Why the Bicycle Industry Moves Manufacturing Away from the U.S.
Over the years, many bicycle manufacturers have shifted assembly and production from China to countries with lower labor costs, such as Vietnam and Cambodia. While labor costs are often cited as the primary reason for this shift, they are not the only—or even the most significant—factor influencing production decisions.
Labor Costs vs. Manufacturing Efficiency
While labor costs are an important consideration, the primary reason behind relocating production to places like Vietnam and Cambodia is the proximity to component manufacturers. Many large-scale bicycle companies still order their parts from Asia, where the industry is well-established and efficient.
For instance, while the labor cost difference per assembled bicycle between the U.S. and Asia could range from $10 to $20, other factors such as tariffs, transportation costs, and the ability to manage production schedules make Asia an attractive destination. Companies assembling in the U.S. often face long lead times—up to 90 days—due to the need to import parts from Asia. This not only increases delivery times but reduces flexibility, making production in Asia far more favorable.
Component Manufacturers: The Key to Production Location Decisions
A key determining factor in where to assemble bicycles is proximity to component manufacturers. In the U.S., assembling bikes often means importing parts from Asia, which leads to inefficiencies. If assembly is done in Asia, especially Taiwan, companies benefit from shorter lead times and fewer administrative challenges, as defective products can be quickly replaced.
Jay Townley, an industry consultant who helped move Schwinn’s production from Chicago to Taiwan, emphasized that automation in Taiwan’s factories, such as Giant’s, helped offset the higher labor costs compared to mainland China. By using automation, companies can produce products faster with fewer labor hours, making it a more efficient option despite higher wages.
Scale and Efficiency: The Importance of Industrial Scale
One of the biggest challenges for U.S. manufacturers is scale. Asia’s industrial scale allows for large, automated factories that are capable of producing millions of bicycles annually. This scale supports not just bicycle assembly but also the manufacturing of critical components like frames, tires, and suspension systems. The infrastructure in Asia is already in place, which makes production there highly efficient and cost-effective.
In contrast, the U.S. produces only 10-12 million bicycles a year compared to China’s 143 million. This gap in scale makes it hard for U.S. manufacturers to compete in terms of production efficiency.
The Impact of Tariffs on U.S. Assemblers
Another significant factor affecting U.S. bicycle assembly is tariffs. Tariffs on imported parts, such as frames and components, increase the cost of assembly in the U.S. Kent International, a leading bicycle assembler, produces bicycles in South Carolina using Chinese-made parts and frames. If tariffs on Chinese parts were removed, Kent would consider expanding its U.S. manufacturing. However, the current tariff structure, where complete bicycles are exempt from tariffs but individual parts are not, discourages more U.S.-based assembly.
Similarly, Light & Motion, a company that assembles bicycles and submersible lights in California, faced a significant challenge when parts for their products were subject to tariffs, while complete products were exempt. This imbalance led to financial struggles and eventually contributed to the company’s closure.
The Future of Bicycle Manufacturing
Despite the rising interest in reshoring manufacturing to the U.S., the reality is that the bicycle industry will likely continue to concentrate production in Asia. As long as most of the key components are made in Asia, the cost advantages and manufacturing efficiencies available in the region will outweigh the potential benefits of relocating production to the U.S.
In summary, the bicycle industry’s move away from U.S.-based production is driven by a combination of factors, including proximity to component manufacturers, economies of scale, and tariffs. While labor costs are a part of the equation, the ability to efficiently manage production and meet global demand continues to be the primary driver for the industry’s production hubs in Asia.