Trek prices , already gone up over the week end grrrrr

[Labrador29]

In a nutshell, the rise in prices across most manufacturers, is called 'Supply & Demand'.
Many factors come in to it, but two of the main factors is demand exceeding supply capabilities, and the buyer having to pay for the cost of new technology.
If we want all the bells and whistles, we are going to have to pay the price. ( That's if you can get one in the next 6 months or so due to large waiting lists all around the world)

 

[Gary]

In a nutshell, the rise in prices across most manufacturers, is called 'Supply & Demand'.
Many factors come in to it, but two of the main factors is demand exceeding supply capabilities, and the buyer having to pay for the cost of new technology.

No. it's not.

 

[Kernow]

I thought Xmas panto was cancelled. Ohh yes it is

 

[Mteam]

In a nutshell, the rise in prices across most manufacturers, is called 'Supply & Demand'.
Many factors come in to it, but two of the main factors is demand exceeding supply capabilities, and the buyer having to pay for the cost of new technology.
If we want all the bells and whistles, we are going to have to pay the price. ( That's if you can get one in the next 6 months or so due to large waiting lists all around the world)

supply and demand - yes

bells and whistles - no - dont think there are any new bells or whistles on these more expensive trek rails compared to the same model of rail that was cheaper before xmas.

 

[Karve]

Many mini factors here, as it's a complicated global picture #globalisation , but its primarily about currency movements affecting supply chain costs. Covid is a factor in those currency changes and the increased demand & fixed supply (also due to covid) allows Trek the confidence they can pass on their increased costs. Trek will hit the countries where they have the most demand first. Basic business 101.

The US dollar has weakened against the Taiwan dollar over 10% in the last 12 months ( an ongoing trend since 2016) - Trek pay a lot in TWD (they have factories there) and are looking to recoup that. I'd imagine that a lot of their suppliers for parts & shipping also pay in TWD so they will be charging Trek more. With demand at an all time high, all parties are confident that they can pass that on fully, to the consumer.

Without the currency shift we would not be seeing such big increases from Trek but we would be seeing some.

Its complicated as I mentioned - As an offset to their increased supply costs the Euro has strengthened against the USD by 15% meaning each Trek Bike in Europe earns Trek more but not sure what % of their market is in Europe. GDP to USD has been stable.

I don't think Trek are massively increasing their margins this year, but they are rapidly passing their increased costs on, which in a non covid world they might be more hesitant to do.

The Euro and the Pound VS the TWD have not fallen as much, so you might find Euro GDP firms (especially those making frames in China Or Vietnam where the exchange rate is stable) not as quick to jump on the price increase. They will be impacted by suppliers who produce in Taiwan, so it will come in some form...eventually.

 

[The Hodge]

I'm not sure when the increase happened ..but sometime in the last 4 months Whyte ( a British brand ) have put the price of the e160rs up by £100.00 to £5850.00
I'm assuming that this has also been applied to the rest of their range ..?

 

[leix_toffee]

I think Specialized have the largest price increases, but not surprised by that. Just as I am about to hand over my money, argh

 

[leix_toffee]

I also looked for a Rail 7 or 9 and was told Nov 2021 or Jan 2022 by LBS

 

[Karve]

I'm not sure when the increase happened ..but sometime in the last 4 months Whyte ( a British brand ) have put the price of the e160rs up by £100.00 to £5850.00
I'm assuming that this has also been applied to the rest of their range ..?

So thats a good example...

Whyte produce in Taiwan like Trek but the Pound has only dropped 2ish% vs the TWD in the last 12 months, and has been stable for the last 4 Years. Part of the reason why they only need to pass on a £100 or 2% price increase.

Treks price increases are around 10% and the TWD has moved around...... 10% vs the USD

Across the bike industry there will be a relatively clear correlation between recent and future price increases and each firms exposure to some fairly large 2020 currency fluctuations - particularly TWD

 

[Gary]

Many mini factors here, as it's a complicated global picture #globalisation , but its primarily about currency movements affecting supply chain costs. Covid is a factor in those currency changes and the increased demand & fixed supply (also due to covid) allows Trek the confidence they can pass on their increased costs. Trek will hit the countries where they have the most demand first. Basic business 101.

