Bike Europe 2022 edition 5 by VMN Media

Volume 26, nr. 5/2022

Is Romania the place to be for the industry? COMPANY REPORTS

P. 12-14

CrankTank CEO, Scott Montgomery

“It isn’t about loyalty; it’s about doing what customers want” NEW EU COMPETITION LAW

P. 10

MARKET REPORT BELGIUM

P. 8

INTERVIEW

P. 9

EU bicycle exports exceed €900 million in 2021 BRUSSELS, Belgium – The international trade in e-bike and bicycle components to and from the European Union accelerated last year. EU trade figures show a double-digit increase in imports and exports.

-bike and bicycle-producing companies in the European Union improved their position on the international e-bike and bicycle market in 2021. The European Union exported €921 million worth of e-bikes and bicycles to countries outside the union.

UK proposes new tariffs for two Chinese e-bike exporters

wo Chinese e-bike manufacturers who are new to the UK market should be allowed to move to a lower import tariff rate - this has been proposed by the Trade Remedies Authority (TRA), a body of the UK governments’ Department for International Trade. With e-bike sales on the rise in the UK, “the change in tariff rate would help meet demand in this growing market,” the TRA said. The new exporters would otherwise pay the much higher rate for those who did not cooperate with the original trade remedy investigation. The TRA will consider any comments before making a final recommendation to the Secretary of State.

Meanwhile, the import value increased to €1,896 million. It was again the e-bike that was leading the market development. Last year the import volume of e-bikes increase by 37% to 1,148,600 units at a value of €849 million as this trade journal reported earlier this year. This increase was not only the result of the market expansion within the European Union. The overall import and export volumes hiked. According to the latest statistics of the European Union, 315,800 e-bikes worth €488 million were exported by the EU. Compared with 2020, the number of e-bikes exported

increased by 15% in 2021, while imports of electric bicycles increased by 37%. What percentages of exported e-bikes were in fact made in Europe or imported from another country in not made clear in the EU statistics. The main destinations for e-bikes exported from Europe are the UK and Switzerland. Most of them were shipped to the United Kingdom with a value of €185 million and Switzerland with an import value of €132 million. Norway was the third-largest destination for European e-bikes with 13%, or €63 million, while the United States ranked fourth with 8%, or €39 million.

Spain reports drastic change in bicycle production volumes MADRID, Spain – The value of bicycle production in Spain increased by 8.8% to €126.4 million in the first half of this year. In this period, a total of 171,218 bicycles were manufactured, representing growth of 4.1% compared to the same period of 2021. However, provisional figures from the Ministry of Industry, Commerce and Tourism show big monthly differences.

he accumulated figure for the first six months of the year has been positive thanks to the 57.2% increase in Q1, when the value of bicycle production reached €64.2 million and the production volume increased by 31.6% to 86,618 units. In Q2, the situation changed drastically. In April, production fell by 23.4%, to €16.9 million compared to the same month last year. In May the drop was 15.8%, to €23.9 million; while in

June it dropped 13.9%, to €21.4 million. In Q2, the total decrease was 17.4%, to €62.2 million. Production volume declined by 14.2% to 84,600 units. It is too early to conclude that the data shows a slowdown in the cycling boom compared to last year, when factories had to adapt to the demand for bicycles caused by the pandemic. The increase in supply costs is a problem currently affecting manufacturers and might have an impact in the long term.

Also for regular bicycles, the United Kingdom and Switzerland are the main markets for European exporters, while the third position is taken by the United States. The main source of e-bikes for the European Union is still Taiwan. This country supplied 57% of total EU imports, followed by Switzerland (13%), Vietnam (11%), China (7%) and Turkey (6%). Since this year, Cambodia has taken over the position as the leading bicycle supplier for the European Union with a market share of 27% (more on this on page 3 of this edition). Taiwan holds a share of 26% in e-bike imports in Europe.

5/2022

BUSINESS Jan-Willem van Schaik Editor in chief

After the crisis

Marwi Group ramps up parts production in Taiwan with ‘smart factory’ To be and remain globally competitive with ‘Made in Taiwan’, the Marwi relies fully on automation for both its mass and customised production. They were among the first parts makers in Taiwan to install robots in its production lines, and due to rising demand, Marwi decided to step up production with new investments. Part of its latest investment round was the opening of a ‘smart’ production facility, including a fully automated pedal assembly line that enables them to triple capacity. Photo: Marwi Group

Cambodia’s bicycle export rises significantly PHNOM PENH, Cambodia – Cambodia earned US$505 million (€503 mln) from bicycle exports in the first six months of this year, the country’s Ministry of Commerce announced. This is a 104% increase compared to last year. Besides high demand, a new investment law and influential trade rulings are cited as reasons for the growth.

lthough Cambodia is the leading exporter of bicycles to the EU, the country lost its grip on the market slightly in 2021. These first-half figures suggest that the country is aiming to solidify its position this year and fend off competition from China. In the same period last year, the country’s bicycle export value was US$247.5 mln (€247 mln).

“Before 2020, China was the number one exporter to the European Union, followed by Taiwan. But it changed from 2020 as Cambodia became the largest exporter of bicycles to the EU, accounting for 24% of the EU’s total imports, followed by China at 17% and Taiwan at 11%,” explained Heng Sokkung, secretary of state and spokesman for the ministry at the announcement of the figures. The main markets for Cambodia’s bicycles are the US, Germany, the UK, Japan, China, Belgium, the Netherlands, Austria, Sweden, Denmark, Australia, the Czech Republic, Italy, Colombia, the Republic of Korea, Spain, Slovenia and Canada. “The successful Covid-19 control with a high rate of the vaccinated population have maintained a stable production chain and also built confidence in new investment,” Sokkung told local media outlet, Khmer Times. “The successful control of the Covid-19 pandemic was the main factor for keeping the production chain of bicycle manufacturing running and ensuring

the purchase orders during this period were met,” he said. Across the country, there are five bicycle assembly and bicycle component factories with a total investment value of US$112 mln (€110 mln). All five bicycle exporters in Cambodia are in the special economic zones (SEZ) at Svay Rieng province near the Vietnam border. To maintain the production of bicycles for the European market, Cambodia and Vietnam reached an agreement on the industrial value chain between the two countries earlier this year. “The trade preference scheme, Everything But Arms (EBA), is the factor pushing Cambodia in the EU as the biggest bicycle supplier,” Penn Sovicheat, under-secretary of state at the Ministry of Commerce told the Khmer Times. Everything But Arms is an initiative of the European Union which still applies to bicycles but has already been suspended for other products due to international concerns related to serious human and labour rights violations.

The first signs of a slowdown in the usage of bicycles for daily practice has already come from the UK. Statistics show that since this spring, the number of people cycling and their mileage is getting less, whereas after sales and the milage people rode on bikes went up during 2020 and 2021. Is this an indication of the end of the coronarelated cycling boom? This has been long warned for, and many predicted a huge over-capacity in production, particularly for components. As a result of supply chain constraints, stocks unevenly piled up at uncommon locations awaiting bicycle and e-bike assembly orders. At Eurobike, the first signs of a slowdown in sales came to the fore and could not be hidden amidst all enthusiasm of meeting face-to-face again on a large scale. Production orders, particularly for the low and mid-end markets, were postponed or even cancelled. The excitement around the booming average retail price for mainly mid to highend e-bikes, and with that the rapidly increasing total market value in Europe, pushed the realisation of declining production volumes into the background. History taught the industry that low and mid-end markets are too important to be neglected. During the pandemic, the bicycle took the momentum on all levels in society and people became aware of its relevance for future mobility. It is up to the industry to keep that momentum going by providing the products which the market asks for. janwillemvanschaik@vakmedianet.nl

Hydraulic H ydr draulic b brake rak ke e SCAN S CAN M ME E

•4x1 16mm 6mm S Se Self elf a adjusting djusting pistons pistons • Powerful Po ow wer erfffu ul mo m modulated odulatte ed braking b brakin rak aki

www.clarks.bike

5/2022

FINANCIAL €5 million sustainability-linked bond issued to support ‘sustainable bicycle tyre’ production

Investment bond supports Vittoria Group’s growth BREMBATE, Italy – To fund its investments in capacity and innovation in both Thailand and Italy, Vittoria’s management, together with owners WISE Equity, has entered into an innovative financing operation. They issued a 6-year, €5 million bond, which is initially fully subscribed by UniCredit.

tijn Vriends, Vittoria Group’s president and CEO, explained: “At Vittoria, we are serious about our ESG initiatives, and we are thus very pleased that the market supports us with competitive financing. As a consequence of this innovative financing operation, a reinforced partnership between Vittoria Group and UniCredit is formed that will further develop through corporate and retail services for Vittoria Group and Vittoria Park in the coming months.” UniCredit’s Lombardy regional manager, Marco Bortoletti, said: “Through the minibond instrument, a segment in which UniCredit is a leader in Italy, we mobilise significant resources in favour of Italian and Lombardy SMEs, en-

couraging and facilitating the transition of our entrepreneurial system towards alternative forms of investment financing. The numbers in Lombardy are of full satisfaction, as witnessed by the approximately €130 million in total volumes underlying the issues of this capital market instrument by 24 companies in Lombardy.”

