Electric bike manufacturers and sellers in the United States have been left dazed and confused by the imposition of tariffs on e-bike components and whole bikes by the Trump Administration in his latest round attacks in the trade war against China.
According to the trade body People for Bikes, “On Tuesday August 7, the [US Trade Representative] USTR announced that the round of tariffs that includes e-bikes and e-bike motors has been approved. This means that tariffs on electric bicycles imported under Harmonized Tariff Schedule (HTS) headings 8711.60.00 or 8711.90.01 will increase from zero to 25 percent. Tariffs on e-bike motors imported under HTS heading 8501.31.40 will increase from four percent to 29 percent.”
The tariffs went into force on August 23. In a webinar held that week, Alexander Logerman of People for Bikes said, “What’s going on here is that the US President signed an order stating that the United States Trade Representative should initiate an investigation under section 301 of the Trade Act 1974. This is a tool that the Trade Representative can use to impose punitive sanctions on a country if they are engaged in an unreasonable or discriminatory practises that affect the US economy.”
Logerman continued, “In this case the Trade Representative is focused on the turn-over of advanced technology and intellectual property by US companies to the Chinese government or Chinese interests. They are investigating whether there are any coercive practices where the Chinese government have forced people to hand this information over.”
The investigation was solely focused on China. As a trade body naturally trying to defend its membership People for Bikes has published a full rebuff of the allegations made by the USTO – its four main arguments are on its website.
Confusion and Dismay
Ed Benjamin of the Light Electric Vehicle Association expressed confusion and dismay at the tariffs. He told the Electric Bike Report, “The industry is confused as to why the hell we are being targeted by this. We are coming to the realisation that asking for exemptions to this is not going to have any weight.”
According to Benjamin there are no demands underpinning the attack: “The Trump administration does not appear to be saying ‘You must do this.’ The comments seem to be vague and we do not see any progress towards a solution or resolution.”
Survival of the Fittest
Of the 263,000 electric bikes sold in the USA in 2017, just 15,000 are estimated to have been physically built here.
CEO of Pedego Don DiCostanzo supplied the Electric Bike Report with an infographic on just what parts of one of his bikes are made where – nothing is made in the United States.
When the tariffs came into effect, DiCostanzo was already working on tackling the issue of 83.6% tariffs being slapped onto Chinese e-bikes imported into the European Union by the European Commission due to lobbying by EU manufacturers in 2017.
In the face of the tariffs being put in place he brought forward several shipments of e-bikes and laughs that only three shipments arrived after the tariffs were imposed – on the 24th, 25th and 26th August!
DiCostanzo compared the tariffs between the USTO and EU and said that across the industry, “I think it is going to have some impact but not as bad as some say it will be. I think the lower cost guys who are working on slimmer margins are going to have to pay more. In the traditional bike industry there is a lot of margin between what we pay as the importing price and what the consumer pays.”
This feeling isn’t necessarily shared by Ty Collins, cofounder and CMO of Rad Power Bikes, which has also had to weather the EU tariff storm and may well be big enough to manage the US tariffs without much of a dip in income.
Collins suggested, “For companies with 10-12 employees this is going to be a long road. I couldn’t tell you of any specific e-bike companies that have closed down but if a small e-bike company wasn’t totally prepared for it could have a pretty significant if not catastrophic impact.”
While a medium sized business today, Rad Power Bikes started out using crowdfunding only a few years ago and Collins is all too aware of the difficulty such price hikes could have on a company following in their wake.
Benjamin explained that many e-bike retailers are being upfront with their customers and raising their prices.
In the People for Bikes webinar it was revealed that some companies are absorbing up to half of the tariffs to be more competitive, which impacts their bottom line in another way.
For Chinese imports, Benjamin said, “I figure on a $200 – $500 increase in prices so a $500 bike will cost $800 and a $1000 bike will now cost $1500.” Rad Power Bikes boosted their cost across their range by $200 and is undergoing an internal efficiency program to absorb the rest of the cost.
The war drums over e-bikes being subjected to tariffs have been beating for some months, giving the industry time to make decisions as to how to respond.
Benjamin pointed out that one of the upshots is that some e-bike retailers have delayed their imports to the point that volumes of e-bikes from China have plummeted: “In 2017 there were 263,000 e-bikes imported from China. In the first six months of this year, only 75,000 were imported. This is even while public enthusiasm for the technology is up!”
While caught out by the sheer speed of the tariffs coming into force after the announcement they were being considered, DiCostanzo seems not to have had his sales impacted even as he rushed to stockpile bikes in the US.
He pointed out, “We had a 56% sales increase in August and September is looking to be as strong as well!”
Meanwhile Rad Power Bikes have not curtailed their recruitment program and are planning for business as usual.
Into the Future
There is some uncertainty as to what will happen in the coming months and years regarding the tariffs. Benjamin sits on the fence while the two companies we spoke to are planning long term.
Benjamin continued, “The bikes I buy now with a 25% tariff? That tariff might be removed in the not-too-distant future and I might have a warehouse full of bikes that I’d paid 25% more on than when the tariffs are suddenly removed in Fall.”
DiCostanzo and Collins do not believe that the Midterms are going to impact the tariffs. Collins: “While like everyone else involved we hope this will be a short term thing, as a business we have to plan as if this will be forever.”
DiCostanzo takes a somewhat different stance: “I think it is becoming more and more predictable that unless the Chinese negotiate as long as the President is President Trump the tariffs will remain in place unless the Chinese acquiesce and I don’t see that happening.”
To him, this isn’t an issue that internal US politics can change. He himself lobbied the USTO during the consultation and felt that it was just a ‘listening exercise’ with a clear agenda to press ahead regardless.
People for Bikes are actively lobbying for change, filing their response with industry comments to the USTO on September 6th. There is no firm consensus as to what will happen next, though it does seem clear that the electric bike industry is a small fish in a war of sharks and its voice won’t be heard as clearly as perhaps Big Soya might.
The message from those on the ground seems to be to prepare for a long term impact and hope for a better future.
Not Just eBikes
On September 24th there will be a 10% tariff on a wide range of conventional bicycles, components, and accessories imported from China. At the end of 2018 that tariff will be raised to 25%.
Safety products like helmets and lights are excluded from the tariffs.
Bicycle Retailer reports that all of these annual tariffs of approximately $250 million are of deep concern to the bicycle industry.