On an early Saturday morning, the line to get into the nonprofit bike shop Gearin up Bicycles wraps around the block in the Eckington neighborhood of Washington, DC. Because the shop usually has 10 to 15 bikes available to sell, most people in line will go home empty-handed. The shop sells used, reasonably priced bikes repaired by Washington-area teenagers. Demand for bikes here and nationwide has skyrocketed since the beginning of the Covid-19 pandemic.
So have shortages. “It’s really hard to get anything bike-related since the pandemic started, because so many warehouses manufacturing the bikes shut down,” assistant manager Daiquan Medley says. Supply has not kept pace with demand. “China went to bed and took a nap and stopped production of everything,” says Michael Carrol, the purchasing manager at Colorado Cyclist, a bike shop in Colorado Springs, Colorado. “You see a delay in the supply side of everything. You see it in the bike industry.” This nationwide shortage has yet again revealed America’s dependence on one or two countries and one or two suppliers for bicycles and bike products. The pandemic closed factories throughout Asia, and a fragile production system collapsed. Moreover, the coronavirus shut down bike production just as bikes became a smart defense against the virus. Travelers and essential workers, wary of public transportation for public health reasons, have been seeking viable alternatives, none better than bicycles.
Garphil Julien is a research associate with the Open Markets Institute.
Yet bikes are in short supply because nearly all bikes sold in the US are imported, predominantly from China. Chinese factories produced about 95 percent of the 17 million bikes sold in the US in 2018, and they provide 60 percent of US bike component imports. Bikes made in Taiwan accounted for 6.3 percent of sales in 2019. All the world’s largest bike manufacturers – including corporations headquartered in the US – have most of their production facilities in China or Taiwan.
But back in 1994, China provided only 24 percent of bikes sold here. What changed? During the past few decades, the Chinese economy has featured lower production costs from cheaper labor and raw materials, as well as lower regulatory standards, and China has benefited immensely from these comparative advantages. Many US companies, particularly in the bicycle industry, decided to move production offshore to take advantage of lower costs, whether to increase profit margins or stay afloat amid increasing competition. Globalization—spurred in part by a liberalized global trading regime with reduced trade barriers and China’s accession to the World Trade Organization in 2001—was also a key factor in China’s success.
Paramount among these reasons is the support of China’s and Taiwan’s governments to build up their manufacturing industries, mass-produce selected products, and increase exports. The number of Chinese manufacturers of bicycles or bike products increased from 38 in 1978 to 1,081 by 1995. It’s worth noting that the Chinese government’s industrial policy was quite loose, even laissez-faire: The central government gave autonomy to the provinces to build their own bases, so in 1995, these factories were producing at only 55 percent of their capacity, and many of these firms were unprofitable. In contrast, the US government has for decades not had any coherent industrial policy for manufacturing, much less a specific policy for bicycle production.
“We don’t engage in a manufacturing industrial policy in the US,” says Richard Schwinn, the great-grandson of the founder of Schwinn Bicycles and founder of Waterford Precision Cycles, based in Waterford, Wisconsin. “Our policies are supporting insurance companies and financial intermediaries. There exists no infrastructure to build things that are fundamental to the bike industry. You have to import low-cost rims and bike tires, and in the US it’s so much harder to get carbon fiber needed for bikes than in China.”
In the early 1970s, bicycle sales boomed in the United States, and annual bike production averaged about 15 million per year. But domestic production could not keep up with demand. To increase supply, bicycle producers outsourced production to facilities abroad in places such as Taiwan.
Taiwan began to export bicycles to the US in 1969. Within three years, the country was exporting more than 1 million bikes per year, just as US demand took off. During this time, Taiwan’s government intervened in the bicycle industry by coordinating production and establishing safety standards deemed acceptable by prominent export markets. Government support for bicycle manufacturing wasn’t unique to Taiwan. Growing demand for bicycles in China during the 1980s led the government to develop the sector. China’s accession to the WTO enabled nearly unlimited exports—and an export-oriented strategy—for the Chinese bicycle industry. Prior to China’s accession, the US was producing 5.6 million bicycles at home in 1990. Over the next two decades, US output dropped drastically to 200,000 by 2015.
