The Potential Impacts of the Novel Coronavirus on the Bike Industry

coronavirus

Covid-19, 2019-nCoV or the 2019 novel coronavirus, affects the respiratory system. Coronavirus actually refers to the group of viruses that this new strain belongs to, along with the common cold, flu, SARS and MERS.

It is believed to have originated from Wuhan, China, where the first four recorded people were infected, all of them workers at the same seafood and live animal market.

We’re very early on in the outbreak of this new virus, which is leading to great speculation and guessing for everything from its origins to how it will spread. The complete genome of the virus was released in mid-January, allowing scientists and researchers around the world the ability to work together to speed up any possible cure or learn more about the virus as fast as possible.

While the loss of life is tragic and the virus is a serious concern, there is not yet enough known about the its ability to spread or cause fatality. Comparing it to other virus outbreaks suggests that it may not be as serious as some news outlets are suggesting. The current flu virus outbreak in the US has far higher figures of people infected and deaths, yet hasn’t had the same weight of coverage in mainstream media.

That said, it’s still vastly important to curb the spread of any virus, let alone a new one. As of this writing, the global infection count has passed 45,000 with more than 1,100 dying from the virus. The province of Hubei, in which Wuhan is in, is home to 60 million people and is on complete lockdown, but the virus has spread to neighbouring countries such as Japan and Taiwan as well as the US, Canada, and countries in Europe.

China plays a critical role in the bike industry for its manufacturing capabilities of frames, components, and accessories. So, how will the coronavirus affect the bike industry?

Travel bans and quarantines are affecting movement of people and goods across not just China, but other countries too.

Production delays seem inevitable.

In global efforts to reduce the spread, other countries have now imposed rules around travel to reduce the number of infected, and many other countries issuing recommendations to avoid travelling to China.

The virus outbreak coincided with the Chinese New Year celebrations. This meant that a huge proportion of the Chinese population was travelling within the country back to their home towns and cities. The travel bans and quarantines set up within China have led to many workers not yet returning to their places of work. Chinese authorities officially extended the New Year holiday by one week, meaning that in theory manufacturers would start work again on Monday, February 10th. However, it is rumoured that further official quarantines may be put in place once the New Year holidays end, further limiting how many workers would return to the factories. Brands do plan for the Chinese New Year and build it into their timelines for development or production. But, what was planned to be a two-week holiday could potentially become a four or five-week period of no work.

Added to this, there are always a certain number of workers that don’t return to their previous employer after the Chinese New Year. Manufacturers then have to recruit new workers to fill the loss, leading to a ramp-up period back to full capacity production. With this annual head count not yet being done there is currently no idea of what percentage of workers will need to be made up for once the New Year holiday and possible quarantines are over.

Travel bans and quarantines are affecting movement of people and goods across not just China, but other countries too.
Manufacturers outside China will likely still be affected.

While China may be most known for its manufacturing of bikes, components, and accessories it is also a major manufacturer of the raw materials needed in the bike industry. The aforementioned holiday and quarantines could also affect this aspect of the industry. With the raw materials being the starting point for the manufacturing it could lead to further compounded delays in factories fulfilling their orders—long after the virus is (hopefully) out of the mainstream news cycle. This delay so early on in the supply chain could result in disruptions to manufactures outside of China as well. Vietnam and Cambodia are currently seeing increased production in the bike industry, mainly as a result of the US tariffs on Chinese goods. But these countries still depend on the raw materials and parts coming from China to allow them to do their portion of the work.

In an email obtained by BRAIN, the CEO of the AnJ Group, Jon Edwards, backed up the fears that countries with manufacturing outside of China would be hit with delays. AnJ has manufacturing in China, Taiwan, Vietnam, and Cambodia, and manufactures for many well-known mountain bike brands. Allegedly some Vietnam factories have issued two-week strikes to stop any possible spread of the virus from returning Chinese workers. AnJ relies on Vietnam for their hydroformed and butted tubes in their Cambodian factories so the delays in Vietnam would be passed on directly to their Cambodian factory. Currently there are a reported 15 cases of infected people in Vietnam and 1 in Cambodia.

Edwards also goes on to report a slower than normal pace at Chinese factories on account of travel bans and quarantines stopping workers returning to their jobs. This extends beyond AnJ with the slow ramp up being felt across the board. Some local officials have stopped factories from re-opening until 17th February.

Smaller brands could get hit hardest.

Many factories have multiple clients varying in size from the big leagues right down to the one-man bands, all producing bikes. Once normal play begins to resume the factories will likely look to complete the orders of their highest priority customers first, meaning that the increased lead times could be felt the most by the smaller brands relying on China and the surrounding countries for their manufacturing.

Some other manufacturers and vendors have already announced increased lead times. Bafang has already announced an increase in its lead times of e-bike engines. It’s expected that if parts manufacturers like Bafang are already announcing their delays then other parts manufacturers and thus bike manufacturers and assemblers will also incur these delays.

Taipei Cycle show, due to be held at the beginning of March, has now been postponed until May.
Face-to-face business dealings will be more limited.

Other impacts in the bike industry have been felt with the cancelling of the Taipei Cycle show, which was originally planned for the 4th to 7th March. The show’s organisers, the Taiwan External Trade Development Council (TAITRA), circulated a questionnaire to all Taiwanese exhibitors to make a more informed decision on what to do about the show. The show has now been postponed until May.

Before its official cancelation the Taipei show had announced that all Chinese exhibitors and nationals were banned and that workers at the show have to wear face masks. The Taiwanese government also banned any Chinese nationals from entering Taiwan and a further ban on visitors who had been to China in the previous 14 days.

Other trade shows such as ISPO Beijing were cancelled and The Tour of Hainan, a stage race encompassing several islands in the South China Sea, has been cancelled too. The impact of the outbreak was felt even at the ISPO Munich trade show where the Manufacturing, Supplier and Sourcing hall which usually has a large number of Chinese exhibitors saw a sharp drop in visitors to the hall amid fears of the virus.

All these trade shows and events pose themselves as invaluable opportunities for networking within the industry as well as signalling a time for important meetings and opportunities for communication that will now have to be done through other channels or postponed or cancelled all together.

Giant, one of the biggest manufacturers, did have plans for a grand opening of its new headquarters building in Taichung and a product launch in Taiwan following the recently cancelled Taipei Show, but both have been postponed.

Many brands don’t have their headquarters in China or Taiwan and so product managers and engineers travel out to Asia for factory visits, production checks and timeline and ordering meetings. Many brands have expressed concern in sending their employees out at this time and are aligning themselves with their countries official recommendations to avoid travel to China.

Taipei Cycle show, due to be held at the beginning of March, has now been postponed until May.

The coronavirus’s travel bans, quarantines, and cancelled events will have a knock-on effect for the bike industry, especially with the outbreak’s timing during such an important part of the cyclical bike calendar. Consumers may not see immediate impacts, but the resulting challenges will likely be felt on the sales floor and financial forecasts for much longer than the virus is in the news.

We should note that we are still early on in the outbreak of this novel coronavirus, so assessing the damage to particularly the bike industry is still mostly an educated guess. As time goes on more will become clear about worker losses and lead times. But what is currently being estimated is also working on a best-case scenario with that the outbreak will be under more control soon. All manufacturers, not just the ones situated in China, are keeping a close eye on the situation and an ear to the ground over the coming weeks and months to see how this virus outbreak will affect them and the industry.

first published https://www.pinkbike.com/news/impacts-of-the-novel-coronavirus-on-the-bike-industry.html