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Hello..first post.

I was reading the August 2004 Mountain Bike Action and was wondering about a little piece of information in the Haro XLS R7 review (page 57).

"Now is the best time to buy a new bike. Why? The heads-up is that the cost of materials have increased significantly and there will be a jump in price on 2005 models."

While I haven't researched for a MTB-based urban legends site, I figured that you, the community at-large, would be the best source of logical and sensible information. Either that, or your info will scare me into buying 12 new bikes tonight to last throughout my lifetime...

I seem to remember various rumblings about this increase, but couldn't find anything (in a quick search).

1. Is this 2005 increase based on fact or the result of someone with motivations?
2. What could the price increase possibly be (above the normal yearly increase..)?
2a Assuming we are talking about a 1000$ bike, are you expecting 100$, 250$,500$....?


Thank you in advance for either responding to help and/or ignoring my ignorance in bringing up some topic already beaten to death and buried with no member ever allowed to unearth the venom held inside.. :eek:

-Bryan
 

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Metal Shortages

swollentick said:
Hello..first post.

I was reading the August 2004 Mountain Bike Action and was wondering about a little piece of information in the Haro XLS R7 review (page 57).

"Now is the best time to buy a new bike. Why? The heads-up is that the cost of materials have increased significantly and there will be a jump in price on 2005 models."

While I haven't researched for a MTB-based urban legends site, I figured that you, the community at-large, would be the best source of logical and sensible information. Either that, or your info will scare me into buying 12 new bikes tonight to last throughout my lifetime...

I seem to remember various rumblings about this increase, but couldn't find anything (in a quick search).

1. Is this 2005 increase based on fact or the result of someone with motivations?
2. What could the price increase possibly be (above the normal yearly increase..)?
2a Assuming we are talking about a 1000$ bike, are you expecting 100$, 250$,500$....?


Thank you in advance for either responding to help and/or ignoring my ignorance in bringing up some topic already beaten to death and buried with no member ever allowed to unearth the venom held inside.. :eek:

-Bryan
Right now AL is hard to come by in the US. Lead times for AL are long and the prices for AL stock have increased.

I don't have a clue how this would affect mountain bike frames as I'm not privy to their cost structure.

Ken
 

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This is just a practical opinion and not based upon any data or bike industry experience.

But I would imagine that they need to keep the price within a certain consumer pricepoint if a there is a increase in price. You can only sell a Giant Warp for so much.

I heard about that MB Action mention. Check with your local bike shop and see the skinny is. They can get the dirt from their reps at the bike manufacturers.
 

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I do not believe an increase in the price of aluminum would have any substantial

affect on the price of bikes. I work in manufacturing (furniture) and I can tell you that raw material is the least of expenses in making consumer goods. How much could a thirty pound block of aluminum cost. If we are making Coke cans from it, you know it is far from a precious metal. I have bought aluminum bar for something like two bucks a pound, and that is the consumer price. So were probably talking about a manufacturing price hike of maybe a few dollars per bike. I know shortages andsprice fluctuations in the wood industries does not translate to direct price increases for the consumer. Of course any long term changes in the price of aluminum would eventually effect the bike industry but not in the way that the price of gold effects the price of jewelery. 99% of what you pay for whan buying a bike is manufacturing, maketing, retail mark-ups, shipping, etc.. I would not sweat the price of aluminum.
 

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It depends...

Johnny M said:
affect on the price of bikes. I work in manufacturing (furniture) and I can tell you that raw material is the least of expenses in making consumer goods. How much could a thirty pound block of aluminum cost. If we are making Coke cans from it, you know it is far from a precious metal. I have bought aluminum bar for something like two bucks a pound, and that is the consumer price. So were probably talking about a manufacturing price hike of maybe a few dollars per bike. I know shortages andsprice fluctuations in the wood industries does not translate to direct price increases for the consumer. Of course any long term changes in the price of aluminum would eventually effect the bike industry but not in the way that the price of gold effects the price of jewelery. 99% of what you pay for whan buying a bike is manufacturing, maketing, retail mark-ups, shipping, etc.. I would not sweat the price of aluminum.
What impact raw materials have on the end price depends upon the specific industry. It's impossible to assign a generic percentage to all manufacturing.

In addition to the increased price of the metal, the delivery of finished stock will also impact the price. If lead times are so far out that a manufacturer has to carry large amounts of raw material on their books to ensure that they meet their deliveries, the manufacturing costs increase.

Your example of picking up a piece of AL bar stock isn't really relevent for a couple of reasons:

1. The price you paid will depend on the accounting system of your POP and the commodity price, not a finished or refined goods price for the metal.

2. Bike frames are made from tube stock AL. As such, the price/foot is more expensive than simple bar stock. There isn't a comparison.

The softdrink analogy isn't quite correct either.

1. The economies of scales realized by AL can manufactureres are mammoth. Especially compared to a bike company.

2. AL can mfgers in many cases are the suppliers of the raw materials, so they can control their costs internally and aren't as affected by market fluxuations as a bike company would be.