Meanwhile, the US is the global leader in carbon-fiber manufacturing, but most of this market is in aerospace, defense, and energy. Aerospace and defense made up 48 percent of total carbon-fiber sales in 2015. The Department of Defense produces a “market pull” for these types of resources; the military continues to buy up most composite materials that could be used for other nonmilitary applications. Moreover, the material used to manufacture carbon fiber, polyacrylonitrile (PAN), is not as readily available in the US as in other places. Most PAN is imported from Japan. On the other hand, the governments of China and Taiwan have made it a priority to increase carbon-fiber adoption in nonmilitary applications.
But the industrial policies of other nations are not the only constraint on US manufacturers. Domestic manufacturers are dependent on foreign corporations, which increases supply chain fragility in the bicycle industry, contributing to bike shortages and anemic domestic production. Corporations like Japan’s Shimano have near monopolies on some parts. Even though some US bike manufacturers build their products domestically, they have to import most of their components. Shimano has a 70 percent global market share of bicycle brakes and gears and 50 percent of the bicycle components market. This concentration makes the supply chain extremely fragile. Rich Fox, who runs Circa Cycles in Portland and manufactures bikes in the US, says, “Most of my bike products come from distributors in Asia like Shimano, and there have been crazy inventory issues among distributors and manufacturers.”
This dynamic of a sole-source supplier especially harms small producers, because Shimano prioritizes scale when supplying its products to other manufacturers, making it harder for small players to get components. “You’re always dealing with Shimano, and they can make it expensive and problematic to get parts into the US,” says Richard Schwinn. “A factory in China that needs millions of derailleurs will get them on time and more reliably than we ever would—and we may have to pay a premium too.”
The problems of US bike producers mirror those of the many US manufacturing industries ill-equipped to compete in global markets. There’s a growing chorus of voices in Washington signaling that industrial policy should be revamped to provide better support for certain industries and vital products. “Republicans have been more at the forefront of adopting industrial policy, although some Democrats are too,” says Schwinn.
An industrial strategy could reduce the possibility of supply chain disruptions in a multitude of economic sectors, such as bicycle production. A government agency for industrial strategy, something like a Department of Economic Resilience, could expose weaknesses in domestic production capability and supply chains. Such an agency could also create export incentives for certain sectors, a strategy that China undertook with bicycles two decades ago. These tactics would likely be illegal or challenged under the WTO’s Agreement on Subsidies and Countervailing Measures, which prohibits export subsidies and allows member countries to challenge other member states’ production subsidies. But all states interested in building resilient production systems will likely have to reevaluate this agreement. In addition, antitrust enforcement should be a core part of industrial policy. To build resiliency, industrial policy should prohibit any global firm from controlling more than 25 percent of any American market, to eliminate dependency on sole-source suppliers such as Shimano.
WIRED Opinion publishes articles by outside contributors representing a wide range of viewpoints. Read more opinions here, and see our submission guidelines here. Submit an op-ed at firstname.lastname@example.org.
More Great WIRED Stories
- 📩 Want the latest on tech, science, and more? Sign up for our newsletters!
- The West’s infernos are melting our sense of how fire works
- Amazon wants to “win at games.” So why hasn’t it?
- Publishers worry as ebooks fly off libraries’ virtual shelves
- Your photos are irreplaceable. Get them off your phone
- How Twitter survived its big hack—and plans to stop the next
- 🎮 WIRED Games: Get the latest tips, reviews, and more
- 🏃🏽♀️ Want the best tools to get healthy? Check out our Gear team’s picks for the best fitness trackers, running gear (including shoes and socks), and best headphones