Sustainability bonus Vittoria will receive a bonus from UniCredit in the form of a reduction in the coupon rate upon achievement of the sustainability targets set at the time of the bond issue. To support the financing of these investments, Vittoria Group and UniCredit have opted to issue an ESG-related Bond with ambitious environment, social and governance objectives to reduce CO2 emissions, and work-related incidents, and to promote diversity in the workforce over the coming years. Vittoria has ambitious growth and investment plans to continue to supply cyclists of all kinds with the most advanced and sustainable bicycle tyres on the planet. Two projects have recently been launched that will boast the leadership of the group: a new factory near Bangkok in Thailand and the Vittoria Park near Milan in Italy.

Doubling tyre production capacity The new factory, which is expected to open at the beginning of 2023, will be part of the group’s

The group’s Lion Tyres Thailand, expected to open at the beginning of 2023, is currently under construction. Photo: Vittoria

Lion Tyres Thailand industrial footprint and will help double the installed capacity for bicycle tyres over the coming years. Designed and built following stringent ESG guidelines, the factory will achieve carbon neutrality through the use of sustainable materials, innovative electrified processes and renewable energy and solar panels. Meanwhile, Vittoria Park, which is being built around the group’s headquarters in Brembate, is being established as the world’s first all-

discipline cycling experience and innovation centre for bicycle tyre development. The 5-hectare area contains over 4 km of cycling tracks, various skill areas and the multifunctional Vittoria House where cyclists can meet. The Vittoria Park will also contain the new Bicycle Tyre Innovation Centre for high-tech testing facilities that will combine internal and external testing, seen for the first time globally. It will reinforce the research and development of ever more sustainable and recyclable products.

Pon Holding adds Dutch scaleup Veloretti to its e-bike portfolio

US investment supports scale-up of German 4-wheeled e-cargobike

AMSTERDAM, the Netherlands – Pon Holdings continues to expand its position in the bicycle market with the take-over of scale-up Veloretti. This e-bike and bicycle brand was founded in 2012, and the company expects to generate a turnover of €42 million this year.

FREEHOLD, NJ, US – The US-based electric vehicle technology company, Cenntro Electric Group Limited, has acquired a minority stake (25%) in Antric GmbH, a Germanbased e-cargo designer. Through the 7-figure investment, Cenntro will support manufacturing the company’s Antric One e-cargobike in Germany and market the product globally.

eloretti is one of Pon.Bike’s smaller acquisitions. The company, which recently announced a turnover of €1.3 billion in 2021, currently employs 58 people and ships bicycles to 26 European countries. Veloretti began just last year with the distribution of e-bikes and plans to distribute 15,000 ebikes and 20,000 bicycles this year. “Veloretti

develops stylish e-commuter bikes and city bikes in Amsterdam,” Pon.Bike wrote in a statement. “In 10 years, Veloretti has become an iconic brand with models for women, men and children, which can be ordered online. Veloretti recently announced a collaboration with the fashion brands Zara and Scotch & Soda.”

Production in Europe In the beginning, in 2012, Veloretti’s were made in Asia. “They were beautiful, but of an inferior quality,” said Veloretti founder and GM, Ferry Zonder. “If we had continued, it would have had a huge negative impact on our brand and growth. After that first order, we quickly moved production to an assembly partner in Europe.” Whether these are made in one of Pon.Bike’s factories is not yet known.

ntric, based in Bochum, Germany, has its roots in a Bochum University spin-off and was founded by Moritz Heibrock and Eric Diederich. The company has designed and engineered the Antric One, an auto-grade 4-wheeled e-cargobike that has been successfully piloted in Europe. The cargobike has been purpose-built for delivery services and general cargo transport.

Meeting the robust needs of city logistics

Pon.Bike has enlarged its portfolio with online brand, Veloretti.

Photo: Veloretti

The company has designed the Antric One with an innovative trolley system in combination with a low loading area to enable easy loading and smooth integration into existing logistics processes. The Antric One offers a 2.3 cubic metre cargo volume and up to 300 kg payload, a fully suspended 4-wheeled chassis and a newly-developed loading system. “The Antric One’s design and mobility will serve as a unique complement to Cenntro’s product line of advanced, market-validated

The Antric One is an auto-grade 4-wheeled e-cargobike that has been successfully piloted in Europe. Photo: Antric

commercial vehicles, providing an innovative form of e-transport that can serve a wide range of applications,” says Peter Wang, chairman and CEO of Cenntro Electric Group. “We look forward to working closely with the Antric team to further scale their Antric One e-cargobike with customers across North America, Europe, and Asia in the months ahead.”

Made in Germany In conjunction with the €2.5 million investment, Cenntro will manufacture the Antric One at its assembly facility in Germany and market the e-cargobike globally. “This transaction was a natural fit and will provide us with additional capital, extensive sales, and marketing capabilities and reach new geographies for the Antric One,” concludes Eric Diederich, co-founder and CEO of Antric.

5/2022

FINANCIAL

Giant Group reports sales record in second consecutive quarter

Pierer Mobility struggles to meet demand as e-bike sales dip

TAICHUNG, Taiwan – Rising global inflation and the war in Ukraine did not impact sales of Taiwan’s Giant Manufacturing, which reported record sales in the second quarter of this year. For the first half of this year, total sales increased by 7.2% to TWD45.01 billion (€1.47 billion). It is still unknown if the rising tension in the Straits of Taiwan will impact sales in the third quarter.

MATTIGHOFEN, Austria – Despite aggravated delivery problems, Austrian 2-wheeler giant, Pierer Mobility AG, was able to record a positive sales value performance in the first six months of the year. As far as unit sales are concerned, however, the demand for e-bikes could not be met.

ising raw material and labour costs as well as the temporary production suspension in China due to Covid-19 lockdowns did, however, impact the gross margin. Profit before tax dropped this year by 5.2% compared to the first half of 2021. However, profit after tax was slightly up by 2.1% to TWD3.62 billion (€118.09 million). Giant Group attributed this to a decline in profitability, which also led to reduced tax payable provisions.

Chinese market The increase in OE business and the recovery of the Chinese market contributed to the group’s sales performance in the second quarter of the current fiscal year, Giant reports. Consolidated second-quarter sales were up 6.4% to a total of TWD22.74 billion (€741.79 million). According

Liv founder and Giant Group chairperson, Bonnie Tu, joined Le Tour de France Femmes. Photo: Giant to Giant Group, this figure represents an historic quarterly record. Despite an unstable supply chain and the temporary suspension due to lockdowns of its China factories affecting overall production, the bicycle manufacturer achieved a gross margin of 24.6%, which is a little bit lower than in the second quarter of 2021. Due to an increase in labour and logistics costs, the quarterly profit after tax dropped to TWD1.8 billion (€58.71 million). Looking ahead to the current second half of the year, Giant Group said inventory levels have improved in both the US and Europe. This applies, in particular, to entry and mid-range priced bicycles, Giant reports. There would still be bottlenecks for high-end products. With energy prices continuing to rise, Giant Group expects bicycles and e-bikes to remain in high demand. As the forecast was published before the rising tension in the Straits of Taiwan, the impact of the economic sanctions has not been included in the report.

ierer Mobility, of which the two-wheeled portfolio includes Felt Bicycles, GasGas, and Husqvarna e-bikes, started 2022 strong. Sales value in the first six months was boosted by 7.1% to €1.15 billion compared to the first six months of the previous year. The value of bicycle and e-bike sales reached €78.4 million.

Despite an increase in sales value, unit sales of ebikes are down 12.1% year-on-year. Photo: Husqvarna in going on sale until the start of the second half of the year,” the company notes. The most important sales markets for its bicycle division are currently in Europe – primarily in Germany, Austria, France, Italy and Switzerland. In the reporting period, (volume) sales were largely in the DACH region (68%), followed by the rest of Europe (15%), North America (13%) and the rest of the world (4%).

E-bike sales down, traditional bikes up However, the volume of sales in the bicycle division reached 51,417 units in the first six months, down 3.7% from the same period in the previous year. Of these, 34,829 units were e-bikes (down 12.1%), and an astonishing 16,588 units were conventional bikes (up 20.4%). The company’s motorcycle unit sales were down 7.2%. “In terms of unit sales, it was therefore not possible to fully meet demand in either segment in the first half of the year. Due to backlogs of parts – especially in the area of electronics – motorcycles and also e-bikes could not be fully assembled. These vehicles were therefore delayed

New subsidiary in Taiwan To counter the current supply chain issues in the bicycle sector, Pierer E-Bikes GmbH established a subsidiary in Taiwan, Pierer E-Bikes Asia Ltd., in June 2022. “It will provide significant support to the Pierer E-Bikes Group in its supply chain management and therefore reduce the procurement risk by providing direct access to the Asian market,” the company said. In addition, the Taiwan subsidiary is expected to help achieve long-term corporate and sales targets.

Shimano sales slow down but remain steady OSAKA, Japan – In its latest financial report, Shimano reports that market inventories of completed bicycles, especially high-end bicycles, remained at a low level as strong demand continued. Meanwhile, the inventory of entry-level bicycles has increased to a high level as supply caught up with demand.

n Europe, sales of bicycles and bicycle-related products remained firm, backed by continued strong demand for e-bikes. Meanwhile, market inventories of completed bicycles approached appropriate levels as demand in some regions showed signs of cooling down.