The US dollar has weakened against the Taiwan dollar over 10% in the last 12 months ( an ongoing trend since 2016) - Trek pay a lot in TWD (they have factories there) and are looking to recoup that. I'd imagine that a lot of their suppliers for parts & shipping also pay in TWD so they will be charging Trek more. With demand at an all time high, all parties are confident that they can pass that on fully, to the consumer.

Without the currency shift we would not be seeing such big increases from Trek but we would be seeing some.

Its complicated as I mentioned - As an offset to their increased supply costs the Euro has strengthened against the USD by 15% meaning each Trek Bike in Europe earns Trek more but not sure what % of their market is in Europe. GDP to USD has been stable.

I don't think Trek are massively increasing their margins this year, but they are rapidly passing their increased costs on, which in a non covid world they might be more hesitant to do.

The Euro and the Pound VS the TWD have not fallen as much, so you might find Euro GDP firms (especially those making frames in China Or Vietnam where the exchange rate is stable) not as quick to jump on the price increase. They will be impacted by suppliers who produce in Taiwan, so it will come in some form...eventually.

This.
I'm glad someone with a clue could be bothered to type a reply.
The other reason for increases in the UK is the added taxes/cost/time from new import/export rules as of Jan 1st

"BEHIIIIIIIIIIIIND YOOOOOOOOOOOOU!!"

 

[tomato paste]

I can't imagine a firm that sources all inputs in FX wouldn't sterilize those costs for exactly such an event. Much more likely all tx's are in USD or EUR. I'm curious myself now, time to scrounge some investor docs.

ATM I put my money on a margin increase, and a volume decrease due to covid delays related to shipping. Asian garlic isn't up 10% in our supermarket and they probably ride the same tanker. The guys know that all forms of entertainment just ate sh*t, except jogging, pets, and bikes. This shifts a huge component of income to the bike sector, and if they fail to raise prices savings increases. No sense in letting that money sit in a bank at negative rates, so people will eat the bike price increase or face divorce.

For non-economists please note that price, supply, and demand are not strongly related. The big "X" they taught you to draw to determine price actually has nothing to do with price determination. Prices are components of a complex system that technically form endogenously and/or through gov purchasing and taxing behaviour. Anyone who throws 'econ 101' at you and 'S & D' in the same sentence drank the Kool-Aid that got us here.

I do like part of Karve's response, but he's very much in the neoclassical school. If Trek really ate 10% (!!) on FX we definitely want to know. That's crazy!

 

[Karve]

Good points TP. Ill bounce a few back. I think there are 2 factors which might be limiting Trek in particular, in controlling their currency exposure.

The USD vs TWD has been on a negative slide for a long time now so finding a way of offsetting that by let's say writing contracts in USD and forcing the loss onto another party will have been increasingly hard . Trek could use financial instruments to hedge in TWD but that means parking a bunch of cash flow which might not be an option.

Trek actually own their factories in Taiwan, so they have to do that USD to TWD exchange at some point. I'm sure its probably set up as a separate company in Taiwan, but at some point the Trek corporation will be taking a lot of the USD to TWD hit.

It's all 1000* more complex than what we are describing here, and the detail will be in each companies accounts.

Note: It's just the TWD which has been climbing vs western currencies. Not the Yuan, Rupiah, or Dong etc... so this is an issue with Bike companies Taiwan exposure only.

I think Max @ Commercial summed it up well in what looked like an honest article before Christmas. Again another company with heavy exposure to Taiwan. Commencal Releases Update on Prices & Timelines Impacted by COVID - Pinkbike. He noted 3 factors, Supply Times, Transport and FX - to quote "The currencies of our main countries (United States, Canada, Europe, Australia) have fallen sharply against the Taiwanese dollar. The cost price of our bikes has therefore increased sharply in just a few months. "

Supply Times lengthening & Transport costs quadrupling will affect almost all bike companies... hence the talk of a general increase in bike prices. Those with TWD exposure (like Trek) will also be hit with potentially a 10% FX cost increase in what they source from Taiwan.

