Ought to bicycles be extra like vehicles within the combat towards local weather change?
As the saying goes, cycling is good for the environment. Unfortunately, the bicycle industry is not as environmentally conscious as you might think. The materials used, the CO2 emissions in the manufacturing process, the somewhat disposable nature of modern bicycles, and the linear economy all contribute to making an environmentally friendly activity a little less environmentally friendly because of the bicycle itself.
The COVID-19 pandemic and subsequent lockdowns sparked a boom in cycling, with more and more people venturing onto bicycles to practice sports when other activities were prohibited.
At the same time, governments have promoted the benefits of cycling in the fight against COVID-19 and climate change, which has led to renewed investments in more cycling infrastructure and safer cycling environments. These investments enable and encourage more people to choose to cycle.
Bicycle stores saw a huge increase in sales, which eventually led to a complete lack of availability of new inventory. The supply chains struggled and even couldn't keep up with the new demand. Can the bicycle industry meet the demand for new bicycles and how much additional environmental pollution will this offer?
Could cycling be facing the bizarre scenario of effectively turning people away due to the lack of available bikes and equipment?
I ask the question: if the number of cyclists is to increase sustainably, should the bicycle industry look to the automotive industry – the very industry it may be trying to replace – in order for a model to replicate itself?
As bizarre as that sounds, should bicycles be more like cars?
Having worked in both industries, I feel well positioned to compare the two and point out some areas that seem to be keeping the automotive industry going.
The full-body packaging makes the new Jaguar F-Pace from Team Sky stand out from the team's other usual black vehicles.
One of the most important options for cycling, the means of transport and the bicycle industry must be the e-bike. E-bikes will surpass all other motorcycles this decade. The support that an e-bike can provide means cycling becomes more viable as a means of transport for everyone. Longer trips can be less challenging. E-bikes can shorten commute times and the cyclist can feel fresher. Seems to be a victory on all fronts.
This presents a tremendous opportunity for climate action, the bike industry and bike shops, but are they ready? Can the industry cope with the expected sustained surge in demand? Will the bike shop opportunity be there to flourish? Despite the industry's environmental impact, could changing the way we buy and sell bikes be an opportunity to ensure that the bike industry as a whole becomes greener and more circular?
But this will surely lead to a continuation and even an increase in the availability of new bikes and components, leading to more sales of new bikes and producing the opposite effect than desired, right? While this is possible, I believe that new car sales only work because of three important pillars, and these pillars could help us have a positive effect on cycling.
Pillar one: new is beautiful
The first pillar for most is simple human nature. Be it a wish, a status symbol, or the trust that newers are more reliable, many people like and want new things.
New bike day.
Pillar two: trade-ins
While I am in no way suggesting the car as an eco-friendly option, credit does have to be given where it is due. Right now the automotive industry is a great example of how a circular economy can work. Very rarely do consumers buy a brand new car and last 20 years from its natural death. Instead, every time someone replaces their current vehicle, someone else takes possession of that vehicle and keeps it running for the subsequent duration that they keep it. Franchise dealers may sell new cars straight from the factory production line, but are also actively encouraged and motivated to trade used vehicles.
Very rarely do I remember a customer who came into the dealership and was buying a new car. The vast majority of people want to trade in the vehicle they already own. The hassle of selling the car privately and the small financial benefit of selling the car privately mean that most customers choose the simple option of dealing in their current vehicle and putting its value on the new one. This trade-in system also applies to customers looking for used cars. Customers who are trading in used vehicles again and send the circle for another round.
Are you thinking of buying a new Ford? You may be selling your old car to the Ford dealer who will service it, clean it thoroughly, add a warranty, and resell the vehicle to a new customer. This new owner usually treats the used car as their pride and joy before closing the loop and repeating the trade-in and sale process again.
Consumers prefer to buy used vehicles from dealers, as a dealership can usually offer warranty and other value-added services, although the same vehicle will typically cost more than if it were sold privately.
New or used, a bike can make you smile.
Compare this to the bicycle market. Very often the bicycle dealer doesn't even get a look at your current bike when buying a new bike. Usually, the depreciation of your current bike (due to the availability of some parts) means that it's worth more to the owner than it would get if traded or sold. This retracts the bike to a backup option in the corner of the shed, collecting dust indefinitely.
Motor vehicles tend to hold up in value much better (or at least are often just worth more in absolute terms), and as such, they are rarely classified as a backup option while there is still life in them.
Although the dealership will make a profit on new cars, in my experience this is often very small compared to the profits made on used vehicles. The volume of new car sales is also usually lower than that of used car sales. The dealership's motivation in selling new cars is to meet the new car sales goals during this period. If the dealership hits its monthly or quarterly goals, it receives a large bonus from the automaker. Because of this, the last week of a month or quarter is always the most stressful when selling a car. The goals are never easy to achieve, but the bonuses are quite an incentive in my opinion.