Market inventories In North America, demand for high-end bicycles continued and market inventories remained at a low level. Similarly, in Europe, demand for middle-class bicycles showed signs of cooling down. Still, the Japanese component manufacturer

reports a brisk order-taking for a wide range of products, including high-end models for road bikes and e-bikes. For the first half of 2022, Shimano reports a net sales increase in the bicycle segment of 17.2% from the same period of the previous year to 249,203 million yen (€1.8 million). The company’s operating income increased by 20.2% to 69,581 million yen (€501 million). * Please note that Shimano Inc. has announced figures in JPY currency only. EUR equivalent amount is calculated by an up-to-date exchange rate for reference only. The company assumes no responsibility for this translation or for direct, in-

In Europe, sales of bicycles and bicycle-related products remain steady. Photo: Bike Europe direct, or any other forms of damages arising from the translation.

5/2022

FINANCIAL Rutger Olderhuis LLM

BikeExchange to adopt European business model as revenues rise SYDNEY, Australia – Online bicycle shop and marketplace, BikeExchange Limited, which has been restructuring over the last 12 months, has managed to boost its total revenue by 47.4% to AU$6.58 million (€4.5 million) compared to the previous 2020/21 fiscal year. A new CEO has also been appointed.

What we can learn from the disastrous Philips recall

BikeExhange’s new CEO, Ryan McMillan, set up the company’s European operations from scratch. Photo: Jo Beckendorff

Impressive revenue growth

ollowing Mark Watkin’s exit as global CEO in mid-2022, company co-founder and board member, Sam Salter, took over CEO duties on an interim basis. On 1 September, the group COO and head of European operations, Ryan McMillan, was promoted to global CEO. He is the man behind the Würzburg, Germany-based joint-venture BikeExchange Europe’s success. He started the European business as partner and managing director from scratch. The native Australian has now been with the company for more than 10 years. Interim CEO, Salter, will remain a member of the board of directors. One of the four pillars that BikeExchange plans to focus on in fiscal year 2022/23 is the transfer of the EU business model to other regions, with the European team becoming the central hub for the operation of the marketplace.

The company reports that the revenue growth of the fiscal year was based on higher e-commerce commissions and subscriptions as well as higher revenues. These were achieved primarily due to the acquisition of the US ‘Ready to Ride’ bicycle supplier and logistics provider, Kitzuma Cycling Logistics, in December 2021 for US$3.375 million (€3.38 million) and the acquisition of a 50% stake in Bike Exchange Colombia, which was finalised in March 2022. Geographically divided, BikeExchange saw its business in North America increase by 137% compared to the previous fiscal year. Kitzuma’s acquisition contributed AU$1.2 million (€0.82 million) to the overall result. In the domestic market of Australia, BikeExchange was able to increase sales by 17% in comparison. Meanwhile, in Europe, sales increased by 26%. (JB)

Discover the ease of power. Meet the A70. Maximum Cadence >120rpm Maximum Torque 90/110Nm Rated Power 250/500W Communication Protocol Com CAN

Always in control with our subscription model.

Subscribe Service Support Insurance 24/7 call support App updates Guarantee

tially lack typical and healthy lung and bodily functions. However, the FDA observed that Philips’ health hazard evaluation documented typical and healthy lung and bodily functions and did not conform to or address the user needs of the intended patient population of these ventilatory medical devices, including patients with a tracheostomy or that lack typical and healthy lung and bodily functions. So, what can we learn from this? Companies need to be in control of their product safety and recall processes, before and after market launch. For that purpose, the list of observations could easily be used as a (non-limitative) checklist. For example, ask yourself the following: • Do you have an adequate risk analysis procedure in place? • Do you have a CAPA procedure in place? • Do you have proper design validation procedures in place, considering the intended users and use? • Do you have a proper complaint system in place? • Does the executive management team take ownership of product compliance and safety within your company? • Do you have proper procurement procedures and supplier agreements in place? I would like to add another observation. Respironics Inc. was acquired by Philips in 2008 for US$5 billon. The affected products were sold from 2009. We can only guess if the product design and safety processes of Respironics were assessed during due diligence. If only Philips could turn back time. However, they must still invent a machine for that… Rutger Oldenhuis is the founder and owner of RecallDesk, specialist in product recalls. Contact: rutger@recalldesk.com

€6 million investment in Econic One

Also available in subscription services. Our unique subscription formula will help your business grow. By subscribing to our products instead of buying them, you reduce your operational risks thanks to Okawa’s product replacement and refund services. Discover how our ease of power can contribute to your business at okawa.org

“The health care turmoil in the US is only temporary,” Philips’ CEO said in an interview in 2017. Today, Philips itself seems to be in its worst turmoil ever. The company is recalling millions of medical devices due to the breakdown of foam (PE-PUR) used in the Philips Respironics ventilators and other medical devices, causing serious potential health risks. And things only seem to get worse – the latest developments are that Philips enlarged the scope of the recall yet again, and their CEO announced he would step down. Typically, we read all of this in the newspapers, but interestingly, the US Food and Drug Administration (FDA) has published observations of their inspections carried out at Philips Respironics Inc., the US-based company that produces the affected medical devices. The observations provide very detailed insight into the product design and safety processes that FDA claims Philips is not sufficiently in control of. Based on 21 company inspections, they made eight serious observations. Each observation is extensively substantiated with examples. To mention just a few… According to the FDA, there was no documented investigation, risk analysis, or design failure mode effect analysis to support Philips’ rationale for which products were affected by the recall. Philips had not sufficiently demonstrated that other devices, also containing PE-PUR foam, should not be included in the ongoing recalls, as well. Furthermore, already in 2015, Philips was aware and knowledgeable of a preventative maintenance servicing procedure implemented by another Philips entity on affected products, but no further investigation, health hazard evaluation, risk analysis, or design review was performed or documented. The FDA also claims that the analysis of quality data, such as complaints, was not adequately performed to identify or detect quality problems. No formal Corrective And Preventive Action (CAPA) was initiated or implemented, when appropriate, and no verification of effectiveness was performed. The FDA goes on to say that management with executive responsibility has not ensured that the quality policy is understood, implemented and maintained at all levels of the organisation. Finally, the intended patient population of affected ventilator devices are individuals requiring mechanical ventilation, that poten-

Buy

SOFIA, Bulgaria – Smart e-bike manufacturer, Econic One, has received a €6 million investment to anchor its next phase of growth. The investment round is funded by Integral Venture Partners, Bulgarian Development Bank, and incumbent shareholders.

conic One is an emerging company focused on the design, production, and market development of smart and connected electric bicycles and related IT systems. The company claims to be one of the first smart e-bike brands building an ecosystem that positively affects the way we ride, for both commuting and leisure purposes. “The investment will be implemented to support our ambition to be at the forefront of the mobility revolution,” ex-

plains Galin Bonev, co-founder and co-CEO of Econic One. “Our aim is to expand in the DACH countries as well as the USA. We also want to strengthen our in-house R&D, production and technology development teams, and facilities.” Econic One employs 70 people in Bulgaria, Germany and the USA. The frames are produced in the capital city, Sofia. The battery is produced in Bulgaria, and the design and the electronics are also developed and made in Bulgaria.

5/2022

FINANCIAL

Global icon LeBron James invests in Canyon to expand US presence

Pinion acquired by Canadian Bombardier Recreational Products

KOBLENZ, Germany – LRMR Ventures of global icon LeBron James and Maverick Carter, together with SC Holders, have announced a strategic equity investment in Canyon Bicycles GmbH. Canyon reports they will work with LRMR and SC to increase engagement in the US and in the e-bike category, elevate global brand awareness and deliver the best online shopping experience.

DENKENDORF, Germany – Bombardier Recreational Products (BRP) is the new majority shareholder of Pinion, alongside the Pinion founders, managing directors and shareholders. “We are expanding our addressable market and entering untapped categories such as urban mobility and services beyond our existing powersports and marine products,” said José Boisjoli, BRP president and CEO.

he strategic investments of LRMR Ventures and SC Holdings come together with t he appointment of Robert Kyncl as board director. The new investors will join the company’s existing shareholders, including majority holder Groupe Bruxelles Lambert, which took over Canyon in 2020, and the company’s founder, Roman Arnold. “While we were not actively looking for new investors, LRMR and the SC team immediately understood our mission to build the world’s most inspiring and innovative bike company. Their passion for what we are building will make them instrumental members of our team,” Arnold said.

The power of the brand Canyon will work with LRMR and SC to increase engagement in the US and in the e-bike category, elevate global brand awareness and deliver

LRMR Ventures, the family office of global icon LeBron James and Maverick Carter, and SC Holdings invested in Canyon. Photo: Canyon/Shutterstock the best online shopping experience. “As an avid cyclist and storyteller, I’m excited about partnering with Canyon,” said Carter. “The quality of the products, the power of the Canyon brand, and the unique distribution model create a lot of compelling opportunities we want to be a part of.” “At Canyon, we are at the crossroads of many societal tailwinds, including health and wellness, sustainable mobility and online distribution. As category leader in many different fields, we are also focusing on new growth areas through the expansion of our service offering and further developments in the field of e-bikes, urban bikes and connectivity,” added Arnold. SC Holdings founder/managing partner, Jason Stein, added: “Canyon has been a pioneer in direct-to-consumer e-commerce for over 20 years. From professionals on tour to everyday riders on streets and trails around the world, Canyon’s impact on sports and culture is seen everywhere. We are excited to help capture the growth opportunity in the US.”

