The European bicycle industry is in crisis. After a boom period in 2021 and 2022, manufacturers are now facing overproduction, rising costs, inventory backlogs and liquidity problems. Demand for non-electric bicycles has fallen sharply, with sales in Germany already down 13% in 2023, and the prospects for a market recovery are unclear. In addition, access to bank financing is becoming increasingly difficult. Although the main consumption drivers remain, sales are expected to stagnate in the medium term. In addition, new competitors such as car manufacturers are entering the market. It is therefore becoming even more important for bicycle manufacturers to quickly and continuously reduce costs, optimize processes and rethink their strategic direction.
The boom is over: Inventory overhang, overcapacity and deep discounting weigh on profits
Many dealers, who ordered a large number of bicycles due to the surge in demand during the pandemic, are now still facing excessive inventories. In addition, supply chains that were disrupted in 2020/2021 are now operating again and many dealers have received orders from all suppliers at the same time. According to the German Bicycle Industry Association (ZIV), sales of bicycles and e-bikes in Germany fell by 13% year-on-year in 2023. The decline was mainly affected by "Bio-Bikes", i.e. traditional bicycles (without motors). In contrast, demand for e-bikes is more stable, one reason for this being the growing popularity of rental models. High inventories and the resulting reduction in trade orders have caused some bicycle manufacturers to see sales fall by more than 30% and profits fall sharply. Giant, one of the world's largest bicycle manufacturers, had to accept a 45% profit drop in 2023. The large European manufacturer Pierer Mobility Group expects its bicycle business to lose 110 million euros in 2024.
In 2023, some companies such as VanMoof, Cycle Union or the online retailer fahrrad.de have filed for bankruptcy. Accell-Group, the bicycle giant that owns brands such as Haibike, Ghost and Winora, has been in the news for months. Swiss bicycle manufacturer Scott accepted a $160 million capital injection from its Korean parent company in order to continue operating the company.
Temporary market correction:But recovery will take longer than expected
The situation remains difficult until 2024. In the first four months of the year, German manufacturers' sales fell by 10% year-on-year. The Eurobike show in July did not lead to a change in the trend: the new products and special offers at the show had a poor response, and the expected spring demand hardly appeared. The persistently high inventory levels increase the price pressure on bicycle manufacturers and dealers, who have to offer high discounts to attract customers. Given the current market situation, manufacturers will continue their discount policy in 2024 and 2025. Nevertheless, the bicycle industry remains optimistic and believes that the current market correction is only a temporary phenomenon. The general trend towards zero-carbon mobility in cities and the desire to transform transportation will revive demand for bicycles. Among them, e-bikes with higher sales and profit margins and the growing bicycle rental business will be the main driving forces.
Manufacturers' high inventories are not expected to be digested in the next six months. This is because dealers will maintain a cautious ordering attitude and first reduce their own inventories until new large orders appear. Statistics from Bicycle Retailer & Industry News, a North American industry information agency, show that retailers' inventories are slowly decreasing, but are still twice as high as normal years before the epidemic. A similar trend is expected in the European market. More than half of the manufacturers surveyed have more than six months of inventory; more than a quarter even have more than nine months of inventory. Consumer sentiment remains depressed and they remain restrained in non-essential spending. Traders are also "picking and choosing" and only ordering what is absolutely necessary. Therefore, inventories are not decreasing as quickly as expected.
The financial situation of some manufacturers is very tight. Inventory financing is a drag on balance sheets, and financiers are much more cautious about the bicycle industry than they were two years ago. Many banks are no longer willing to extend credit lines or provide seasonal financing. In the bicycle industry, which is mainly composed of small and medium-sized enterprises, not all companies have sufficient financial resources or channels to survive the period before recovery. In order to ensure liquidity, important restructuring measures at the operational and financial levels must be taken and cannot be postponed.
As a rising star in China's bicycle industry, Tianjin Panda Group has expanded its production scale on the basis of traditional mountain bike production and manufacturing. It has expanded from a single mountain bike category to the electric bicycle manufacturing industry. This year is a year of concentrated adjustment and transformation for Tianjin Panda Group. Our factory in Tianjin has begun to focus on high-end products and improve product performance. We have made adjustments mainly in the supply chain system and technical team; our factory in Hebei focuses on mid- and low-end products, improving the overall cost performance of products, and has made adjustments mainly in product diversification and production teams, including the completion of the landing plan of the new factory before the end of the year. At the same time, as an innovative company, Tianjin Panda Group is also working with Tianjin University to establish a research and development design company in the industrial park to improve product research and development capabilities, study smart and healthy cycling software and supporting hardware equipment as well as the surrounding ecology, and create diversified and differentiated products to improve the overall competitiveness of the market.
