Brexit and the bike industry: how the situation is evolving

Since we looked at how the new Brexit rules were affecting UK brands, retailers and distributors two weeks ago, things are continuing to evolve. What does it look like the situation will be, in terms of supply and pricing, over the coming months?

If Britain leaving the EU wasn't enough to contend with, an ongoing shortage of shipping containers in Asia since the start of the COVID-19 pandemic has had a knock-on effect of price increases, making it even harder for brands to absorb the already escalating costs of Brexit with tariff fees and new customs costs.

Stock that brands have built up in anticipation of port delays (because of lengthier customs processing) are dwindling as a result of the continual high demand of bikes—which, on top of shipping container shortages, has meant delays for customers after purchasing.

We previously reported on how the UK’s new rules on VAT are impacting brands and retailers in the EU selling to customers in the UK—with some having suspended sales to consumers temporarily, and others stopping altogether. Pages with Brexit rules and FAQs are popping up on websites as they try to effectively communicate to customers their approach in following the new guidelines.

There has been some confusion regarding who pays what charges — company or customer — and whether those charges are taken at checkout or upon delivery with courier.

> Planet X customers on the continent being asked to pay UK VAT amount as well as EU VAT

We reported yesterday that Ribble admits its information “could have been clearer” around the 14% post-Brexit tariff applied to bikes moving between the UK and EU that fall outside of the new 'sale of origin' rule, and has offered to refund the tariff amount for EU customers who ordered between 1st-17th January.

David Stacey, Ribble's Commercial Director, said: "We’ve removed all UK VAT from the pricing that any European customer will see, so they aren’t paying for that twice. The customer also gets a pop-up message when they’re in our Bike Builder, which is the process every customer has to go through to buy a bike from us.

"That pops up to tell the customer that because of Brexit and the changes, they will be liable for local taxes and they will need to work that out with their local customs office when they receive the bike.”

Italian clothing brand La Passione also states on its website that for orders over £135, UK VAT will need to be paid to the courier upon delivery, and warns that the courier could charge an additional management fee.

Canyon has simply changed its pricing to cover any applicable duties or customs handling fees, so you see the whole amount you will have to pay at checkout: “The benefit is the pricing you see on our website and during checkout is the final pricing, and there are no additional fees once your Canyon order arrives with you,” the German bike manufacturer added.

Prices are rising, but not in a uniform fashion, as brands attempt to absorb some of the additional costs. As we reported, taking the Canyon Aeroad CF SL 8 Disc as an example, the price increase of 9.21% is not as much as the 14% import duty; but still, it's a significant increase for customers. 

One EU bike brand, that wishes to remain anonymous, has made road.cc aware that new customs costs are based on the volume of the parcel being shipped rather than weight. Although bike boxes are quite light for their size, calculating the shipping in this way means that considerable fees are being levied. This is a particular issue for lower end bikes, as the increased fees are proportionately greater relative to the cost of the bike compared to higher end models.

Mitigating that 14% import tariff (if a sizeable proportion of a bike's frame and components are made outside of the UK and EU), plus the new customs charges is difficult for many brands to fully cover themselves.

Added to this, freight rates have risen to new highs due to the shortage of shipping containers transporting goods from Asia into Europe. The cost of shipping a 40ft container from Asia to Northern Europe has increased from $2,000 in November to more than $9,000, according to the Financial Times.

The slowdown in global trade and economic shutdown in Europe in the spring of 2020, due to coronavirus lockdowns, meant less containers were shipped back to Asia. Then in the second half of 2020, western demand for Asian-made products soared, and so did freight rates as shippers became desperate for available containers. Port delays are causing a further rise in prices, as freight operators are charging extra to compensate for longer waiting times.

For Ribble’s UK customers, this issue surrounding the shipping container shortage has meant lengthy lead times after purchasing.

David Stacey commented: “These factors are definitely not new, since about October time we’ve been experiencing major delays at ports.

“Not all of that is to do with Brexit, it’s to do with several other factors, mostly COVID and the furloughing of people at ports, and this has created a massive knock-on effect of container shortages and shipping delays, and therefore supply and demand dictates the price rise [with containers]."

This is an issue the brand has been battling for months now, but Brexit complications has exacerbated these inter-weaving problems. Stacey added: “It’s really difficult as a UK manufacturer, because we’re totally reliant on those constituent parts arriving with us. We basically build to order, none of our bikes sit on a shelf in a box. Every single customer who orders a bike from us has it hand-assembled from its constituent parts, and we’re just being crippled really by these delays. It’s been very, very difficult.”

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This all coincides with an increase in the numbers of us cycling and buying bikes, as the UK government has supported and encouraged cycling (amongst limited other forms of exercise) to continue through the pandemic, and the related lockdowns.

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Ribble’s CEO Andy Smallwood said: “We’re still tracking at a very high level of demand. We forecast on a very regular basis, but it takes time to react to an increase in demand, and that’s compounded by delays as well.

“We are well placed to meet the demand, although there is obviously lead times involved, and that has an impact on what product will be available.

“That’s not just us, that’s the whole bike industry. Lead times are growing and availability is tough.”

> Bike at Bedtime: Drops Le Col Ribble Endurance SL R Disc

Any well-made plans made before the new Brexit rules arrived on 1st January 2021 have only helped to a limited extent.

Smallwood added: “We bolstered stock around multiple Brexit timing points in order to cover us for any delays. But with the bike industry there’s been significant growth, so that’s eaten into any buffer stocks we put in around Brexit. From a stock perspective and delays it wasn’t a case of being unprepared, just a case of other factors outside of that which has impacted us.”

Are the buffer stocks from other brands on the verge of completely running out? Perhaps then, we will see an even bigger hit from customs delays and shipping container shortages, as there’s no back-up stock to hide the damage?

There is also another issue emerging, relating to transporting imports from the EU, that could have implications on the bike industry in the coming months.

Increasing numbers of freight groups are rejecting contracts to move goods from the EU to Britain, according to a recent report by The Guardian. This is explained to be the result of the burdensome new financial guarantees, known as T1s, that apply to goods being exported to the UK. Alongside this, customs declaration and Rex (registered exporter system) documents to certify the origin of the product need to be provided, and cause added complications and paperwork for these freight companies—and these shippers are simply not interested.

We'll be following the developments over the coming weeks and months, and will provide updates when any significant changes happen with the current situation. Are you a bike brand, distributor or customer with a story to tell about Brexit and the bike industry? Get in touch at info [at] road.cc