More Cost Increases expected for Bicycle and E-Bike Manufacturing in 2022.
The bicycle manufacturing industry in Taiwan is bracing for significant price increases effective immediately until the second quarter of 2022. Due to worldwide supply chain disruptions affecting raw material costs, followed by increased overhead costs pertaining to labor, utilities, and shipping.
The unprecedented market demand for bicycles and e-bikes in 2021 during the Covid-19 pandemic has spurred an equally unprecedented challenge for the bicycle manufacturing industry in keeping up with worldwide demand. Bicycle factories across Asia in China, Taiwan, Malaysia, Thailand, Indonesia, Cambodia, and Vietnam are struggling to balance Covid-19 difficulties with supply chain and production.
Beginning in Q3 of 2021, aluminum raw material cost skyrocketed from USD 2,000 to USD 3,000 per ton following a coup in Guinea. This caused a ripple effect which caused aluminum to continue rising until the end of October 2021. It is expected to continue rising before peaking by the end of 2021. Besides aluminum, cost for petroleum and plastics have also risen drastically and will continue to rise well into Q2 of 2022.
The central government of Taiwan has passed new legislation requiring a 5.3 percent increase in minimum wage effective in January 2022. This increase in labor costs will impact Taiwanese manufacturers for complete bikes, e-bikes, and components heavily. At the same time, it will push their reliance on foreign labor from Vietnam and Indonesia even more, slowly reducing the competitive edge they have on e-bike production.
China has seen various challenges throughout 2021 from Covid-19 to raw material shortages. More recently, China faces utility difficulties in providing enough electricity to fuel its high manufacturing demand in Guangdong Province. China also faces growing difficulties in meeting high demand due to rising materials and overhead costs.
For 2022, OERUS has started to advise clients to expect between 15 to 30 percent increases for bike frames, components, and various accessories. Complete bicycles and electric bikes will automatically become more expensive due to component upcharges, but also because of assembly labor costs and miscellaneous factors such as paint, packaging, and transport costs. We advise clients to urgently balance these cost increases in calculations for the next model year in conjunction with long lead times for product and the incredible shipping costs for seaborne freight, which are still causing havoc to the supply chain.