On not blaming the Chinese

Jack Baruth quotes a couple of bicycle prices, and then shows you why they matter to us non-cyclists:

The Tomasso Corvo costs $1,699 through the direct sales channel, although it periodically goes on sale for $1,499. The 1987 Cannondale SR500 sold at a bike shop for full MSRP of $599. That’s $1,282 in today’s money. To put this in an automotive context: In 1987, a Honda Accord DX sedan sold for $11,174, which adjusts to $23,933. The 2017 Accord LX costs $22,455. In both cases, final assembly and much of the component production was done in Marysville, Ohio. And if you’re reading this site, chances are that you know enough about cars to understand the vast gap in power, capability, and equipment between a 1987 Accord and a 2017 Accord.

Which leads to a legitimate question: If Honda can make a better car for less money without moving production out of the United States, why have bike makers raised prices after moving everything to China, where costs are supposed to be lower? How do you manage to drop the labor rate from $25/hour to a fraction of that and still charge more for the product?

It turns out that Chinese labor isn’t as cheap as it used to be. Which leads to a frightening conclusion: Cannondale et al aren’t making bikes in China because it’s cheaper. It isn’t cheaper. Instead, they are making bikes in China because they’ve forgotten how to make them in the United States. This isn’t just true for bicycles. In every industry you can imagine, from watchmaking to commercial-vehicle production, Americans have simply let multiple generations’ worth of knowledge and expertise disappear. While we were all busy watching “peak TV” and selling each other real estate, the entire industrial base of this country was donated to the Pacific Rim. They now have an effective monopoly on many products and processes. And because they are intelligent, resourceful people, they are taking full advantage of it.

I wasn’t always a non-cyclist, of course; I ran up some serious miles on some low-end (by comparison) Schwinns, which ended when I got my hands on a similarly low-end Chevrolet. What happened to Schwinn? What do you think?

In September 2001, the Schwinn Company, its assets, and the rights to the brand, together with that of the GT Bicycle, was purchased at a bankruptcy auction by Pacific Cycle, a company previously known for mass-market brands owned by Wind Point Partners. In 2004, Pacific Cycle was in turn acquired by Dorel Industries. Once America’s preeminent bicycle manufacturer, the Schwinn brand was now affixed to bicycles fabricated entirely in China, fueling most of its corporate parent’s growth.

Dorel Industries, incidentally, is headquartered in Montréal, and as of 2008 is the owner of Cannondale.





3 comments

  1. Joe »

    10 May 2017 · 7:24 am

    Labor is not as cheap in China as most of us think. What is cheaper is raw material, electricity, and employee benefits. Also absent is the huge burden of government regulation. In china you also do hot have included into the cost of goods a factor to pay for the almost certain litigation you will find once the product is sold into the US.

    As a society, we have lectured our kids to go to college, don’t spend your life in a factory like your Dad did. Now we have no one to work the factories. *

    *Yes, I know we still have an incredible manufacturing base. But you get my larger point.

  2. Holly H »

    10 May 2017 · 12:20 pm

    I agree with a lot of what Joe says, especially the point about litigation. However, we are moving into a robotized society, so fewer and fewer people will be needed at the factories. Therefore, I think our bigger problem is the brain-drain, rather than labor shortages.

  3. Holly H »

    10 May 2017 · 12:23 pm

    Then again, our robot overlords know how to do all that stuff, right? Wall-e was much too prophetic.

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