@ Gary on this - The other reason for increases in the UK is the added taxes/cost/time from new import/export rules as of Jan 1st - Potentially with EU imports ( YT / Canyon). However Trek bikes come in from the US, and the rules we have with the US are a replication of the rules we had when in the EU.

 

[Bontee]

Unlikely really. Pretty much all the big players have Emtb in their range and any smaller brand new to the Ebike market's running/manufacturing costs will be higher rather than lower than an established Ebike brand's. So the only way to undercut currently available Ebike prices to the public is to go direct sales (Competing with YT, Canyon, Commie etc.) or to offer a lower spec/cheaper product. Or to sell at a far lower profit margin.

Two years back folk interested in buying their first Emtb were saying they would wait until Emtbs were more affordable before dipping their toes in. Sorry, but that's just never going to happen. £5k is now considered an entry level RRP for an emtb in an LBS. And cheaper bikes like the Decathlon Stylus or Rob's DIY Dengfu still don't represent better value than many off the shelf bikes from big manufacturers did 2 years previous.

It actually amazes me how naive/noob so many Emtb owners thinking is with regard to how the bike industry works.

True,and lets not forget who mines the rare earth metals used in batteries.Some years ago someone in the motor industry stated that the rise and rise of electric vehicles would hand the motor industry to china “on a plate” I believe ,north america ,australia and china have the main reserves of materials to make batteries.it should come as no great surprise that the electronics industry is based in the east.
I just don’t think it is possible to cut prices any lower without a corresponding drop in quality,and chinese workers now want western wages.Touche.

 

[Mikerb]

The cost of component parts may well be out of the immediate control of the main bike brands but their overall cost base is not. It was the ability of either an existing or new player in the market to create a very different marketing model that in turn reduces costs, that I was referring to. In a market with high demand ( even a niche market) that is suffering from limited supply and spiralling prices, opportunities are presented.
I agree the excellent analysis on FX above, and that is just one part of the growing recognition of the dangers intrinsic to the dependence on concentrated centres of low labour costs, far remote from domestic markets, for manufactured goods. Trade tariffs and quotas are another. In respect of Taiwan specifically, there is also the political risk posed by the CCP.
All factors that would be in the "risk" category of any marketing analysis.

 

[Gary]

The cost of component parts may well be out of the immediate control of the main bike brands but their overall cost base is not. It was the ability of either an existing or new player in the market to create a very different marketing model that in turn reduces costs, that I was referring to.

wut?

In a market with high demand ( even a niche market) that is suffering from limited supply and spiralling prices, opportunities are presented.

Um...
Not short term they aren't
Unless you mean the opportunity to service/maintain/refurbish/recycle used components.
Zero component supply = Zero opportunity to make money selling components

 

[Mikerb]

There are many other component suppliers beyond the main brands.....and many other organisations with both the tooling and the expertise to enter one or more parts of the component supply trade. That will evolve in line with market forces but I was referring to the complete marketing model of bike supply not just components.

 

[Gary]

There are many other component suppliers beyond the main brands...

Not really. not in the sort of quality or quantity required for high end mtb.
plus those brands are also struggling with supply.

..and many other organisations with both the tooling and the expertise to enter one or more parts of the component supply trade.

and you think that can happen overnight? Believe it or not new components from the major brands take quite a long time from design to manufacture and then supply.

That will evolve in line with market forces but I was referring to the complete marketing model of bike supply not just components.

you don't understand the complete marketing supply models of bike manufacturers. and from what you are saying you clearly don't understand how the supply chain works product year to product year or even why manufacturers choose the component brands they do.

 

[Mikerb]

Businesses are created and thrive through innovation Gary.....not by being constrained by accepted norms. Change is the only norm.

