reacting on expected shortages with price increases.

The expected 8 to 10% price increase for complete bikes at dealer level is for Europe. Here the weak US Dollar and its exchange rate against the euro have a dampening effect on parts price increases and with that on retail prices. For the US, the situation will be different with retail prices expected to rise over 10%. And talking about the US Dollar exchange rate; the continued weakening of the US currency is prompting more and more suppliers to urge for payments in Chinese Yuan Renminbi or euros.

End of price inflation

Apart from the uncertainty on parts prices; the current situation on the global bike market also has its positive sides. 2008 will bring an end to a price inflation trend that has be going on for years and years and with the drop in prices also margins eroded. Hopefully margins will improve now with the search for new strategic price points for bikes on the various markets.