<b>Russia 2005:</b> Bike Market Calming Down
MAARSSEN, the Netherlands – 2005 once again proved our previous conclusion that the Russian bicycle market is far from maturity and saturation. But there are signs that it is calming down, at least in certain segments. Speaking about the Russian bicycle market in 2005 we have to note that it is steadily developing without fast […]
MAARSSEN, the Netherlands – 2005 once again proved our previous conclusion that the Russian bicycle market is far from maturity and saturation. But there are signs that it is calming down, at least in certain segments.
Speaking about the Russian bicycle market in 2005 we have to note that it is steadily developing without fast rises or falls. The main trends: entry level, but modern styled bicycles replace the old single-speed models from the Soviet era. Most new bikes in Russia are imported from China, as a complete bike or in components. Some companies set up assembly facilities in Russia, either in one of the traditional bicycle factories or in newly built.
The other trend is a continuous rise of the average bike retail price. Demand is moving towards more sophisticated models with the Moscow region leading the market and the big cities with populations of several million following. The rural areas still have a strong demand for the cheapest commuter bicycles, but at the same time the weekend leisure bicycle is making its entry.
The total number of bicycles sold on the home market in 2005 is estimated between 2.5 and 5 million with a qualified estimate of 3.2 million units. Exact figures don’t exist for two reasons: First, the customs are sometimes corrupt, and let shipments pass as goods with a lower import tax. Thus shipments of bikes may enter Russia as other goods, and they never reach the official statistics. While the approximate numbers can still be roughly estimated in the European part of Russia, Moscow does not seem to have any reliable information at all of what is happening on the Asian side, especially the region where the Chinese influence is high.
The second reason is that unclear end-of-season and other stocks are sold via gas stations, markets, local general stores and other outlets. They are all interfering with the figures of the official retail outlets.
The 2005 season started extremely late in Russia because Spring was late. Imports of quality bikes (major western brands) in Russia totalled a couple of hundreds of thousands. BMX is gaining popularity among the city youth. The market for the branded foreign bikes is relatively well organized with distribution through dealers. Some would argue that there are still good business opportunities for the well-organized newcomers, but it is clear that the prices are sky-high compared with the anonymous local stuff.
In Ukraine, prices are higher than in Russia. In 2005 the import taxes for bicycles were doubled from 10% to 20%. Duties for components remained at the lower rate. Bike importers addressed president Ushenko with their problem of a stream of low-quality assembly kits flooding the country. But with an average Ukranian personal income of about € 170, the Ukrainians cannot afford themselves very much, and for the oncoming season the prospects for the foreign brands are minimal, unless they find a way around the taxation.
Russian manufacturers usually make two kinds of bikes: the all-Russian-made ‘heritage’ models, old single-speed roadsters, and ‘modern’, multi-geared MTB look-alikes mainly from Chinese-made frames and components. With the average income in Russia now around € 300 per month, more and more ‘modern’ bikes find their way into the Russian home market. Some factories try to combine ‘old-school’ and ‘new-school’ practice, especially those in low-employment areas: there is still demand for the ‘heritage’ bicycles, and the factory management feel comfortable to have a total control over all production processes.
The largest ‘old-school factory’ is MotoVelo in Minsk, the capital of Belorussia. It was nationalised in 2004. As a result, the figures seem to have become a bit more realistic. Former claims were an annual production of between 600 -700,000 units under the Minsk or Aist brands. In 2005, the actual output was 480,000 units. Planning for 2006 is 580,000 units. Next to MotoVelo there are a host of traditional bicycle factories turning out between 30,000 and 100,000 ‘heritage models’ each. Some other factories produced 30 to 100 thousand of ‘heritage’ bicycles each.
Simple assembly line
Modern bicycles from Chinese bike kits are much easier to produce, and a factory for these is easy to set up. That’s why most traditional factories are eager to find customers for those bikes. Some give it a try – a factory in Nerekhta (Kostroma region) set up production for an order of a mere 20,000 private label bikes to be sold in the biggest Russian sports chain store, where they will show alongside Trek and Kona eye-catchers. An estimated 2 million of such cheap bike kits have been imported in 2005, with the result that more and more brands and more varieties of bicycles than ever before were seen on the shows as well as in the streets.
MotoVelo also produces motorcycles. But the numbers are low – just 10,000 units in 2005, mostly 125 cc Minsk two-strokes with a dealer price of only € 450.
A good share of the production is claimed to be exported to Afghanistan, so that only 1,000 motorcycles were left for the home market. Total sales of new motorcycles of all the world brands in Russia are estimated at no more than 2,000 – 2,500 in 2005. Imports from China are hard to estimate. Under 50 cc scooters are a bit more popular than motorcycles. MotoVelo presented a new scooter in April 2006 with a production estimate of 5 thousand. There were rumours that MotoVelo’s unsold stock is several ten thousand units. It at least hints that MotoVelo is in trouble. The Belorussian government has promised a restructure credit equalling € 4 million.
10,000 scooters under the Venta brand were assembled by Baltimor in Kaliningrad. This company has a partnership with Chinese Qingqi. Plans for the next 3 years are to triple production. Some other assembly facilities were heard of without exact numbers or even estimates. About 90% of all scooters sold in Russia are imported second-hand from Asian countries.