“T

his acquisition is strategic for us as it enables BRP to leverage Pinion’s unique, state-of-the-art technology in order to spur the development of new electric human-assisted products,” adds Boisjoli. Pinion is the next in line of bicycle industry company’s take-over by investors from outside the industry, like the Porsche acquisition of Fazua and Greyp, Accell Group by KKR, and Motinova by Midea Group. The Canadian group’s portfolio includes Rotax and Great Wall Motor Austria powertrain systems, in addition to snowmobiles, personal watercraft, on and off-road vehicles, as well as pontoons and boats. With annual sales of CA$7.6 billion in more than 120 countries, BRP employs nearly 20,000 dedicated people worldwide. Pinion founders, managing directors and

Pinion is the next in line take-over by an industry outsider. Photo: Pinion shareholders, Michael Schmitz, Christoph Lermen and Thomas Raith, will continue to shape the company’s path to success and play a key role in guiding its strategic direction. Together with a committed team of more than 60 highly qualified employees, they will expand the potential for transmission and drive solutions for bicycles and e-bikes and drive the innovative strength of the company forward.

Previous shareholders “The previous shareholder families, who have successfully supported Pinion from the start-up to the present day, fully commit to this path for further growth and are disengaging from their shareholdings,” notes Pinion in a press release. Christoph Lermen, co-founder and managing director of Pinion GmbH, added: “Together we will continue providing class-leading Pinion gearbox technology to our 100+ valued bicycle manufacturers while at the same time expanding our offering and developing next-generation drive solutions.”

Private equity partner invests in German e-bike battery manufacturer to strengthen position

SKion acquires minority stake in BMZ Group KARLSTEIN, Germany – BMZ Group has found a strategic partner in investment company SKion. Besides capital, SKion will bring expertise and networks to shape strategic issues and significantly increase corporate values to the rapidly expanding e-bike battery manufacturer.

EO & founder of BMZ Group, Sven Bauer, comments: “We as BMZ Group emerged in 1994 from my firm belief in the potential of lithium-ion battery technology. Over the course of our company’s

history, we have entered into several successful strategic partnerships.” Last year, the German financial newspapers reported that BMZ Germany was planning an IPO on the Frankfurt Stock Exchange.

Innovative products BMZ reports it is pleased to win SKion as an investor and thus to further expand its positioning in the field of important future topics around the braking of climate change via energy and transport transition. SKion is the investment company of entrepreneur Susanne Klatten. According to their mission statement, they invest in companies with sustainably successful business models. In addition to economic success, the sustainable orientation and social responsibility of the companies play an

With SKion as an investor, BMZ expects to strengthen its position. Photo: BMZ important role. They invest in companies with revenues between €300 million and €2.5 billion.

5/2022

MARKET REPORT BELGIUM Supply issues cause growth in market to falter with 2,000 fewer e-bikes sold

Belgian e-bike market at a turning point BRUSSELS, Belgium – Total sales in the Belgian bike market fell by 1.2% in 2021, turning the tide on the 4% growth seen in 2020. A drop in e-bike sales and the sportive segment, which were both hampered by limited availability due to supply chain problems, contributed to the overall decrease. Jeroen Rietvelt

n Belgium, the year 2020 was a special year due to Covid-19 and the associated lockdowns and delivery problems, but also by Belgians (re)discovering the bicycle, both as a means of transport and leisure. Skip forward to 2021 and the inventory levels at brands and retailers were better replenished, but according to the national industry organisation, Traxio, ongoing disruptions in the supply chain, including raw material shortages and factory closures, caused a slight loss of turnover. In 2021, the demand was there, but there were simply not enough products available. This resulted in a 1.2% decrease in Belgian bicycle sales.

Strikingly, more than 2,000 fewer e-bikes were sold in Belgium in 2021. E-bike sales dip In 2021, more than 2,000 fewer e-bikes were sold in Belgium than in 2020, which is a striking decrease when looking at the growth in other European e-bike markets. Sales of rear derailleur e-bikes fell, whereas e-bikes with an (inter-

nal) hub gear saw some small gains. Whereas the e-bike market share grew from 34% to 38.6% in 2020, this market share remained static at 38.7% in 2021. A noticeable trend is that the share of e-bikes sold through dealers has been declining for years in favour of other suppliers. In numbers, this dropped from 75% to 71%, although more expensive e-bikes are predominantly purchased from specialist retailers. The share of speed pedelecs remains at the same level and accounts for 5% of all e-bikes sold. These are mainly purchased in the northern Flanders region, also as a mobility solution for traffic jams around the major cities. The demand for sports bicycles decreased significantly compared to 2020, when mountain bike and racing bike sales were given a huge boost. Here, too, delivery problems are largely the cause of the decrease, but the rising popularity of the gravel bike can’t be ignored; this segment appears to have cannibalised the sale of other sports bikes. Incidentally, the share of electrically assisted sports bicycles did increase in 2021, but this was not enough to absorb the total decline in turnover. An increase of 7.8% was recorded for children’s bicycles, mainly because of overdue orders finally being delivered.

Representative figures “The representativeness of the figures has increased to no less than 71% in recent years,” explains Guy Crab of Traxio. “These are reliable figures because they come directly from manufacturers and wholesalers. These are purchasing figures, whereby the difference between purchasing and sales is always fairly stable.” According to Traxio, one of the main reasons for the contraction of the sales figures is supply problems. The industry organisation received these signals not only through figures but also through conversations with wholesalers. Crab: “In addition to the delayed deliveries, we are also seeing a shift in the time of delivery. In the past, orders were placed for one year, now this has been increased to two years.” He is convinced that availability has improved again this year. “But the limited financial options – especially amongst smaller retailers – means that consumers have to look around for availability of their desired bike,” Crab explains.

Photo: Marcel van Hoorn

Erratic consumer spending In 2020 and 2021, the spending pattern of consumers changed due to the Covid-19 pandemic. In some cases, this was temporary, while in other cases, it was structural. Online retailers, in particular, were able to benefit from the mandatory store closures. However, there was also a loss of purchasing power and a changed spending pattern. For the Belgian bicycle industry, this meant, among other things, that the demand for more expensive models fell. On the positive side, consumers are still willing to buy well-equipped e-bikes – models with a belt drive and a gear hub, in particular, are becoming more popular.

Does financial stimulation have an effect? The decline in bicycle sales is interesting because the country has a tax-friendly bicycle policy. For example, company bicycles are 100% tax deductible, gross wages can be exchanged for the purchase of a (lease) bicycle, the city of Brussels offers a subsidy of €4,000 for cargo bikes and Belgian (e)cycling commuters can earn up to €0.25 per km. Crab sees that the gross wage exchange has not yet penetrated well in Wallonia, while the potential for speed pedelecs there is enormous. The same goes for Brussels. “We are also seeing a shift in sales from consumers to businesses. But at some point, the market will become saturated and it becomes a replacement market. You can now see that with speed pedelecs in Flanders where this market has stabilised.” Almost half of all e-bikes sold in Belgium were purchased by private individuals (-6.6%). The other half was accounted for by companies and leasing, with the leasing market increasingly gaining ground. Has availability also put a brake on turnover growth with a lease? Crab: “The effect is less with business purchases. This is because an employee then chooses an alternative, which is often more expensive bicycles, and they were generally more available,” Crab concludes.

5/2022

INTERVIEW CrankTank CEO: Scott Montgomery

“Those with no D2C actvities will be the minority” KETCHEM, US – “It seems like almost everyone is playing the game now,” e-commerce specialist, Scott Montgomery, says when looking at the direct-to-consumer (D2C) activities of the top 10 bicycle brands in the US. Having held senior positions at several leading brands, including Scott Sports and Cannondale, Montgomery is now CEO of the US-based digital marketing and consulting agency, CrankTank. With the US e-commerce market being far more advanced than in Europe, the current developments could reshape the bicycle retail market for the future. Jan-Willem van Schaik

In January, you posted a blog in which you stated that most of the top 50 cycling bike brands will prepare and likely roll out a DTC strategy by year-end. How did you get to this conclusion? At CrankTank we are very heavily involved in helping brands in the cycling and outdoor business with direct-to-consumer strategies. We see them reaching out to us as well as us reaching out to them. A few years ago, many people were debating whether that was something they would want to do. Fast forward to now, the whole pandemic situation, in particular, has really turbo-charged this whole environment. A lot of people in the industry cut their tradeshow and event budgets and redirected those revenues towards direct-to-consumer types of marketing activities. And then, of course, the big bomb dropped this year when Specialized announced that they were going to move to a direct-to-consumer strategy. So, yes, I think there will still be companies that won’t offer directto-consumer, but I think they will be the minority, particularly in what I like to call the Super 10; the billion-dollar players. Most of those are currently active, or for their parts and accessories. Some have a partial omnichannel approach where you can order online, then click and collect by a retailer. It seems like almost everybody is playing the game now.

Is that also the reason why you concluded that US e-bike sales last year were close to 1 million instead of the 600,000 units which were the official statistics? The NPD Group in the US has a very good system of collecting sales, but the one area they are not as strong in is the direct-to-consumer side. At least in the US, I have lost track of how many brands there are now selling direct-toconsumer e-bikes, but it’s definitely in the range of 30-40 brands. Of course, the big players, like Rad Power and Canyon, we all know very well, but I’m just doing my own math to calculate, and I personally think it was close to a million if looking at all direct-to-consumer sales; I would swear that its 800,000 at least. Unfortunately, we will never really know, as most of these direct-to-consumer brands in North America do not contribute to the data collection being measured. Unfortunately, the government system is not very accurate either, as it doesn’t capture bikes that are assembled or come in with the batteries separate. So, there are still some reporting issues that aren’t very accurate in the US.

