Your next bike just got a lot more expensive

Godzilla

Active Member
The issue is that it is a fake tax being imposed by manufacturers. They are not losing any money, and still will be making high profits on all produced products. All they are doing is passing this government imposed tarriff onto you the consumer. So instead of the tarriffs doing what they are intended which is to in a sense " punish " manufacturers for going overseas, they are instead punishing you for buying their products. And i find it hard to believe it is to devalue the Yuan, since as consumers we will still have to buy these products. It is not as if these companies can readily move back and setup shop in the USA anytime soon. If anything this will just strengthen the Yuan and further devalue our buying power.
 

Godzilla

Active Member
Plus with all the american business imposed taxes, and insurance,... the price increase we would be facing they did come back to america would be closer to a 60% price increase no joke
 

one piece crank

Well-Known Member
Very few things are necessary to have, so it will always be the willingness to pay
that drives the price, not the cost of producing/delivering the goods, or the taxes.

The issue is that it is a fake tax being imposed by manufacturers. They are not losing any money, and still will be making high profits on all produced products. All they are doing is passing this government imposed tarriff onto you the consumer.


And they are counting on you to buy early and often to avoid their next price hike!
 

Chris(NJ)

Well-Known Member
5-8% is manageable, no?

I have no idea. Maybe. All I said was I wasn't convinced the the msrp would go up by 10% and it wouldn't be reflected in one months time. Maybe I'll be wrong about the price increase. Dumb luck would have it that I captured some of the C-dale bikes on a previous post. However I still maintain the position that a 3,000 bike won't become 3,300 a few weeks and furthermore, won't be 3,700 in January. Again. maybe it will and I'll be wrong.
That still doesn't change my position that this is nothing more than political. I won't buy into the liberal hysteria.
 

Patrick

Overthinking the draft from the basement already
Staff member
This was in the last paragraph that I posted earlier from Cannondale. Received similar from Jamis saying 10% effective 10/1.

Orders shipped by September 28th will be price protected. For some of you, it may make sense to bring in additional inventory this week ahead of the pricing update.

why don't they bring in inventory before the pricing update? Cause they are going to start charging it immediately on bikes in-stock.

are they going to lower the wholesale price to protect the retailer?

and once again, what price is the tariff on? retail, wholesale, average retail?

and what about recovering the credit card fees on the tariff amount? What about sales tax? and the credit card fees on the additional sales tax?
 

soundz

The Hat
Team MTBNJ Halter's
consumers don’t react well when they are threatened into buying things .. i think
 

Delish

Well-Known Member
Team MTBNJ Halter's
why don't they bring in inventory before the pricing update? Cause they are going to start charging it immediately on bikes in-stock.

are they going to lower the wholesale price to protect the retailer?

and once again, what price is the tariff on? retail, wholesale, average retail?

and what about recovering the credit card fees on the tariff amount? What about sales tax? and the credit card fees on the additional sales tax?

Tariffs are collected on the invoice value of the imported goods. Think of it like wholesale value but it’s a little more complicated.

Pivot, for example, appears to be importing container loads of frames from China. If they are paying XDS Carbon-Tech $200 (I have no idea what actual wholesale frame cost is) for a made in China frame, that $200 invoice value is the basis for the standard duty rate applied to the import as well as the special trade war tariff of 10%. As of Monday, Pivot has to pay an additional $20 to US Customs to import the frame. However, Pivot is buying Fox shocks and DT Swiss wheels from Taiwan, which are probably not be subject to the duty unless they happen to be made in China and are just being sent from Taiwan. Pivot is probably kitting up, assembling, and boxing bikes in Arizona for shipment to retailers. So the 10% increase should really be on the wholesale value of the Chinese made components of the bike. It’s tough to know exactly how much the cost for a bike actually increasing but bike manufacturers, or really anybody importing items on the list have very real and immediate cost increases.

I use Pivot as an example but the same is true for most of the bike companies.

The reason companies are already starting to push price increasss through is because they don’t receive their entire stock all at once so they cost average the antipated increase over their full buy. Yes, this means that they will be making higher margin on the unit the sell tomorrow at the higher price but they’ll be eating it on units received after the tarfif increases to 25% in January. They didn’t build the extra 10% or 25% increases in when they did their costing way back in March or whenever they planned the 2019 season because these tariffs were all just theoretical until about 2 weeks ago.
 

one piece crank

Well-Known Member
Who are they?

The bicycle companies of course.

...Yes, this means that they will be making higher margin on the unit the sell tomorrow at the higher price but they’ll be eating it on units received after the tarfif increases to 25% in January.

I highly doubt they will eat what you describe, just find a way (another increase) to pass it along to the consumer...
 
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Patrick

Overthinking the draft from the basement already
Staff member
Tariffs are collected on the invoice value of the imported goods. Think of it like wholesale value but it’s a little more complicated.

