I’ve been sitting on this story since September and now Bike Europe has broken the news: Bicycle production costs are going up significantly in China. The Bike Europe article notes that labor costs are increasing in China, along with other costs of doing business such as new pension requirements and new taxes.
Bike Europe mentions a six to seven percent increase in the cost of bike components, which just happens to match the seven percent drop of the value of the dollar against the Chinese yuan. Bike Europe also fails to mention the skyrocketing cost of raw materials used to build bikes, fuel shortages in China that make it increasingly difficult to manufacture product there, along with rapidly rising costs of energy and fuel. While the cost of transporting product from China to the rest of the world is still negligible, this is also increasing.
I expect more demand for bikes in the USA, Canada and Europe, especially for the low end bikes that are typically produced in mainland China. Some of these cost increases will be passed along to consumers, but the increased production cost of bikes will eat somewhat into profit margins.