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The Retired Investor: Bicycles Sales Are Booming

By Bill Schmick
iBerkshires columnist
In the age of the pandemic, some industries have thrived. Take the bicycle industry, for example; sales have more than doubled this year, and the only impediment to further growth seems to be the availability of product. Thanks to COVID-19, biking has become a global phenomenon.
 
The real growth is centered in the metropolitan areas where much of public transportation has been curtailed due to the infectious nature of the virus. In April alone, bicycle industry sales grew by 75 percent to $1 billion year-over-year, according to bike manufacturer, Huffy. Leisure bikes, those that sell for under $200, jumped 203 percent, while mountain bike sales increased 150 percent.
 
The reason for this surge is obvious. Many commuting urban workers, faced with going back to work, but fearful of catching COVID-19 in packed buses and/or subways, found the bicycle a reasonable alternative. We must wait and see if this changes during the winter months in places such as the Northeast.
 
At the same time, with many of the country's gyms shut down, the bicycle also provided an alternative source of exercise. And as the number of outside activities for most families dwindled to streaming videos and other computer-related activities while cooped up in their homes, the bicycle offered family outings that combined safe spacing, fun, and exercise in an outdoor environment. 
 
The same virus-related circumstances saw a similar reaction with the populations in many foreign cities across the world. Local authorities and planners responded quickly to the curtailment of transportation by embracing the trend toward bicycling. Paris, for example, added 400 miles of bike lanes in a matter of weeks. New York City and Oakland, CA designated various streets as "car-free" avenues, while the United Kingdom pushed through a $315 million infrastructure project dedicated to bicyclists. Italy is offering a 60 percent reimbursement of any bicycle purchase up to $593.
 
But thanks to the disruptive nature of this pandemic, there is a supply chain problem getting bikes and parts from China, which is the global hub of bicycle manufacturing. There are also U.S. tariffs on bikes and parts (25 percent) imported from China. This not only raises costs for U.S. dealers, but also injects uncertainty, since the tariff rules keeps changing.  
 
Here in the U.S., 90 percent of all bicycles are either imported from China, or use parts made in China in their assembly. Finding a bicycle to purchase these days could be difficult. Since many bike shops have only one supplier source (China), the waiting list for new bikes can be lengthy at best. 
 
As for supply chains overall, it could take several years before American companies can alter their supply chains to import goods from other countries outside of China, according to McKinsey Global Institute. Bicycles are only one product caught in this supply chain transition. McKinsey estimates that as much as 26 percent of exports worth almost $5 trillion are in play. 
 
The good news for bikes, however, is that the decades-long barriers are breaking down. Despite city planners' pleas to forsake their cars, and at least try some alternative forms of transportation, commuters are finally paying attention. 
 
Suddenly. in just a few short months, thanks to the pandemic, commuters are not only listening, but acting on at least one of the planners' suggestions — the bike. The hope is that when (or if) the virus finally fades, at least some of those bike riders will have embraced this not-so-new form of transportation. For those of us who have long enjoyed cycling, however, the fact that the world is becoming bike-friendly can only be a plus.  
 

Bill Schmick is now the 'Retired Investor.' After working in the financial services business for more than 40 years, Bill is paring back and focusing exclusively on writing about the financial markets, the needs of retired investors like himself, and how to make your last 30 years of your life your absolute best. You can reach him at billiams1948@gmail.com or leave a message at 413-347-2401.

 

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