An Electric Bike Maker Shows Why Inflation Isn’t Likely to Go Away

Prices for next year's models are going up, thanks to component costs, supply-chain delays and strong demand

Manufacturers are building bikes for 2022 in a continuing environment of economic uncertainty—with more questions added recently by the emergence of the Omicron variant. Today’s rampant demand and strangled supply are already pushing next year’s prices higher.

“The cost of our product is not going down. If that is inflation, I wouldn’t call it transitory.”

—Richard Thorpe, chief executive of Karbon Kinetics Ltd., which sells Gocycle electric bikes

Prices for handlebars, brake levers, reflectors and chains have risen sharply over the past 12 months. Mr. Thorpe is still waiting for delivery of a thousand pieces of an electrical component he ordered more than a year ago, and he is competing with auto makers and online ordering bots, which use software to scoop up stock, to get hold of computer chips.

A basic child’s bike might have 50 components. A full-suspension electric mountain bike might have 350. Gocycles have around 800. A single missing part can cause delays that bring the entire production process to a halt.

Mr. Thorpe says that beginning Jan. 1, he plans to increase the prices of his range of folding e-bikes by up to 25%. The company’s latest models will cost between $4,999 and $6,999, depending on the specification, compared with $3,999 and $5,999 in 2021. “It’s all disruption, which costs money,” Mr. Thorpe says. “It’s the Wild West out there.”

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The bicycle industry’s challenges go to the heart of the conundrum facing the Federal Reserve and central banks around the world.

Policy makers have said they believe inflationary pressures will dissipate over time as high demand for consumer goods subsides and kinks in the global supply chain work themselves out.

“We don’t see any improvement for 2022, for sure. We’re going to be in the same boat that we’ve been in since the end of the summer 2020, when there’s not enough supply to meet demand.”

—Larry Pizzi, chief commercial officer at Alta Cycling Group

Pandemic lockdowns in the U.S. and Europe turbocharged a cycling renaissance that was already benefiting from growing consumer interest in personal fitness, greener forms of transport and the proliferation of bike lanes in big cities.

The average selling price of a new bicycle in the U.S. in September was $346, or

54% higher

than the average selling price of a bicycle in 2019.

The flood of demand for bikes as the pandemic arrived took the industry by surprise, executives say, an example of how unprepared the global economy was for the mass switch in consumption to goods from services as the pandemic forced people to stay home.

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Produced by Matthew Riva

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