The online marketplace has changed drastically in recent years. What is the position of online sales in the total bicycle market now?

I think the fact that Canyon came into the market in the US and did a great job really pushed Specialized to feel like that they needed to play as well. Canyon quickly got past all its technical issues and some of the problems it had earlier in its evolution. They also have a very strong supply chain and were willing to make big bets on increasing the volumes, so I think that was really a pivotal moment. Canyon brought ‘value’ to the table. With approximately the same parts, be it Shimano or SRAM, they gave the consumer a value incentive with a 10% or 15% better retail price. What most people tend to forget is that this isn’t about being loyal – or not to retailers – it’s about doing what the customer wants. When we’re really talking D2C, and we get beyond our small universe of just bike brands, look at the iPhone. There is no tension between whether I buy my iPhone from an Apple store, Apple reseller, Verizon or another

“The [bicycle] industry had no choice but to take the step towards direct-to-consumer” company. They don’t really care. I’m sure Apple would always prefer that I buy it directly from them, but at the end of the day, they just want you to buy their products. I think in our industry, we get all kinds of caught up in it, but really, it’s about serving the customer what they want. Then I think the part which is undecided and unclear is what’s fair to your retailers. I think everybody has a vested interest in making sure bicycle stores/retailers stay in business as they provide a lot of value for a lot of customers.

Do you think that Specialized’s decision was a real structural break in the bicycle industry, or is it an event that other industries have seen months or even years ago already? I think the industry had no choice but to make the step to direct-to-consumer, because if you didn’t do it, you run the risk of not communicating directly with your customer, and that is a very risky decision to make, especially postCovid. I might not have a good retailer in my area, or I might not like my retailer in my area – they might have offended someone. There are a lot of issues around direct-to-consumer that break down barriers for people of ethnicity, and people in geographic areas, and there is also the whole situation where you need to get something arranged quickly. Many decisions are made around 8-9pm in the evening, and you just need to get something arranged. It’s coming back to that convenience. I believe the industry had to do it, but I think other

Scott Montgomery, CEO of CrankTank, supports the industry in e-commerce. industries figured it out way sooner than the bike industry did.

About that convenience, multi-brand platforms like Amazon and REI, and singlebrand platforms like Decathlon, are commonplace now also in the bicycle industry. What should the bicycle A-brands do to keep up their position versus those platforms? I think, in general, most people want to be as omnipresent or omnichannel as possible, to some degree. For example, what we see on Amazon is that they are really competitive on replacement parts and impulse-type buys, like shoes, gloves, helmets, and those kinds of things. As you move up over US$500 dollars, Amazon loses a lot of purchasing comfort. They don’t have a good online chat system; people are less comfortable with the aftersales support that they will get. If I had to guess, most things under the US$200 price should be available through 4 channels: direct to consumer through their own webstore; some sort of Amazon offering probably through an own Amazon channel; through national players like REI, Decathlon or Mikes in the US; and independent retailers. I think most people will end up doing more of the options. You even saw that with Trek. They didn’t sell a Trek bike via REI, but they sold Bontrager accessories, and they’ve been selling Bontrager parts, shoes and gloves, and products like that, for quite some time. You’re seeing more of the top brands participate in either all or at least three or four eventual options.

Consumers are buying far more complex products online these days. How long will the argument still stand that the consumer needs the dealer for advice, test riding and service?

Photo: CrankTank

Canyon has obviously shown that that doesn’t need to happen. Even though we all work very hard to create differentiation, at the end of the day, we still have a lot of generic situations where most of the parts on the bike are SRAM or Shimano or some well-known component brand. The reality is that there aren’t that many differences even as you move into 6, 7, 8 or even US$10,000 bikes. There’s a lot on there that’s easy to compare on different websites, so test riding different bikes equipped with the same specs could become less relevant. Obviously, I don’t have a crystal ball, but if I had to guess, my sense would be that the retailer is going to change to a model like the automotive industry. My prediction is that we won’t see dealers go away, but I wouldn’t be surprised if they moved to smaller retail locations with less total inventory available on the floor. Or they might go to a strategy where they might have one large location and three or four satellite stores. Or they might have one main location and two small service centres and two sprinters offering pick-up and delivery. It feels like it’s going to move towards retailers changing and becoming more focused on service and support and less focused on being in the main high-rent districts, particularly if they start to feel the reduction in margin. I don’t personally think every company will cut the retailer margin as much as Specialized did, and I wouldn’t be surprised if it comes up with a new strategy down the road. They’re going to do what’s smart for business. We may see that if margins are less compressed to dealers in the coming years, by more of the volume moving direct-to-consumer, we might see their footprint and location strategy changing to be more economical, let’s say.

5/2022

LAWS & REGULATIONS New law is in force for 12 years and is directly applicable across the EU and EEA

Reform of EU competition law complete BRUSSELS, Belgium – All commercial operators in the bicycle sector, as in other industry and trade branches with direct or indirect business activities in Europe, will be impacted by the new EU regulations on competition law rules. Legal attorney, Dr Jochen M. Schaefer, explains what is important for the bicycle sector to know. Dr Jochen M. Schaefer

he first overview of this new legally binding EU Vertical Block Exemption Regulation (VBER) was published in conjunction with a detailed WFSGI webinar in November 2021. Its accompanying comprehensive guidelines came into force on 1 June 2022, and it is now finally clear what the contents of this revised set of laws are. In force for 12 years, the regulation will be directly applicable to all member states of the European Union and the European Economic Area.

Recap of the history of this law reform In 2018, the EU Commission had already begun working on a comprehensive review of the predecessor of VBER 2022. The private sector was involved in a series of stakeholder workshops and public consultations, which in July 2021 led to the first publication of a preliminary detailed draft version of the regulation and its guidelines. The Commission realised that the market forces and players between 2010 and 2022 had changed and shifted considerably, particularly in online sales. Consequently, it was necessary to substantially modify the rules of the game as it is now reflected in VBER 2022.

Impact of the revised EU competition law VBER 2022 is by its nature an EU regulation, which, in contrast to an EU directive requiring to be transposed into the national laws of the EU member states first, comes immediately into force. Its name already signifies that it is relevant for all vertical business relationships and transactions within the supply chain from suppliers to manufacturers, wholesalers

The regulation will not only have an impact on major brands and commercial operators in the bicycle sector but also on smaller to medium-sized companies. Photo: Bike Europe

(such as distributors) and retailers up to the end consumer. The regulation will not only have an impact on major brands and commercial operators in the bicycle sector but will also be of relevance for smaller to medium-sized companies doing business in Europe. Decision-makers at an executive management level should be aware that EU competition law infringements cannot only be investigated and taken up by the EU Commission and/or national competition law authorities (with the threat of fines up to 10% of an annual global turnover of a company in case of hard-core infringements) but also be subject to civil lawsuits between brands and their marketing partners at wholesale and/or retail level or be brought up by consumer protection groups and associations.

While the regulation itself is binding upon companies during their commercial endeavours, its accompanying guidelines (104 pages in the English language version) are only binding upon the EU Commission itself. Consequently, courts in the EU and national competition authorities do not necessarily need to act in line with the guidelines, although in practice, they mostly do.

The Safe Harbour Principle of VBER 2022 As long as commercial operators in the EU act in compliance with the contents of VBER 2022 (and its guidelines), they sail in calm waters and can be pretty sure not to violate any EU competition law provisions (the so-called ‘Safe Harbour’ principle). Yet, it must be noted that VBER 2022 does not apply for transactions/arrange-

ments/conduct between/of companies, where the market share of one of the operators involved exceeds 30%. In practice, my experience shows that the determination of ‘the relevant market’ in a concrete case may well lead to diverging opinions of companies/brands on the one hand and of public institutions such as courts and federal cartel offices on the other. While the public sector tends to define the relevant market in a very narrow sense, since this provides a broader base for interventions, private operators try to convince their counterparts that a wider interpretation should be accepted. A concrete example would be to argue that the relevant market is bicycles, while courts and competition authorities may argue, in a certain case, that, for example, a separate market for brakes or saddles exists. In cases where, on

5/2022

LAWS & REGULATIONS the other hand, the combined/aggregate market shares of the commercial operators involved in the EU do not exceed 15%, the restraints of competition may not be noticeable, always provided the respective concrete acts or omissions are not intended to unduly restrict competition within the European Union/the EEA.

Biggest change concerns online sales VBER 2022 reflects in numerous respects the changed policy of the European authorities in the area of online sales. Whilst in the past decade, the Commission (same as most national competition authorities and courts) had viewed the online distribution channels – notably marketplaces – as a positive vehicle in particular for smaller brands and retailers to significantly increase their visibility and reach, this is obviously very different now. The online sales channel is now regarded by the Commission as a mature channel that no longer deserves specific protection from EU lawmakers. On the contrary, it has now been acknowledged that the traditional brick & mortar trade needs to be strengthened. Elements in VBER 2022 that reflect this paradigm shift: • Granting of more favourable conditions to stationary sellers than to online dealers is now permissible (so-called dual pricing policy). • Contractual bans or restrictions of the presence of wholesale or retail customers on third-party marketplaces, regardless of the nature of a product, no longer constitute a hardcore competition law infringement. • It is now allowed to require a customer to sell a certain defined quantity or value

of goods (only) online and the rest at its stationary sales premises. • Marketplace operators who sell products online in their own name and at the same time act through their dealer customers no longer enjoy the benefits of VBER 2022. • Platforms and other online operators are no longer allowed to prevent their customers from offering and selling products at more favourable prices in other sales channels (so-called wide parity clauses).