 

[paul-g]

I thought it might be currency, but the GBP has been fairly stable over the last year with the US dollar, the Euro, the Chinese Yaun, the Vietnamese Dong and the Taiwan dollar. It could be just Trek putting their prices up, I'm sure all bike companies do it from time to time. But 10% does seem high, opportunistic pricing maybe - because bikes are in demand?

breweries always put their prices per pint up by 2p
hands up all of you that only paid the 2p increase sat
in the pub.
ahhhhh nobody
it was always bloody 4p poor poverty stricken landlords.
do we not think this is happening, i`ll put a quid on it is.

 

[Gary]

This discussion is pointless if you don't have a clue how the basics of the actual industry your talking about works nevermind when you've completely missed the bigger picture.

I'll leave you to discuss your own little unrealistic fantasy thoughts.
They're simply not worth reading.

 

[Gary]

i`ll put a quid on it is.

Retail margins on UK bike sales have actually gone DOWN in the last month
PM me and I'll give you my paypal address.

Make it a fiver though. I don't live in Yorkshire

 

[paul-g]

Retail margins on UK bike sales have actually gone DOWN in the last month
PM me and I'll give you my paypal address.

Make it a fiver though. I don't live in Yorkshire

no but you`ve got short arms and long pockets like we have

 

[Gary]

Nice try Paul. I spent time in Barnsley every summer growing up.
Scots are actually very generous.

Now pay up or I'll send the boys round

 

[paul-g]

Nice try Paul. I spent time in Barnsley every summer growing up.
Scots are actually very generous.

Now pay up or I'll send the boys round

now now Gary i never said the Scots weren't generous, i`ve always found them very
good hearted to we southerners.
might i ask what area?]
i`m still sticking to the short arms long pockets though

 

[Gary]

What area of Barnsley? Sort of across the road from the Hospital. Dunno what the area is called.
My Brother and siuster lived there with their Mum and her partner.
now stop trying to change the subject and get your round in.
and none of yer cheap Tetleys pish

 

[paul-g]

What area of Barnsley? Sort of across the road from the Hospital. Dunno what the area is called.
My Brother and siuster lived there with their Mum and her partner.
now stop trying to change the subject and get your round in.
and none of yer cheap Tetleys pish

hospital area is Gawber.(main entrance on Gawber Road)
Garry Tetleys left when the Vikings went.
but Garry if your ever in town i`ll buy you a pint just for your cheek lad.

 

[Gary]

Yeah. A cul de sac off Gawber road.
I was obvz joking about the Tetleys. I'm Scottish. I'll drink anything going.

 

[Labrador29]

This discussion is pointless if you don't have a clue how the basics of the actual industry your talking about works nevermind when you've completely missed the bigger picture.

I'll leave you to discuss your own little unrealistic fantasy thoughts.
They're simply not worth reading.

I'll take your advise and go back into my little cave. Next time I will stick to something I do know - how to lock up the bad guys!

 

[Zimmerframe]

The thread seems to have diverted to the far more interesting subject of "just how bad is Tetleys" .. But when it comes to bad beverages, Surely SKOL, would win ?

As you'd expect the same low demand, reduced purchasing supply issues and slow ramp up affect more than just the bicycle industry. Thank god the same thing didn't happen in the alcohol industry !

Chip-shortage 'crisis' halts car-company output

A shortage of computer chips is leading to car factories shutting down for days at a time.

www.bbc.com

 

[Bontee]

The thread seems to have diverted to the far more interesting subject of "just how bad is Tetleys" .. But when it comes to bad beverages, Surely SKOL, would win ?

As you'd expect the same low demand, reduced purchasing supply issues and slow ramp up affect more than just the bicycle industry. Thank god the same thing didn't happen in the alcohol industry !

Chip-shortage 'crisis' halts car-company output

A shortage of computer chips is leading to car factories shutting down for days at a time.

www.bbc.com

Ah yes and given a global pandemic ,who in their wildest nightmares would have thought that the default comfort blanket would be mountain bikes rather than alcohol...the world truly has gone mad