Your next bike just got a lot more expensive

jimvreeland said:
White claims they use US raw metals so that price increase has nothing to do with the tariffs. I don't doubt their costs have gone up but blaming it on a tariff is lame when you're whole company purpose is to build things 100% here in the states. Industry Nine and Velocity haven't increased costs...yet.
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See my previous post. US suppliers of raw metal immediately raised their prices when the tariff went into effect.

Some products it doesn't make much of a difference, others it does.

Honestly I don't think the cost of billet aluminum is really that high where a 25% tariff is going to make a huge difference for a small manufacturer like White Industries to do tariff increases.

A 2x2x72" 6061 bar @ $140 from McMaster (very expensive metal supply, worst case scenario) should make 9 crankarms at about $15 in raw material each. That's about $7 more money per pair of crankarms. That's assuming they buy bar from McMaster and not a metal supply house in bulk, or they use a 2x2 piece and waste a lot of metal. Nor does it account for the additional 25% they'll get on their chips they sell for recycling. :)

But, then again I don't know the pricing structure of White Industries. Maybe that $250 crankset sells wholesale for $100 and an extra $7 is an extra 7% which is kind of a big chunk...

I'm overthinking this now.
 
pooriggy said:
Isn't the simple solution here to move to China?
I heard the foods pretty good, how are the trails?
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Road riding is great, trails need work, but oodles of potential. Unfortunately your Ford Focus which is a popular car there, will cost you more
 
I get why people support the intent of the tarriffs. I'm not going to act like I know enough about economics to suppose what the actual outcome is going to be. It's a complex issue.

I can say, however, that the reality, as a manufacturer is that there is immediate pain and no room to plan for the sudden changes as a direct result of the policy. Projects my team started work on 18-24 months ago were impacted very recently while key components that you can't get domestically were on a ship en route to the US. Pricing models go out the window as a result. And this is directly affecting pricing that's already been locked in at distribution and retail levels in some instances.

From that perspective, it seems less like a strategy and more like a game is going on. A lot of people are not getting what they bargained for.
 
Magic said:
Simpler solution is to give @qclabrat an extra suitcase and a couple dollars next time he goes to visit.
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Truth be told high end parts cost double there due to demand. The good stuff is mostly sent out of the country. It's crazy to see them outfit full carbon bikes with Sora. 105 is mid level and Ultegra is almost the best you can find. My friend is roadie and he paid 5k for a carbon Orbea with Ultegra. He considered Di2 but the upgrade was a staggering 2k. Want Dura Ace, plan to spend 10k. If it were less, I would have suitcases filled with bike parts, clothes and electronics. There's no market for fake Dura Ace.
 
rick81721 said:
So you think at 10% increase in a 20 cent raw material cost justifies a $20-$50 increase in finished product price?
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Crank is $300, 4% of that is $12, XMR rear hub is $350... Where are you coming up with adding $50 for a finished product?

Santapez said:
I buy a lot of stuff for work that has a high metal content. Electrical enclosures I buy are 100% US made with US steel. Same thing, tariff charges as all of the steel suppliers raised their prices to them.

They were very clear about it, We got an X increase so therefore we are increasing our cost to you by Y.

-Steve
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@Chris(NJ) is this ok? Are those suppliers making a political statement and price gouging?

To be fair, Paul doesn't state any specific reason for price fluctuations, I will simply noting that the price went up significantly since early 2017.
 
grilledcheeseking said:
I get why people support the intent of the tarriffs. I'm not going to act like I know enough about economics to suppose what the actual outcome is going to be. It's a complex issue.

I can say, however, that the reality, as a manufacturer is that there is immediate pain and no room to plan for the sudden changes as a direct result of the policy. Projects my team started work on 18-24 months ago were impacted very recently while key components that you can't get domestically were on a ship en route to the US. Pricing models go out the window as a result. And this is directly affecting pricing that's already been locked in at distribution and retail levels in some instances.

From that perspective, it seems less like a strategy and more like a game is going on. A lot of people are not getting what they bargained for.
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About a year and a half ago we hired an OpEx guy to run risk a analysis on all critical parts of the business, and put contingency plans in place. Everything from natural disasters, epidemics, identify single-source suppliers, etc. He modeled this particular scenario, and as a result we qualified a bunch of other strategic suppliers in the US and EU (we don't source a huge amount from China anyway). Is there a cost increase? Yes, but its a good way to off-set a potentially escalating trade war. FWIW, I don't think that this will escalate indefinitely, both sides have way too much to lose. I think that eventually the point will be made and things will normalize.
 