Grey market imports The newly-revised set of laws will afford a higher standard of protection against grey market imports for suppliers/brands in that it will now be permissible to contractually interdict sales into territories where a selective distribution system is in place or where, for example, one or several exclusive distributors have been appointed. Furthermore, it will be allowed to contractually oblige a marketing partner to pass on such obligations to its own customers. For a better understanding, active and passive sales are now defined in the regulation, and active sales activity would, for example, be the operation of a website in a different language and/or by using a different top-level generic domain than spoken/used locally (with the exception of English). For the first time, it will now be possible to appoint up to five co-exclusive distributors in a certain territory. Non-compete clauses may be under certain circumstances legally valid beyond the maximum period of five years. Resale price maintenance practices remain strictly forbidden in most cases, with just three exceptions:

• In the event of short-term advertising and sales campaigns during the launch of new products or expansions into new markets. • In the event of short-term sales campaigns coordinated between the respective marketing partners covering the period of 2-6 weeks. • If (only) a fixed price enables a marketing partner to provide intensive consultancy services and advice vis-à-vis the buyers of highly complex products. The (partial) conversion of independent dealers into commercial sales agents with the aim to maintain strict price control requires a comprehensive set of arrangements in order not to be viewed as a circumvention of the RPM prohibition and may not be a viable solution in numerous cases.

Dual distribution problematic In those cases where a supplier/brand sells its goods at the same time directly to consumers and to the retail trade (so-called dual distribution schemes), the EU Commission has maintained in its final version of VBER 2022 the principle that communication between the commercial operators (brand and retailers) needs to be restricted since they meet each other as intra-brand competitors at the same horizontal level. It remains unclear, however, where such communication is still permissible and where it would already constitute a hardcore competition law infringement. An obvious example of competition law infringement would be the exchange of a planned pricing policy of a new collection of products between a brand and a retailer, while the

provision of aggregate anonymous data of already completed sales by retailer to a brand would be permissible.

A transition period of one year From a strictly legal point of view, VBER 2022 provides a kind of one-year grace period to be in full compliance with the new law. From a commercial viewpoint, however, it is recommended to look into existing contractual arrangements with marketing partners much earlier and, if appropriate, redefine a company’s EU distribution policy by benefiting from the numerous new elements and opportunities VBER 2022 brings to the table.

About the author Dr Jochen M. Schaefer is a German practising attorney based in Munich. For numerous years he represents both the World Federation of the Sporting Goods Industry (WFSGI) and the European Federation of the Sporting Goods Industry (FESI) as their Legal Counsel. He also chairs the WFSGI’s Legal Committee and co-chairs FESI’S digital working group. He is a specialist in national and international distribution topics, intellectual property, and risk management issues and in the drafting and negotiation of comprehensive contracts at an operational level, particularly in European selective distribution schemes. For questions he can be contacted at sj@sjlegal.de.

SPONSORED CONTENT

Portugal positioned to become an international R&D partner

‘Together we go further’

he Portuguese have an expression that says, ‘Alone we can go faster; together we go further’. This is the spirit behind Portugal Bike Value. And now, the country is preparing to become an international partner in research and development. The beginning of the 21st century has seen two golden decades for the Portuguese bike industry. Since 2000, Portuguese bike exports have continued to grow, but everyone, by themself, was “going to the market”. In 2015, a defining year for the Portuguese bike industry, Portugal Bike Value was created, and a new way of thinking was established. Under this ‘umbrella’, the Portugueses industry developed a new way of thinking, and with it a new way of acting in the market.

‘Made in Portugal’

New R&D project The new R&D centre has been established to affirm itself as a multifunctional project that will manage various requirements for the sector and which, in the words of Gil Nadais, ABIMOTA’s secretary-general, will become the “go-to partner amongst worldwide leaders in the universe of bicycles in terms of research and development, combining and developing, in a unique location, the capabilities that already exist in Portugal”.

João Miranda, CEO van Abimoto.

Recently, at Eurobike, this spirit was presented. ABIMOTA’s president, João Miranda, explained: “The importance of participation in an event like this is obvious. We are, at this moment, the strongest bicycle and component producer, and we are all here together, creating synergies. This is the biggest European fair, and perhaps the biggest in the world. All these synergies, and all this collaboration among all of us, is very important, and we have to sell ‘Made in Portugal’.” The ‘Made in Portugal’ concept is developing itself, following the trends but, more importantly, preparing to maximise those trends.

The vision of the R&D centre is “to develop and produce bicycles, but also components of the best quality and, for this, modern and competitive facilities are needed as well as laboratories that allow us to create, develop and test the best solutions and technologies,” highlighted the ABIMOTA’s leader. So, Bikinnov is the next step, and it is expected to be working by the end of 2023.

5/2022

BUSINESS Timişoara is the home town of a number of companies in the bicycle industry

Is Romania the place to be for the industry? TIMISOARA, Romania – For a long time, Romania was considered the poorhouse of Europe. After the communist dictator, Nicolae Ceausescu, was forced to leave in 1989, there were hopes of a rapid improvement. However, restructuring the economy turned out to be much more difficult. What is the potential to develop the country’s bicycle industry? Bike Europe visited a series of companies that made the step to Romania. Jo Beckendorff

he bicycle industry has been eyeing Romania as a potential production location for some years. In 2018, Taiwan’s trade promotion organization, TAITRA, already organised a trade mission, while Campagnolo runs a big operation via their subsidiary Mechrom Industry. The ambitions of bicycle assembler, Sport Mechanical Workshop (SMW), operating exclusively for Decathlon since the beginning of 2022, go one step beyond. SMW

operates one of Europe’s largest bicycle factories as part of the self-proclaimed Romania Bike Valley project. Let’s not forget the negative side of the country, too. The Corruption Perceptions Index (CPI) 2021 published by Transparency International ranks Romania just 66th with 45 points (the index ranges from 0 to 100 with 100 being least corruption). The social disparity is still enormous with about one-third of the population living in poverty. The pandemic has made the situation even worse. But the bicycle industry is one of the bright spots for the country. Besides SMW/ Decathlon-Romania, Timişoara is home to Corratec-Romania, Mach1 Wheels Components, and Mavic’s carbon wheel supplier Atelierele Pegas. In this and the following edition, Bike Europe reports on the strategies of the Romanian bicycle industry.

Local market The local market is still dominated by local offers of large suppliers such as Decathlon, which are adapted in price to Romanian conditions, as well as the international sporting goods buyers group, Intersport, and the Austrian sporting goods chain, Hervis Sports. Slowly, the Romanians are discovering the bicycle as a sport and fitness device. The pandemic gave cycling a boost. The previously flourishing

Timişoara is the home town of various companies in the bicycle industry. tourism industry, offering many guided mountain bike nature and culture tours, is

Photo: Jo Beckendorff

unfortunately being slowed down by the war in neighboring Ukraine.

Mach1 Wheel Components opens rim production in Romania TIMISOARA, Romania – The Romanian Decathlon bicycle manufacturer, Sport Mechanical Workshop SRL (SMW), has achieved what many European bicycle producers dream of. Mach1 Wheel Components SRL began in-house rim production.

ate in 2021, Mach1 also opened its own rim production in Timişoara working for other suppliers. Both facilities fit precisely in the ‘RO Bike Valley’ concept proclaimed by Decathlon-Romania. With the move to integrate the production of an experienced rim manufacturer into its factory, Decathlon, together with its Romanian production partner SMW, is once again making an important step forward in the realisation of its ‘Made in Europe’ concept. Mach1 Wheel Components opened its first production unit here in 2019. This facility is located just 2 km from the new SMW factory.

Two full production lines “Initially it was meant that our rim production should start inside the new SMW factory. But as their project was delayed, we decided together with Decathlon to open our factory earlier and at a different location,” explained Mach1 Romania MD, Raul Bude. When SMW finally opened their new factory at the end of 2021, the French company relocated their first production line in the SMW factory. “Then we decided to keep our first factory for other customers like Corratec. The goal is to have two full production lines in two shifts here at the beginning of 2023.

Mach1 Wheel Components’ aluminum rim production in Romania focuses on double-walled hollow 14 to 29-inch rims. Photo: Jo Beckendorff Inside the SMW factory, work was underway on one production line at the time of our visit. The second is scheduled to run by the end of the year. There is also enough space for a third production line. Mach1 will make all single and double wall rim quantities needed by SMW. At the time of Bike Europe’s visit, some 50,000 rims were on site – there will be around 130,000 at the beginning of 2023. According to Raul Bude, “both Timisoara locations can produce single and double-walled hollow chamber aluminium rims from 14 to 29 inches. The (aluminium) profiles come from Greece, Poland and some other EU rim profile producers. Mach1 Unit Two employs 8 people in two production shifts and it will be increased to 16 as soon as the second production line is running. Mach1 Unit One is already employing 25 people. “95% of our production inside SMW is for this bike assembler. In the future, however, it should be 100%.” Obviously, both Mach1 production locations are mainly equipped with many machines from sister company Mach1 Machinery.