Pivot, for example, appears to be importing container loads of frames from China. If they are paying XDS Carbon-Tech $200 (I have no idea what actual wholesale frame cost is) for a made in China frame, that $200 invoice value is the basis for the standard duty rate applied to the import as well as the special trade war tariff of 10%. As of Monday, Pivot has to pay an additional $20 to US Customs to import the frame. However, Pivot is buying Fox shocks and DT Swiss wheels from Taiwan, which are probably not be subject to the duty unless they happen to be made in China and are just being sent from Taiwan. Pivot is probably kitting up, assembling, and boxing bikes in Arizona for shipment to retailers. So the 10% increase should really be on the wholesale value of the Chinese made components of the bike. It’s tough to know exactly how much the cost for a bike actually increasing but bike manufacturers, or really anybody importing items on the list have very real and immediate cost increases.

I use Pivot as an example but the same is true for most of the bike companies.

The reason companies are already starting to push price increasss through is because they don’t receive their entire stock all at once so they cost average the antipated increase over their full buy. Yes, this means that they will be making higher margin on the unit the sell tomorrow at the higher price but they’ll be eating it on units received after the tarfif increases to 25% in January. They didn’t build the extra 10% or 25% increases in when they did their costing way back in March or whenever they planned the 2019 season because these tariffs were all just theoretical until about 2 weeks ago.

Thank you for the synopsis.

It sounds like uncertainty is more of the problem than the tariff.

just to run it through a little further - What did i miss?

let's say a $1000 bike costs $250 in parts and 100% are subject to the 25% tariff .
worst case is $63 in extra tariff, and let's throw the cost of money in at 10%, so $70
The cost of sale also has a cost of money, another 10% increase, so another $7,
add the cost to sell - assuming the sales people are not on commission, and most people use credit cards
at a 3.5% (high side) of $77+$5 increase in sales tax = $3

so the consumer should see an $85 increase on a $1,000 bike at the 25% tariff rate to maintain margins all the way through.
so 8.5% to the consumer. Worst case. unless wildly wrong on the cost of parts - and i think i'm probably high.

Are the margins are higher on higher-end bikes? Then percentage should be lower.

=====

Al and Fe are traded on the futures market (futures means contracting the obligation to buy it in the future at a specific price, on/by a specific date)
This is different from the spot market - which is the price often quoted. (think bbl of oil, you see the spot price, but the refiners don't pay that,
as they have locked in a price and supply - reducing uncertainty)
Al is down 15% in the last couple months (i just dropped 100lbs off at the local metal scrap, and the price they pay is down 25%)
Fe seems to be up 15% - interesting.
 
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rlb

Well-Known Member
I'm not an economist, politician, or smart person, but from the looks of it, great again America is collecting more tax$$ that the consumer is ultimately paying. Is there another bottom line I'm missing?
 

Patrick

Overthinking the draft from the basement already
Staff member
I'm not an economist, politician, or smart person, but from the looks of it, great again America is collecting more tax$$ that the consumer is ultimately paying. Is there another bottom line I'm missing?

sort of -
one scenario is that more jobs/sourcing are moved back to the usa. This increases the tax base
which should lower govt debt (which might or might not be a bad thing) - more people working means
less drag on the system (maybe - cause it may drive the cost of labor up, because of a lack of supply)

it is very complicated.

BTW - why are politicians up for a higher min wage? more taxes collected, and they get to claim they helped the people.

--
i missed one other non-trade item that they may be pressuring - human rights issues.

they squeezed the crap out of turkey over the one guy they want released from prison.
 

I Ride Bikes

Well-Known Member
Thank you for the synopsis.

It sounds like uncertainty is more of the problem than the tariff.

just to run it through a little further - What did i miss?

let's say a $1000 bike costs $250 in parts and 100% are subject to the 25% tariff .
worst case is $63 in extra tariff, and let's throw the cost of money in at 10%, so $70
The cost of sale also has a cost of money, another 10% increase, so another $7,
and the cost to sell - assuming the sales people are not on commission, and most people use credit cards
at a 3.5% (high side) of $77+$5 increase in sales tax = $3

so the consumer should see an $85 increase on a $1,000 bike at the 25% tariff rate to maintain margins all the way through.
so 8.5% to the consumer. Worst case. unless wildly wrong on the cost of parts - and i think i'm probably high.

Are the margins are higher on higher-end bikes? Then percentage should be lower.

I'm not an expert on this stuff but this is what I was thinking and I don't think anyone else explained it like this. If a bike sells for $3000 but only costs the manufacturer like $1000 or less to build, the tariffs are only applied to the cost of the build, not the sale, right? Again, I don't really know. But I do agree everything is too political now.
 

Santapez

Well-Known Member
Team MTBNJ Halter's
I can't imagine the massive loss in productivity due to this. I don't directly buy things from foreign countries at work, nor sell to, yet our small company is hammered with the changes to all our ordering processes.

-Steve
 

rlb

Well-Known Member
sort of -
one scenario is that more jobs/sourcing are moved back to the usa. This increases the tax base
which should lower govt debt (which might or might not be a bad thing) - more people working means
less drag on the system (maybe - cause it may drive the cost of labor up, because of a lack of supply)

Why not create incentives for companies to bring mfg jobs back, instead of trying to force it through punitive measures? I feel like the "shake out" here will be higher costs for the same goods, and the jobs will stay overseas.
IMO more taxes=more waste, not < govt debt.

it is very complicated.
Yes, very. And we all understand that. However, there's this problem:


i missed one other non-trade item that they may be pressuring - human rights issues.
See my previous comment
 
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