Monkey Soup said:
About a year and a half ago we hired an OpEx guy to run risk a analysis on all critical parts of the business, and put contingency plans in place. Everything from natural disasters, epidemics, identify single-source suppliers, etc. He modeled this particular scenario, and as a result we qualified a bunch of other strategic suppliers in the US and EU (we don't source a huge amount from China anyway). Is there a cost increase? Yes, but its a good way to off-set a potentially escalating trade war. FWIW, I don't think that this will escalate indefinitely, both sides have way too much to lose. I think that eventually the point will be made and things will normalize.
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In our business, raw material/packaging price increases were a constant issue. Consumer products being lower margin, raw material costs alone contributed about 1/3 to the total finished product cost - I would imagine in a high-margin bike part, the raw material costs are a much lower percentage. Anywho, we had annual programs to find creative way to reduce costs to offset these increases - only rarely were raw material cost increases passed to the consumer.
 
rick81721 said:
In our business, raw material/packaging price increases were a constant issue. Consumer products being lower margin, raw material costs alone contributed about 1/3 to the total finished product cost - I would imagine in a high-margin bike part, the raw material costs are a much lower percentage. Anywho, we had annual programs to find creative way to reduce costs to offset these increases - only rarely were raw material cost increases passed to the consumer.
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When Shimano dropped the XT group price, it did provide a nice window into exactly how high the margins on parts are, because even at that lower cost, you know that they're making money. The bike industry has been on a PR-tear lately justifying their high prices, so I anticipate that they'll pass this all straight onto us. I realize though that for some of the smaller boutique players with smaller volumes, this will eat into their margins a little bit more than the bigger players, but this will all be good justification for raising prices.
 
grilledcheeseking said:
I get why people support the intent of the tarriffs. I'm not going to act like I know enough about economics to suppose what the actual outcome is going to be. It's a complex issue.

I can say, however, that the reality, as a manufacturer is that there is immediate pain and no room to plan for the sudden changes as a direct result of the policy. Projects my team started work on 18-24 months ago were impacted very recently while key components that you can't get domestically were on a ship en route to the US. Pricing models go out the window as a result. And this is directly affecting pricing that's already been locked in at distribution and retail levels in some instances.

From that perspective, it seems less like a strategy and more like a game is going on. A lot of people are not getting what they bargained for.
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How do FX rates play a role here? The Yuan dropped 8% against the dollar in recent months which should offset the 10% tariff.

Just curious.

Obviously 25% would be a real problem....
 
stb222 said:
Crank is $300, 4% of that is $12, XMR rear hub is $350... Where are you coming up with adding $50 for a finished product?



@Chris(NJ) is this ok? Are those suppliers making a political statement and price gouging?

To be fair, Paul doesn't state any specific reason for price fluctuations, I will simply noting that the price went up significantly since early 2017.
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First off, I'm not the one who said it was price gouging. Get that part straight. You keep referencing me as the one who called it that.

Second. Their company doesn't sound like it's a consumer direct business. So unlike White or Paul, there is no potential for influence or blame. It is very obvious that these companies want the customers who are visiting their websites to blame President Trump for the extra money you're spending on their parts. And once again, as I pointed out...it is not the case. You claimed aluminum prices were elevated based on tariffs and a trade war. I simply corrected the fake news and pointed out that it is at historic norms. Or at least not at a signification deviation to blame an administration that isn't popular in the media and bike industry.

Ok. I think i've clarified everything.
 
WI isn't doing anything that Coca-Cola didn't do when they announced prices increases related to Alu/Steel tariffs back in July. The biggest difference is how much the companies can afford to spend on lobbyists.

Anyway. Unlike the Alu/Steel tariffs, these new tariffs are different than in the past because they will largely be passed to consumers. The new tariffs cover a broad spectrum of consumer products as well as industrial inputs used by American manufacturers to produce Made in America products for both domestic consumption and export...everything from bicycles to buttons to bull semen.

Don't take my word for it. Here's what Dorel (owns Cannondale and other bike brands) is telling inventors: "…proposed tariffs recently announced in the U.S. would impact a significant number of our product categories, and is creating business uncertainty. However, our competition will be similarly affected as we will all be required to adjust pricing upwards and higher costs will ultimately be passed on to consumers."
 
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