5/2022

BUSINESS “The Decathlon magnet is intended to attract other manufacturers”

Decathlon-Romania and SMW take pioneering role TIMISOARA, Romania – Sport Mechanical Workshop SRL (SMW) is known for being one of the four exclusive assemblers for Decathlon in Europe. The Romanian company joined forces with the French sporting goods giant to launch phase two of its ambitious longterm strategy. At the beginning of the year, they celebrated the start of a major new factory, and there is more to come. Jo Beckendorff

o date, around €25 million has been invested into this brand-new facility. At the end of phase three in 2026, this could have increased to €30 million, SMW reports. Under the newly-created ‘RO Bike Valley’ umbrella, it is about close to the market production. In the long term, the company aims to rely on on-site parts production partners. SMW, which also serves as headquarters of the Decathlon-Romania production team, is making bold steps forward to make this vision a reality. Raul Buzgar is manager of the Decathlon production team in Romania. Though he is particularly familiar with the topic of bicycles, he is also responsible for all other Decathlon sporting goods produced in Romania. “Decathlon-branded bicycles have been in the stores since the beginning of Decathlon in July 1976. Our own bicycle production activity started in 1986. The first product conceived and produced by us was a bicycle. Today, we are considered to be Europe’s largest bicycle distributor, and our position is growing with the help of long-standing business partners.”

Decathlon acts as a magnet Decathlon-Romania and the SMW investors had a long-term strategy when the company

was founded in 2016. In Phase One they increased production from 235,000 units in 2017 to 711,000 bicycles in 2021. Due to the pandemic, the newly-built SMW factory, which was part of that vision, could not begin before the end of 2021. At the same time, DecathlonRomania created the vision ‘RO Bike Valley’. “In this vision, Decathlon acts as a magnet to attract other suppliers,” explains one of SMW’s investors, Francesco Russo. “Currently many Asians are looking for a good production location in Europe. We are on site and can support Asian Decathlon partners to locate their production in Romania. In general, it’s easier to have the partners here and not far away.” Decathlon is also keen to convince Romanian component suppliers to join the RO Bike Valley. For a long time, the French sporting goods giant has been active in keeping production for Europe in Europe: “It has always been part of our strategy. The EU’s longtime anti-dumping duties on bicycle products from China and other countries have helped. Still, it wasn’t and isn’t easy,” states Buzgar. “Romania is very centrally located in Europe. In terms of transportation, Timişoara is well connected both by road and rail.”

Sport Mechanical Workshop SRL (SMW) celebrated the start of a major new factory. “That is not really our thing,” states Buzgar, who works closely with Adam in Timis¸oara, “We prefer to invest in our products. We want to make bicycles accessible to everyone. After all, not every citizen in Europe can afford or needs a high-quality premium brand bike or e-bike,” he adds.

Volume production “As far as Decathlon’s Central European customer base is concerned, the majority of them will be served from Romania,” says SMW MD, Mihai Adam. “In the next three to four years, 30% of Decathlon’s overall bicycle volume will be assembled by SMW in Romania. This means we will cover 85% of all models offered by Decathlon.” By comparison, SMW started with the assembly in Romania with six Decathlon bike models. “Currently, they offer 50 to 60 models and this number continues to rise,” Adam assures. With its production partners and its own R&D departments, the French sporting goods chain is not only a retailer, but also a manufacturer. As a result, it can sell directly at low cost without middlemen. In addition, they save on marketing.

Ecosystem and circular economy For Buzgar, however, the RO Bike Valley includes much more: “We want to create an ecosystem and a circular economy that goes from production to transport to the expansion of the bicycle infrastructure and the end of use of the product, including recycling.” According to Buzgar, “it also important to build a community of like-minded people. For example, we are going to invite other producers based in the area, like Corratec-Romania, who are just getting started with their e-bike assembly, to participate in RO Bike Valley.” Phase Two of the long-term strategy presented by Decathlon-Romania and SMW was launched with the opening of the new 21,000 sqm factory. This phase is scheduled to run un-

Photos: Jo Beckendorff

til 2024. “In this period we want to start powder and wet painting and want to have the warehousing of all parts and finished goods in-house. This also means that by 2024 we are ready to operate relatively self-sufficient and assemble close to one million bicycles and e-bikes per year,” explains Buzgar. At the time of the Bike Europe visit only the powder coating facility was already in place.

First parts producer on site SMW convinced Mach1 Wheel Components to start in-house 1,500 sqm rim production. The SMW factory comes with a U-flow production lay-out. While the components are delivered at one end by 12 trucks a day, the frames come straight from the warehouse and pass by one of the three painting booths and the decal division. Mach1’s in-house rim production delivers directly to the wheel building department. The finished wheels then roll on to one of the currently four assembly lines where the bikes and e-bikes are fully assembled and packed.

Phase three: in-house frame production

Decathlon’s Romania operation In Europe, four bicycle factories assemble exclusively for Decathlon: SMW in Romania, RTE in Portugal and Poland, and Telai Olagnero in Italy. The three investors behind SMW are AllColors Serv SRL, Blue Moon SRL, and Telai Olagnero SRL. AllColors (owner and MD, Laci Nyardi) is a Romanian powder coating paint expert. They have been working with Decathlon for more than 10 years. AllColors is also responsible for the paint facility in the new SMW factory. Industry veteran, Francesco Russo, is the man behind Blue Moon. The Italian is considered to be the initiator of the SMW project. For 40 years, Russo worked at Decathlon, and he was the very first foreign Decathlon employee. “In 1978, I was involved in the opening of the world’s second Decathlon store in Lille.” Later, he built up Decathlon in Italy. In 1991, they started an Italian bicycle frame production, and that is how the third SMW investor came into play. Italian steel frame producer, Telai Olagnero, builds more than a million steel frames a year exclusively for Decathlon. “In 2005, Decathlon took a closer look at Romania, where, at that time, many Italian shoe and textile makers were based. To serve the Eastern European market, Decathlon started with the Romanian NextCity as our exclusive production partner in 2009,” explained Russo, who retired from Decathlon in 2018. “In 2012, Decathlon was already Romania’s largest bicycle assembler,” added Buzgar. “A year lat-

In 2016, SMW was launched by investors Vittorio Olagnero, Francesco Russo and Laci Nyaradi (left to right). er, it was clear that we wanted to do it ourselves. By then, they made 300,000 to 400,000 units a year, and we had already stopped expanding production at NextCity.” In 2016, SMW was launched thanks to investments by long-time Decathlon business partners Laci Nyaradi, Francesco Russo and Vittorio Olagnero.

The new factory offers so much space that SMW-MD Mihai Adam is already talking about a fifth assembly line. That will probably be added in one to two years. “This isn’t the end of the road,” Buzgar emphasized. “In the next phase, which will start in 2025, we are also considering our own steel and aluminum frame production includes an expansion of the factory to a total of 30,500 sqm.” In this regard, Decathlon-Romania and SMW are also thinking locally. While both Asian and European component manufacturers are to be attracted with international investment, for raw materials such as steel tubes the company plans to rely on suppliers in Bulgaria and Serbia. When talking about aluminum, both parties point on existing aluminum extrusion specialists in Romania. Buzgar is confident that the RO Bike Valley would attract skilled workers to Timişoara, who are currently in short supply: “Many well-educated young Romanians are abroad. So far, several international suppliers from the automotive and IT sectors have secured high-quality jobs over here. Decathlon wants to create a local green alternative.” Today, SMW employs 450 people who are assembling 4,000 bikes and e-bikes a day.

5/2022

BUSINESS

Corratec celebrates grand opening of Romanian facility TIMISOARA, Romania – German Corratec is the next in the industry to start bicycle production in Romania. On 6 August, the company celebrated the grand opening of its new production facility in Timișoara.

RESITA, Romania – After a gradual termination of the cooperation with Decathlon on 31 December 2021, NextCity had to rethink its future. In the past 12 years, they had assembled almost 4 million bicycles exclusively for Decathlon.

he opening of the new Corratec factory in Eastern Europe is the start of a new series in Bike Europe on production in Romania. It will highlight the latest happenings in this Eastern European country related to ‘Romania Bike Value’. According to Corratec founder and CEO, Konrad Irlbacher, the company decided to open a new site “to regain control over the production of our e-bikes and bicycles; assembly needs to take place in Europe again”.

Why production in Romania? One of the biggest advantages of ‘Made in Romania’ for European companies is probably the shortened shipway to Asia. According to Corratec GM, Konrad Irlbacher, “Romania connects Asia with Europe. This new location reduces our shipping time by almost one week. Freight no longer has to pass through the entire Mediterranean Sea toward Gibraltar and the Atlantic Ocean to arrive in Western Europe, but from the Mediterranean Sea, ships can sail directly to the Black Sea right into the Romanian port of Constant‚a.” From Constant‚a it is only

NextCity makes a new start

Corratec founder and MD, Konrad Irlbacher (left), and Corratec-Romania MD, Loredana Pintea, at the grand opening in Timișoara. Photo: Jo Beckendorff an 800 km overland truck drive to Timis‚oara. Last year, Corratec acquired a site of approximately 50,000 sqm, including a 30,000 sqm factory building in Timis‚oara. This made it possible to begin production quickly. Today, Corratec-Romania is already assembling e-bikes for the Western European market. The family-owned company invited around 160 guests from Europe to the European Capital of Culture in 2023 for the grand opening. In addition to about 40 selected IBDs, business partners and friends, they had also invited a group of local celebrities from politics and culture, making a total of approximately 300 guests attending the grand opening of Corratec Timis‚oara.

