In the fight against climate change, should bikes be more like cars?
Cycling is great for the environment, or so the saying goes. Unfortunately, the cycling industry isn’t as environmentally conscious as you might think. The materials used, CO2 emissions in the manufacturing process, the somewhat disposable nature of modern bikes, and the linear economy all add up to make an environmentally friendly activity slightly less environmentally friendly because of the bike itself.
The COVID-19 pandemic and subsequent lockdowns created a boom in cycling, with more and more people venturing out on bikes for exercise when other activities were off-limits.
Simultaneously, governments have been promoting cycling benefits in the fight against COVID-19 and climate change, resulting in renewed investment in more cycling infrastructure and safer cycling environments. These investments both empower and encourage more people to choose cycling.
Bike shops have experienced a huge spike in sales, eventually resulting in a complete lack of availability of new stock. Supply chains have struggled, and even failed, to keep up with the new demand. Can the cycling industry meet the demand for new bikes, and how much extra environmental impact will this supply create?
Is cycling potentially facing the bizarre scenario of effectively turning people away due to a lack of available bikes and equipment?
I am posing the question: If we are to see sustained growth in the number of people cycling, should the cycling industry look towards the automotive industry – the very industry it is perhaps trying to replace – for a model to replicate?
As bizarre as this sounds, should bikes be more like cars?
Having worked in both industries, I feel well-positioned to compare the two and point to some areas that seem to keep the automotive industry thriving.
Net gains?
One of the most significant opportunities for the sport of cycling, the mode of transport, and cycling industry has to be the e-bike. E-bikes are set to outsell all other bikes this decade. The assistance an e-bike can offer means cycling as a mode of transport becomes more viable for everyone. Longer commutes can be less of a challenge. E-bikes can reduce commuting times, and the cyclist can arrive feeling fresher. Seems like a win on all fronts.
This presents a massive opportunity for climate change action, the bike industry, and bike shops, but are they ready? Can the industry cope with the expected sustained surge in demand? Will the opportunity be there for bikes shops to thrive? Despite the environmental impact of the industry, could a shift in how we buy and sell bikes be the opportunity to ensure the bike industry as a whole becomes more environmentally friendly and more of a circular economy?
But surely this will lead to a continuation and even a ramp-up in the disposable nature of new bikes and components, driving more new bike sales and producing the opposite effect than desired, right? While this is possible, I believe new car sales only work because of three key pillars, and these same pillars could help us achieve a positive effect on cycling.
Pillar one: New is nice
The first pillar is simple human nature for most. Be it desire, a status symbol, or trust that newer is more reliable, many people like and want new things.
Pillar two: Trade-ins
While I in no way want to suggest the car as an environmentally friendly option, one must give credit where it is due. Currently, the car industry is an excellent example of how a circular economy can work. Very rarely do consumers purchase a brand new car and keep it 20 years until its natural death. Instead, every time someone replaces their current vehicle, someone else takes possession of that vehicle and keeps it running for the subsequent duration they retain it. Franchised dealerships may sell new cars straight off the factory production line, but they are also actively encouraged and are motivated to trade in used vehicles.
Very rarely do I remember a customer walking into the dealership and buying a new car straight. The vast majority of people want to trade in the vehicle they already own. The bother to sell the car privately, and the small monetary benefit of selling privately, means most customers take the easy option, trading in their current vehicle and putting its value towards the new one. This trade-in system also applies to customers looking for used cars; customers who will again trade in used vehicles, sending the circle off for another lap.
Are you thinking of buying a new Ford? Chances are you will trade your old car to the Ford dealership, who will service it, give it a deep clean, add a warranty, and sell the vehicle on to a new customer. This new owner usually treats the used car as their pride and joy before going full circle and repeating the trade-in and sell-on process once again.
Consumers prefer to buy used vehicles from dealerships because although there is usually an increased cost for the same vehicle compared to if it were traded privately, a dealership can offer a warranty and other value-added services.
Compare this to the bike market. Quite often, when buying a new bike, the bike retailer never even catches a glimpse of your current bike. Usually, the drop in value of your current bike (due to some parts’ disposable nature) means it is worth more to the owner than he/she would get in trading or selling it. So the bike gets retired to a backup option in the corner of the shed, gathering dust indefinitely.
Motor vehicles tend to hold value much better (or, at the very least, often are just worth more from an absolute perspective), and as such, they rarely get consigned to being a backup option while there is still life left in them.