Ken
 

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I was at my LBS last week looking at a Rockhopper for my brother, and the salesman told me to buy a 2004 while I could. He said the 2005's would be identical, but would cost more. I didn't put much stock in it though, as I figured he was just trying to make a sale. But I suppose it could be true.
 

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weak dollar

The dollar is weakening in comparison to other currencies. If the dollar slides against the Taiwan dollar and the Japanese yen then that will have a major impact on the price of a bike, which is composed of many (if not all) imported components from those countries. Maybe this is what MBA was referring to.
 

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being in the Industrial import bus

Our Business deals directly with importing items made from Aluminum, Steel andother materials like rubber, etc. and yes, material costs (ALL materials) are going crazy right now...Because China has pretty much bought ALL secondary steel available anywhere, there is no more secondary steel....as far as alloys and other materials...they are all related....and materials that aren't related are jumping on the Band Wagon and joining in....Hell, steel prices here have increased over 100%. Other things like when the F'n longshoreman feel that 150,000 per year for riding around in a little electric cart is not enough money and decide to support a dock slow-down (not strike)...all this causes costs to go crazy because it effect cash flow etc....small companies like the smaller bike co.s dont have the funding to float this extra time/cash flow problem.....Hopefully, for these smaller bike Co's, they dont go out of business because they cant afford to compete with the like of specialized etc because specialized moves so much more raw material volume and they fill shipping containers to the max utilizing ocean rates to the maximum.
 

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some metals are becoming difficult to come by in asia. Shimano can't fill all of their orders because they can't get the materials necessary. On the news you commonly hear stories of man hole lids being stolen because people need the metal for making stuff, etc...

There's just not enough natural resources available for everyone in the world to live like an American. As other countries become more industrialized and try to live the American dream it puts huge pressure on resources and drives the prices up.
 

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It wouldn't surprise me if AL is becoming scarce. In the last 5 years the majority of the aluminim smelters in the USA have shut down. Due to the price of electricity in the USA it has become unprofitible to operate Aluminum smelters in the USA. The USA made the highest quality aluminum in the world.

My dad works for Alcoa, one of the largest (if not THE largest) producers of aluminum in the world. He never knows how long his job will last. He could be fired tomorrow. Alcoa and similar companies are rapidly shifting they production of materials from America to over seas because with the high price of labor and electricity they cannot afford to do business here.
 

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Next year's bike prices

Just my own 2cents, but I can think of two forces that might keep the price under control.

First, the U.S. dollar likely isn't fundamentally weak. The dollar was perhaps overbought in anticipation of the Fed's announcement of a rate increase. The increase was in fact modest, and the dollar backed off again. I was surprised at the buying because it is well-established that the Fed never changes rates sharply during a presidential election year. After November, we won't be waiting long before U.S. rates rise from their current historic lows.

The Canadian dollar provides a good illustration of just how powerful relative rates are. The C$ was languishing in the low-60 cent range, then shot up more than 20% to the upper 70's when the U.S. dropped it's interest rates but Canada did not follow. When U.S. rates rise we are certain to see the exact opposite.

(BTW, the reason Canada did not lower its own rates is that we have the luxury of knowing our economic activity will rise on the coattails of a U.S. recovery powered by lower U.S. rates. Consequently, we need not lower our own rates much to enjoy our own robust rebound. It continues to be a popular bit of political theatre up here in Canada to claim that the C$'s rise reflects the fundamental strength of our economy relative to the U.S., but this bit of self-congratulatory flagwaving borders on being delusional.)

While rising rates will raise interest costs to manufacturers, the effect on credit-strapped consumers will be more dramatic. It's hard to raise prices much when customers are tailing back their own buying after bingeing while borrowing was cheap, even if the manufacturers' own cost of borrowing are rising and the companies know their margins are going to be squeezed.


Second, the bike marketplace looks to me like it is becoming commoditized by standardized designs and component mixes, and that's never a recipe for big price increases.
 

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anecdotal support of material effects...

i just had the chance to visit the rolling mill that produces the steel strips from which sc r a m's middle and lower end chains are made. the mills steel suppliers have increased the price of certain steels (not just the ones for the chains) from 50 to 1000%. naturally, the mill passes on as much of the cost as possible to ScR A M, but they naturally can't pass it all on. likewise, ScR A M prolly wont be able to pass on all of their cost increase to the consumer. (they may try, but i doubt they will). due to the many levels through which the effects of material price must pass before they hit the consumer, i would say price increase due to raw material cost may be noticeable, but not as dramatic as it is 'upstream' inside of the industry.

north american bikes are real cheap over here right now.... :p

oh yeah, i also talk regularly to a guy at large world wide tubing producer. he says that it is not such a problem anymore to fvck up a batch of tubes. why? well, it seems the scrap price isn't really all that far from the finished product price!!! :eek:
 
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