Compare this to selling bicycles, where used bicycles are often of little value and selling used bicycles is a tiny and less profitable percentage of a store's business. As a result, the new bicycle sales darkened bicycle sales.
Could continued industry growth be driven by a circular economy? Trade, trade, resell?
Could a bonus system for selling new bikes promote a circular economy and ensure inventory availability and profitability for local bike shops? In theory it could work. The bike store hopes to meet a sales target and as such creates promotions and welcomes the used bike trade to encourage the consumer to buy a new bike. The turnaround could force a shift towards more durable bikes and components to facilitate the sale of used bikes and greater value retention. Bicycle manufacturers would rely on used bicycle sales to drive sales of new bicycles. Used bikes are serviced and prepared for resale by the store, adding more work to the store, inventory for the workshop, and choice for a customer for used bikes.
This doesn't even mention the benefits for cyclists when buying from a local bike shop, which can provide reliable advice and tips on a bike to fit, resulting in a more enjoyable cycling experience, as opposed to the greater risks of buying a bike from the Facebook marketplace.
With Specialized and Giant (among other brands) now running concept-style proprietary retail stores, this idea may not be as wild as it seems. High-end bikes can cost more in total than some of the best-selling cars, and sales are sure to increase. While I don't want to encourage continued price inflation in the bicycle industry, could there now be scope for manufacturers to incentivize retailers with rewards to sell new bicycles?
Could big brand dealers and franchises function like auto dealers?
Pillar three – finance and leasing
The final pillar that enables the automotive industry to both new and used is funding. The financing not only makes it easier for customers to buy a car, it also motivates dealers. Every time a dealership sells a car in finance, it receives a commission from the finance company. These additional sources of income not only help ensure the dealer's overall profitability, but also add to the overall margin of each sale. This commission means that the total price of a vehicle doesn't have to offer that extra margin to ensure that the cost of a car doesn't increase year on year, as we've seen in the bicycle industry.
Admittedly, the costs for this bonus for the dealership are integrated into the financing costs for the customer, but are spread over 24/36/48 months. These additional costs are much more manageable. Compare this to financing in the bicycle industry, where the financial firms often bill retailers for the financing options. At first glance, the 0% interest rate that bike stores can offer seems great, but it hides the fact that the cost of this financing package to the retailer directly affects the amount of discount a bike store will offer on any bike can.
Even more worrying, the bicycle industry's financing offers are often quite costly and result in high penalties for customers for missed payments. Some of these funding options actively encourage total delay in payment until a later date, which is often most attractive to customers who would be most at risk of unexpected bills or charges during this period.
While financing in the auto industry traditionally meant spreading the cost of buying the vehicle over a set period of time, leasing and hiring personal contracts are becoming increasingly popular. Leasing almost guarantees the continuation of the circular economy and the future sale of more vehicles. The customer knowingly and willingly signs an agreement to only keep a vehicle for a specified period of time, typically three or four years. At this point, the vehicle will be returned to the finance company or dealership, but the lessee still needs a vehicle. So a new agreement is signed, often for a different vehicle, and the customer drives away again.
The advantage of leasing is that the customer only pays for the time they use the vehicle. Since the customer is not paying the full value of the vehicle, both the deposit and monthly payments are lower. This means that the customer can either reduce travel costs or drive a vehicle that would otherwise have been over budget.
Right now there are very few options like this in cycling, which is most likely again due to the single-use nature of modern bicycles. Leasing only works in the automotive industry, as the leasing company is confident that the vehicle will retain a certain resale value at the end of the lease.
For leasing to be a viable option in the bicycle industry, frames and components need to be more durable, retain more value, and the industry itself needs to get to know the used bike market better.
With the advent of e-bikes, leasing and financing options may become more important. With the added weight and support associated with an e-bike, manufacturers in theory don't have to be as obsessed with the lighter weight and aero gains that, at least in some ways, have resulted in the less durable bikes we see today.
Another key difference to e-bikes is the market. Manufacturers often sell pedal assisted transportation to a more general market at a high cost of money.
Compare this to the traditional bike market, which usually deals in discipline-specific bikes, with a wide price range to a somewhat select market. Potentially, the e-bike market could be more similar to the automotive market and attract the same variety of consumers.
While I've asked a lot of questions here, they are just questions, not opinions or answers about how the bike industry might be tracking in the years to come. Aligning with the world of auto sales would certainly have a fair share of negatives. There is no doubt that the industry still has to do something to ensure the continued growth of cycling. As the industry figures this out, we as cyclists also need to make sure that we encourage any cycling boom by welcoming everyone who chooses to ride a bike.
The feature image at the top of this post is from Sean de Luna and was submitted as part of the Mark Gunter “Photographer of the Year 2020” award.