In the noise and uncertainty of mid-2021, it looked very much like the bicycle had quietly won the pandemic.
The attention may have focused, at the time, on ecommerce giants, in-home entertainers, social media titans and other stewards of seclusion. But the outdoorsy share prices of Taiwanese bike-makers Giant and Merida and of the Japanese component king Shimano, meanwhile, were breezing to almost unimaginable highs. Even Thule, the Swedish maestro of bike racks and other paraphernalia, was surging towards its all-time peak.
But near the close of 2022, the market’s two-wheeled fling looks done — a wholesome phenomenon derailed by the world getting back on track. Those four stocks have lost between 25 and 55 per cent of their value this year, after months of steady selling. Halfords, the UK bike retailer, is down over 46 per cent. In October, Goldman Sachs placed an outright “sell” recommendation on Shimano, warning of an impending correction in component orders from bike-makers.
Both halves of this story make sense, though both look overdone. If the bike boom is truly finished, though, the question is whether a bigger one might be induced by regulation, the energy crisis and Emmanuel Macron’s vision of “collective sobriety”.
The 2021 bike-related share price spikes were propelled by a subset of the belief that Covid-19 has permanently changed the way we live. The pandemic created a world where crowded public transport and gyms presented infection risk, cabin fever was powerful, commuting patterns were in flux and working days were reshaping themselves. The bicycle, already heavily credentialed as a traffic-defeating, health-benefiting eco-machine, answered a lot of new questions about the way we live and work.
The soaring mid-pandemic demand for traditional bikes, e-bikes and components was real, as were the acute shortages of all three, and rising profit margins for the likes of Shimano. Google Maps searches for cycle routes and cycle rides logged on the Strava app reportedly surged. Investors piled into the narrative that global bicycle demand was now on a stratospheric trajectory. A projection by research group Fortune Business Insights valued the global bicycle market at $78bn in 2021, rising to $128bn by the end of the decade.
The reckoning of what Covid-19 achieved for bicycles suggests something impressive, though perhaps less transformational than the market guessed. Morten Paulsen, an analyst who covers Shimano for the brokerage CLSA, calculates that the pandemic created a global demand for about 5mn bicycles that would not have been sold without it. Of those 5mn new owners, he estimates that roughly half remain in the saddle today.
In 2022, even as sales for the likes of Shimano remained firm, investors have decided that their earlier exuberance may have overshot. The pandemic-driven issues for which a bike once seemed a great antidote now seem less severe. Shimano’s new orders for delivery nine months from now are looking weaker than a year ago. Investors now fret that the once inadequate global inventories of bicycles are being steadily replenished, and that economic downturn — particularly in the key European market — will soften overall demand.
But while those concerns may prove entirely justified in the short term, bicycles have friends in high places — national sponsors of large-scale growth in ownership and the construction of more attractive cycling infrastructure as a route to decarbonisation. Macron’s efforts to steer France through a winter of energy crisis, notes Mark Chadwick, an analyst who publishes on Smartkarma, has landed on a formula for presenting energy saving (collective sobriety) in terms that others may seek to emulate and which clearly favours bikes. French citizens are simultaneously being enticed, via a €4,000 subsidy, to trade in cars for electric bicycles: the stated aim is to raise the ratio of cyclists in France from around 3 per cent now to 9 per cent by 2024.
Europe more broadly has also presented Shimano and others with a juicy opportunity. At the end of 2021 — just before the listed bicycle and component makers began to lose their buoyancy — the EU voted to allow member states to cut VAT on sales, rentals and repairs of bicycles from 15 per cent to 5 per cent and to theoretically scrap all such taxes by 2030. Analysts calculate this could enhance existing predictions that combined bicycle and e-bike sales in Europe would rise by roughly 50 per cent from pre-pandemic levels to 30mn units a year by 2030.
The pandemic bike boom looks, in retrospect, like the accelerant of a conversion already under way. The energy crisis may now add even more fuel.
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