Reshoring: How far has the trend come and what obstacles remain?

Numerous articles over the past few years in particular have alluded to a trend of reshoring from Asia to Europe. So, how far has this movement come and what are the real reasons behind a desire to bring business back?

For over 30 years now Asia, most notably China, India, and Taiwan, has been the centre for bike manufacturing. Since the 1990s, the ‘standard’ operating model for the big European and US bike makers has been to produce bike frames in places like Taiwan, assemble them in China, and finally ship them to markets like Europe or the US for distribution and sale. In the USA a 2020 report conducted by the Coalition for a Prosperous America (CPA) found that over 97% of bikes in the US were imports.

TIMES A SHIFTING

However, over the last couple of years we have reported a number of times that bicycle production in Europe is on the rise. European bicycle production (of all kinds) reached a new peak of 12.15 million units in 2020, up from 11.4 million units in 2019. As you’ll read on page 62 through 66 of this issue, Portugal leads the list of European producers with just over 2.6 million units, followed closely by Italy (2.1 million units).

Speaking with Manuel Marsilio, General Manager at CONEBI (the Confederation of the European Bicycle, E-Bike, Parts & Accessories Industries), he believes “that it is in eBikes that there is particular room for growth. 3.6 million of the 4.5 million e-bikes sold in the EU/UK were manufactured in region; equating to 80% of all products sold in EU/UK.”

It’s not only the sales of units to consider, but also where values is added. “50% of the value of an eBike sold in Europe is made up of components from Europe. Much of the batteries are being produced in Europe,” says Manuel. For a bike maker like Riese & Müller, whose European footprint has in recent times grown by two production lines, the reasoning for investment is clearer than ever.

Julia Werling, Team Lead Public Relations told CI.N “Although our supply chain is very global, over 50% of our components come from Europe. Many of our suppliers are German or European family-owned companies with whom we have maintained close business relationships for years and decades. These include, for example, Schwalbe (tires), Abus (locks), Hebie (components) or Selle Royal (saddles). Since 2018, we have been working closely with the Portuguese frame manufacturer Triangle’s, which manufactures the frames for our best-selling product according to our specifications. In the production of our eBikes and cargo bikes, we have always been committed to Germany as a business location. Since 97% of our bikes are sold in Europe, our location in Mühltal near Darmstadt has the advantage of being very centrally positioned in the middle of our largest sales market. This allows us to keep delivery times and distances to our dealers as short as possible.”

The brand runs this in tandem with Asian supply, which it is keen to flag to be equally as crucial in its infrastructure. Sourcing certain goods from China, Taiwan and Vietnam, where decades of experience exists, remains critical and quite hard to match in Europe at present. Some trends, such as transport, have made local supply more appealing, however.

“Production in Europe offers the advantage of significantly shorter transport routes and thus increased flexibility, while at the same time greatly reducing transport emissions. It can therefore be assumed that production in Europe will continue to gain in relevance in the coming years,” adds Werling.

IS ANYONE ACTUALLY DOING THIS?

Based on current CONEBI projections, the value of the parts and accessories produced in Europe is expected to double to EUR 6 billion by 2025. But who are the brands currently, quietly increasing production closer to Europe?

More brands are beginning to demonstrate investment in local production. PIERER Mobility AG, a maker of all things two-wheels, which includes the KTM brand, formed a joint venture with Maxcom, an eastern European bicycle maker, for eBike production in Bulgaria. They have invested €40 million in a 130,000m2 production facility, which when completed in 2023 will have capacity for 350,000 pieces. Büchel, a parts manufacturer, announced an investment plan of around €20 million for the next five years to expand production capacity on the continent; Xener, the Italian based e-bike battery producer is ramping up production in facilities in its home country; WATT Mobility, a Netherlands-based eBike maker, has raised EUR 1.5 million to continue production of its urban eBikes; Fifteen, a French based bike network sharing company have raised €40 million to expand its operation to more cities across Europe; Bikap has also completed a new facility with the aim of producing 50,000 eBikes per year, and; Mondraker, the Spain based MTB maker, announced a sparkling new HQ in Elche, Spain towards the end of 2021. The new facility houses all departments, office space and production. Mondraker claim the new production area, where almost all models and bicycles are assembled, has enabled them to more than double the current bicycle production figures.

But it is not only smaller, homegrown brands. Giant, one of the world’s largest bike makers based in Asia, has been increasing its production capabilities in Hungary since 2020, with expectations of exceeding 300,000 units per year. Since March 2022 consumers have been able to purchase Pirelli’s high-tech tyres, including all the models of the P Zero Race family, with a “Made in Italy” badge, since they started production in its Italy based production facility. Brompton, are also increasing their footprint in the UK announcing earlier this year it was submitting proposals for an investment in a 200,000 bike a year factory in Ashford, Kent. Already the country’s largest bike maker, the 100-acre site will employ over 1,500 staff when completed in 2027.

WHY, OH WHY?

