I recently carried out a review of bicycle manufacturers in Europe and was really surprised to see how strong the growth is in this sector. The most competitive operations are lean and highly automated. Being close to the market gives them the edge in terms of controlling quality and responding to market demand and servicing warranty agreements:
The close to market advantage:
- Controlling quality: The key to maintaining quality is performing final assembly in-house although increasingly frame production is also being re-shored with automated production.
- Responding to demand: The established business model, with retailers ordering their stock for the year ahead, and then waiting for a shipment from Asia, doesn’t work in a more dynamic consumer market. For bike share operators, rapid design changes are expected in response to operational experience.
- Servicing warranties: Whether bikes are sold to consumers or to fleet operators, being able to quickly return bikes to the factory for warranty repairs allows better service, and for quality to be improved, preventing future issues.
Low-Wage or High-Productivity?
Traditionally, bicycle manufacturing has had low levels of automation and therefore competitiveness has depended on operating in a low-wage economy. However, if productivity can be enhanced, then a more highly-skilled workforce becomes an advantage. German automotive production is a classic example of competitive manufacturing with very high wages. Lean principles can enhance the productivity of manual operations but achieving very high productivity requires automation.
E-bike sales are growing incredibly quickly and greatly increasing what people are willing to pay for a bike. The Dutch buy about one million bicycles a year, with an average value of $1,300. On a $/kg basis, they are more expensive than the Porsche 911 Turbo. This is high-value manufacturing and it creates a real opportunity for job creation as we transition to a low-carbon economy.
The Importance of Automation
The most rapid growth has been seen in Portugal where a ‘Bicycle Valley’ has been created with state aid. Bicycle exports from Portugal grew by 400% in 2019 with production now approaching 2 million bicycles annually and supporting 8,000 direct jobs. The flagship company is Triangles, the first company in the world to fully automate the production of aluminum bicycle frames, with a capacity of 250,000 frames annually. The expense of setup, programming and proving out routines, means this isn’t suited to very small production runs of less than 5,000 frames per year.
Potentially the greatest savings from automating frame production may come from high-pressure die casting in magnesium alloy. Some smaller manufacturers, such MiRiDER, are already buying in die-cast frames from Asia but at relatively low volumes of just 2,000 frames, it can be economical to purchase your own tooling. Foundries based in the UK are highly competitive and well established in the automotive supply chain.
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