After an extensive tour of the factory and opening speeches, including one from Bernhard Lange, president of the German industry organization ZIV, and owner of Paul Lange & Co., the guests met in the evening in downtown Timis‚ oara on Piata Unirii. Here, Corratec celebrated the ‘1st Race Corratec Timis‚ oara 22 Bike Days’, a show race in which its own MTB Race Team and members of the Timis‚ oara Cycling club took part. It was certainly the very first time that such a bike race took place in the beautiful Cathedral Square with its outdoor cafes and restaurants right in the centre of the city. It was obvious that this event has taken a lot of time and energy from the Corratec team.

he first step they took was to downsize the company by moving to a temporary location within the production facility of a sister companies. This location is suitable for current production, which includes up to 100 mm width e-bike wheels which are made for the Danish folding e-bike supplier Mate. Recently, NextCity got their first e-bike assembly order from a customer in the Netherlands. From October 2022, they will rent a 1,500 sqm production facility in Resita. The company is also close to signing some contracts for close-to-the-market e-bike assembly. (JB)

NextCity currently produces bicycle wheels of all types. Photo: Jo Beckendorff

5/2022

BUSINESS UK e-bike manufacturer Volt successfully navigates new production location, Covid pandemic and Brexit

“Reshoring production was right for us” MILTON KEYNES, UK – In 2020, and with Brexit looming, e-bike manufacturer, Volt, decided to reshore its production from China to home soil in the UK. Two years, and a global pandemic later, has the move paid off? Bike Europe caught up with co-founder, James Metcalfe.

In the hindsight of Brexit and the Covid-19 pandemic, has the move to reshore production paid off? “For sure, reshoring is absolutely fantastic, and we know we’ve made the right decision for us,” claims Metcalfe enthusiastically. Although a number of large bicycle component distributors are located close to the UK factory, which simplifies the sourcing for production parts, Metcalfe is still well aware of the difficulties of manufacturing a product with so many parts produced globally.

Rosie Burgin

Parts imports remained steady

he trend of reshoring and close-to-market production in the bicycle industry has accelerated in recent years. Volt, a UK-based e-bike brand founded in 2008 by brothers James and Lyle Metcalfe, originally set up its production facilities in China. Despite a small sourcing team that will continue to be based there, the company opted to relocate its production base to Europe in 2020. “We saw Brexit as one of the primary reasons for setting up in the UK and actually physically onshoring the factory and everything here,” explains James Metcalfe, whose bike factory is now up and running in Milton Keynes. “That was matched alongside the uncertainty of all the anti-dumping duties, so we decided to get some continuity by bringing it into the UK.”

“Not everything we use comes from England, so we’re still in that world where you don’t have complete control. Prior to Brexit, we knew the import scene. We know how to get parts in and out. We’re very well versed in those things as we’ve been doing it for 10 years already. So, that’s not really affected us too much,” claims Metcalfe. “What we have seen, which I guess everyone else is saying the same, is that selling into Europe and importing and exporting products from the UK to Europe is really over-complex, confusing, and with an excessive amount of red tape that seemingly even the distribution companies themselves don’t understand. From an import perspective, of parts coming in, it’s not been too crazy as we have good relationships with suppliers.”

Ecoride reshores its e-bike production in Sweden GOTHENBURG, Sweden – Swedish e-bike manufacturer, Ecoride, is relocating its e-bike production from Poland to a new factory in Gothenburg, Sweden. Alongside reshoring the factory, a deputy CEO has been appointed to oversee the company’s growth.

riginally producing in Kunshan, China, Ecoride took the step to relocate its production to Poland in 2018 citing anti-dumping duties as the reason for the move. Four years later, the company is now bringing the production back to home soil. “It feels good to be coming back to Gothenburg where it all started 14 years ago. Since our inception in 2008 we have been an extremely entrepreneurially driven company. We’re now building a more linear organisation that makes us ready to take the next step,” says founder and CEO Martin Walleräng. In the past, Ecoride had teamed up with British e-bike manufacturer, Volt, who also has chosen to reshore production in its home market.

Shorter lead times and less transport With a view to continue growing with profitability, create structure and bring in new skills, Ecoride has recently appointed Henrik Rosenlund as deputy CEO. “By moving production to Sweden we get closer to our market, and with sales, purchasing, production and aftersales in the same place our decision paths will be far

The new factory of Ecoride in Gothenburg, Sweden. Photo: Ecoride

shorter and faster,” explains the newcomer Rosenlund. “Producing in Sweden will also reduce our lead times and reduce the amount of transport. The next stage now is to recruit team leaders and build up warehouse and assembly teams, which will mean new jobs during the autumn.” The investment is expected to mean about 50 new jobs during the autumn and into next year.

Increased output Ecoride bikes are currently distributed in four countries across 200 dealers. “The goal is to sell 100,000 bicycles over the next three years in Sweden, Norway and Finland. In the Netherlands electric bikes are the standard, while in the Nordics a lot of people haven’t tried them yet. And as energy and fuel prices rise, electric bikes are becoming an increasingly important complement to the car,” concludes Rosenlund.

Volt’s factory in Milton Keynes has an annual capacity of 25,000 e-bikes. Downsides of Brexit There are some noticeable downsides to Brexit, which have impacted the company’s workflow. “We have a situation where, historically, our batteries would be serviced in Germany. If there was ever a problem with a battery, we would just send it over for warranty repairs, etc. It used to be a simple process – you send it out and get it back. Following Brexit, it took about four and a half months just to work out how to get the battery out to them, and it just doesn’t get any simpler. These are warranty products, so there shouldn’t really be any duty, or it should be refundable duty. We’ve got to the point where we’re writing off any duties as it feels impossible to claim back. From our per-

Photo: Volt Bikes

spective, we’ve been very lucky because it’s been busy in the UK anyway.”

So no international aspirations? In terms of distribution, Volt has a network of around 100 dealers in the UK and also sells direct with a click-and-collect service through its own website. “We are really well set for targeting different countries across Europe, and we’ve got plenty of great ideas for doing that. But for the moment, our intention is just to stick with the UK for now,” Metcalfe confirms. With a 5% year-on-year growth (excluding “the crazy 2020 year”) and still a relatively immature e-bike market compared to mainland Europe, Volt is in no hurry to scale up.

5/2022

BUSINESS New PWseries S2 drive unit marks a turning point in Yamaha’s production relocation strategy

Yamaha moves drive unit production to France IWATA, Japan – Yamaha is strengthening its range for 2023 with the launch of the new PWseries S2 drive unit, which offers a range of new and improved features for the sport and trail category. Noticeably, the production of the new lightweight, more powerful motor will be moved from Japan to France to “reduce the need for expensive and unreliable logistic operations.”

country’s bicycle industry back on the map. This included convincing Asian manufacturers to open factories in France, and it appears that Yamaha took notice. “As well as contributing towards Yamaha’s aim of carbon neutrality, the relocation of PWseries drive unit production from Japan to Western Europe reduces the need for expensive and recently unreliable logistics operations and offers many additional benefits to bicycle manufacturers: lead times substantially reduced, enhanced flexibility in deliveries, external supply chain shocks – such as port congestion – eliminated, optimized packing for inland EU logistics, and waste reduction,” Yamaha said in the launch statement.

Rosie Burgin

n an interview in 2020, Yamaha Motor Europe president, Eric de Seynes, told Bike Europe that “relocation to Europe is high on the agenda and only a matter of time”. With the release of its latest drive unit, that time has come. As part of Yamaha’s accelerated carbon neutrality goal for 2050, Yamaha drive units will be produced at the company’s wholly-owned MBK Industrie facility based in France. The St Quentin factory currently manufactures over 80,000 Yamaha motorcycles, scooters, and recreational vehicles each year. Earlier this year, the French government announced that it would launch a series of initiatives to put the

‘Made in France’ - Yamaha’s new PWseries S2 e-bike drive unit.

Photo: Yamaha

‘Less is more’ Developed with the philosophy that ‘less is more’, the PWseries S2 drive unit is lighter and more powerful than the PWseries ST, which was launched in 2018. Designed to “satisfy the needs of European e-bike manufacturers, the new PWseries S2, is multi-role drive unit suited to everything from commuting and general daily usage through to countryside trekking, weekend touring and mountain trail riding,” Yamaha explained. Producing 75 Nm maximum torque, the compact PWseries S2 drive unit is over 7% more powerful than the PWseries ST, and weight has been cut to 2.85 kg – 16% less than the previous design. Yamaha claims that

this ensures that the new PWseries S2 achieves one of the highest torque-to-weight ratios in the high-volume multi-role segment. The smaller dimensions of the new unit offer e-bike manufacturers even greater freedom to produce new generation frame designs with features such as increased ground clearance for improved performance on technical terrain. The 20% more compact PWseries S2 layout also makes it possible for bike manufacturers to develop idealised frame designs with shorter chain-stays that can potentially increase overall rigidity to give enhanced manoeuvrability and increased rear wheel traction.

Ideally suited to e-MTBs The new PWseries S2 features a 22.8 mm shorter bottom bracket than the PWseries ST to enable improved pedalling efficiency and feel that, together with the Automatic Support Mode, ensures an easy and enjoyable riding experience. The PWseries S2’s new ISIS bottom bracket axle interface delivers increased rigidity, making this new mid-class drive unit ideally suited to the needs of e-MTB riders – and being fully compatible with a front double chainring, the compact new drive unit opens up greater possibilities for bicycle manufacturers.