Much of the motivations for such a shift are not the proverbial ‘rocket science’. At present the challenges affecting manufacturers of all products, not only bicycles, are numerous. A myriad of factors such as lockdowns, labour shortages, blocked shipping channels, political unrest and wars, and various general strains on logistics networks has led to shipping-cost increases and significantly lengthened delivery times. According to the IMF, container rates have more than quadrupled since the start of the pandemic, with some of the biggest gains concentrated in the first three quarters of last year. Although there are signs of prices beginning to decline, it’s widely expected that for the foreseeable future they will remain elevated.

In the view of Erhard Büchel, CONEBI President “the current situation in the global supply chain is an important signal: we need to invest more in local production; we need to invest more in Europe.” Though it should be said that is not all negative factors instigating the transition. A suite of new national policies focused on cycling infrastructure, driven by changes in consumer behaviour, have also encouraged European bicycle manufacturers to rethink their strategies.

Though the environment is often cited. The benefits of simply shifting production closer to home are not quite so clear cut. However, from an ethical environmental perspective there are benefits. Dr Bernhard Isopp, a lecturer and researcher at the Technical University in Munich tells us that “one interesting angle about this is how it ties to notions of local environmental responsibility. Even if in the grand scheme of things, manufacturing one bike in the EU has a similar potential environmental impact as making one in China, if the bike is being sold in the EU (and the company is based financially in the EU), then reshoring means the environmental impact is being felt closer to home. I would argue that this is actually a more responsible approach, since you are forced to confront the impacts of your own production and consumption (and thus might be more likely to implement measures to reduce the impact).”

What headwinds does the movement face? Surging energy costs that have become the norm since Russia’s aggression in Ukraine began have taken the shine off the idea.

Bastian Roessler, the chief executive of Cube Bikes, whose ever-growing European assemblies turned out over one million units in 2021, told the FT in Spring that “It would be a dream to buy most of the parts in Europe, but this is a big challenge. With the current challenges of a war and higher energy costs, it will be harder to do more sourcing in Europe.”

Indeed where lead times for many components averaged between three and four months on many components pre-pandemic, the industry continues to grapple with between 12 and 18- month lead times in some areas. This has not been helped by spring closures and lockdowns in areas like Shenzhen and Shanghai and so there is a sense that despite headwinds something has to be done for the longer-term health of European industry members.

WHAT DOES THE FUTURE HOLD FOR RESHORING?

It’s worth noting that this trend to at least look toward a future of localised bike building is not only a pandemic induced phenomenon. Manuel at CONEBI tells us “since before the pandemic eBike sales in Europe had been growing. 4.5 million units were sold in 2020 and 80% of all ebikes sold in Europe were assembled in Europe. In 2017 it was 50% and 2018 it was 64%. So, it was increasing pre-pandemic.”

The one-million-euro question for Manuel at CONEBI is: “is this a bubble or is this structural change?” And the answer, of course, is “we do not know for sure; we are not wizards. But we have forecast that by 2030 there will be 30 million bikes sold in Europe. We’re now seeing cities, like Paris for example, that weren’t cycling cities having more bikes. We’re seeing cases where the ‘second family car’ is an eBike. Where people are replacing their journeys with bikes. We’re also seeing more and more regulation coming to combat climate change.”

According to a report by Markets and Markets, the global eBike market was estimated at $21.1bn (£16.9bn) in 2018 and projected to reach $38.6bn (£30.9bn) by 2025. “In two of Europe’s main markets, Germany and the Netherlands, e-bikes have been embraced by the consumer,” says van Schaik. “Sales increased spectacularly in 2018.

Meanwhile, Bicycle sales are at records levels based on CONEBI (the Confederation of the European Bicycle, E-Bike, Parts & Accessories Industries) data collection which revealed that bike sales in the EU and the UK in 2020 increased a remarkable 40% to reach a 20-year high of EUR 18.3 billion or 22 million units sold (bikes and eBikes).

Bike retailers, having many years ago held on to hesitancy to give the market another shot after a false start decades ago, are now convinced. CyclingIndustry.News’ annual study of the UK retail market has 66% of businesses committing more cash than in 2021 to the pedal assist segment and little wonder when around half sold in such stores are going for between £1,500 and £2,500.

The feeling, then, is that once the market settles the reshoring trend will push on, even if it appears some parts of the industry look likely to have a glut of select stock in the near-term. That may be exacerbated by whether the upwards trend of ridership seen during the peak of the pandemic remains engaged and buying, or whether the industry was spiked, yet ordered like the party would continue indefinitely. On this note, some manufacturers invested, others took a more cautious approach, but all considered the locations of their operations in the face of unprecedented challenges.

“We have to be careful how we look at the data,” concludes Anna-Lena Scherer, Public Affairs Manager at CONEBI. “2020 was a record year. But we’re starting to get some figures in for 2021 and demand is still very high, but there’s still some supply chain issues. It’s not as high as it was in 2020, but higher than what we’d have expected. The momentum is still there.”