Shortly after Joe Bike opened in the US city of Portland last November, an angry cyclist stormed in and challenged the owner, Joe Doebele, about why he was selling bikes made in China. ‘He wanted to know if the Chinese workers have pension plans,’ remembers Joe. ‘My shop was just getting started. We didn’t even have pension plans.’
The outburst came as a surprise to Doebele, who’s accustomed to Portland’s sophisticated bike culture. Eight per cent of Portlanders commute by bike, compared to less than two per cent nationally, and the city has carefully cultivated its image as a cycling mecca. He assumed it was common knowledge among cyclists in Portland (the most populous city in the State of Oregon) that most bicycles come from factories in China and Taiwan.
It’s been 20 years since most bikes sold in the US were also made stateside. Several large dealers and about 100 mid-size brands are doing some domestic manufacturing (although one of the leading bike builders in this field – Cannondale – is just moving its operations to Taiwan). In addition, there’s a growing sector that skilfully hand-files a few hundred high-end bikes each year. However, the demand is overwhelmingly for mass-produced, affordable bikes made in Asia. The US imported 200 times more bicycles than it exported last year; 95 per cent of the 13 million imports were shipped from China.
But the factors that favour manufacturing in Asia are changing and the trade imbalance is about to shift again, says Jay Townley, a prominent industry analyst and 52-year veteran of the bicycle industry based near Madison, Wisconsin. Rising oil costs over the long term are making overseas shipping less economical. And US retailers now want faster turnaround. For these reasons, Townley predicts large-scale bike manufacturing will return to the US ‘in a bigger way’ sometime within the next three years.
The rising cost of running cars, an increasing focus on climate change and the emergence of a recent ‘buy American’ sentiment stemming from the global financial crisis could create a much larger US market for bikes. In addition, a shift by US manufacturers to mass-produced, low-to mid-range bicycles designed for everyday use should help them compete with the ‘China Price’ – the low price-tags for which Chinese goods are famous.
More competitive local manufacturing costs will also help. Bike factories have become fully automated. They employ significantly fewer people who require only a basic level of training. As a result, labour has become a small slice of the total production costs.
It now makes sense for the proven profiteers – established Taiwanese or Chinese companies – to open a large-scale production in the US. Taiwan’s bicycle industry is a competitive force to be reckoned with. Its tightly clustered, efficient industry has been dubbed the A-team because of its co-ordinated efforts to assemble parts manufacturers, painters and other industry experts within an hour’s drive of the large assemblers. The industry has become so efficient that some 85 per cent of Chinese bike manufacturers have signed on to joint ventures with Taiwanese companies.
At the same time, consumers (and therefore retailers) increasingly want to add custom options to the mass-produced bikes they buy. With the long lag-time and costs associated with putting bikes ‘on the water’ these extras are difficult for overseas factories to meet.
So the move back to the US is becoming financially feasible for both national and international manufacturers – but only if the location also makes economic sense. Portland – bike mecca that it is – will have to work hard to prove it’s the right place. Ranking 13th in the nation for the number of manufacturers, Portland has an established supply chain for metals manufacturers and a growing ‘bicycle industrial-complex’ that could provide the foundation for a large bicycle manufacturer. And as a port city, Portland manufacturers can readily receive parts and materials from overseas. However, as a distribution centre to the US market, Portland’s roads and railways are not placed as favourably as a Midwestern transportation hub like Indianapolis or Nashville.
So it’s down to State officials to sell Oregon as the best location for a large bicycle manufacturer in the current economy. Oregon’s green business incentives – such as a 35 per cent business energy tax credit – are among the biggest in the nation. The right combination of tax breaks and other incentives could offset shipping costs and other imbalances. If the State rallies behind the effort and attracts a major bicycle manufacturer, perhaps one day the angry cyclist storming into Joe Bike will instead demand to know which Chinese-brand bikes are made in Portland.
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