Although the dealership will make a profit on new cars, in my experience, this is often very small in comparison to the profits made on used vehicles. The volume of new car sales is also typically smaller than that of used car sales. The dealership’s motivation in selling new cars is to “meet targets” for new car sales in that period. If the dealership meets its monthly or quarterly targets, it will receive a hefty bonus from the car manufacturer. This is why the last week of any month or quarter is always the most stressful in car sales; the targets are never easy to hit, but the bonuses, I am lead to believe, are quite the incentive.
Compare this to bike sales where used bikes often retain little value, and used bike sales make up a tiny and less profitable percentage of a shop’s business. As a result, new bike sales eclipse used bike sales.
Could a bonus system on new bike sales promote a circular economy, ensuring more stock availability and profitability for local bike shops? In theory, it could work. The bike shop hopes to achieve a sales target, and as such, creates promotions and welcomes trade-ins of used bikes to incentivise the consumer to buy a new bike. The shift in trends could force a shift towards more durable bikes and components to facilitate used bike sales and more significant value retention. Bike manufacturers would rely on used bike sales to power new bike sales. Used bikes would be serviced and prepared for re-sale by the shop, providing more work in the shop, stock for the shop floor, and choice for a used bike customer.
That’s not even mentioning the benefits for cyclists in buying from a local bike shop that can provide reliable advice and tips on a bike to suit, resulting in a more enjoyable cycling experience, as opposed to the greater risks of buying a bike off the Facebook marketplace.
With Specialized and Giant (amongst other brands) now operating company-owned concept-style retail outlets, this idea might not be as wild as it seems. High-end bikes can cost more than some of the best selling cars in terms of the total price, and the sales volumes are certainly on the increase. While I don’t want to promote the continued inflation of prices in the bike industry, could there be scope now for manufacturers to motivate retailers with bonuses for new bike sales?
Pillar three – Finance and leasing
The final pillar that enables the car industry, both new and used, is finance. Not only does finance make it easier for customers to buy cars, but it also acts as a motivator for dealerships. Every time a dealership sells a car on finance, it gets a commission from the finance company. This extra revenue stream not only helps ensure the dealership’s overall profitability, but it also adds to each sale’s overall margin. This commission means the headline price of a vehicle does not need to provide this extra margin, ensuring the cost of a car does not escalate year on year as we have seen in the bike industry.
Admittedly, the cost of said bonus for the dealership is built into the cost of finance for the customer, but spread over 24/36/48 months; this added cost is much more manageable. Compare this to financing we see in the cycle industry, where the finance companies are often billing the retailers for the finance options. On its face, the 0% interest rate bike shops can offer seems great, but this is hiding the reality that the cost of this finance package to the retailer directly impacts the amount of discount a bike shop can offer on any bike.
More worryingly, the cycle industry’s finance offerings can often end up quite costly, with steep penalties for the customer on missed payments. Some of these finance options actively encourage delaying payment in full to some point in the future, which quite often is most attractive to the customers who would be most at risk from any unexpected bills or costs in that period.
While financing in the car industry traditionally meant spreading the cost of purchasing the vehicle over a set period, leasing and personal contract hiring are now becoming more popular. Leasing almost guarantees the continuation of the circular economy and the future sale of more vehicles. The customer is knowingly and willingly signing into an agreement to keep a vehicle only for a set period of time, usually three or four years. At this point, the vehicle is returned to the finance company or dealership, but the leaseholder still needs a vehicle, so a new agreement is signed, often on a different vehicle, and the customer drives away again.
The benefit of leasing is that the customer only pays for the time they use the vehicle. As the customer is not paying the vehicle’s full value, both the deposit and the monthly payments are lower. This means the customer can either bring down the cost of driving or drive a vehicle that would otherwise have been above their budget range.
There are currently very few options like this in cycling, which is most likely again down to the disposable nature of modern bikes. Leasing only works in the motor industry because the leasing company is confident that the vehicle retains a certain resale value at the end of the lease contract.
For leasing to be a viable option in the bike industry, frames and components need to become more durable, retain more value, and the industry itself needs to be more welcoming to the used bike market.
With the rise of e-bikes, the leasing and financing options may become more prominent. With the added weight and assistance associated with an e-bike, manufacturers theoretically do not need to be as obsessed with lower weight and aero gains that, at least in some capacity, have led to the less durable bikes we see today.
Another significant difference with e-bikes lies in the market itself. Manufacturers often sell a pedal-assisted mode of transport, with a high monetary cost, to a more general market.
Compare this to the traditional bike market that typically trades in discipline-specific bikes, with a wide price range to a somewhat select market. Potentially, the e-bike market could look much more like the motor vehicle market and attract the same wide variety of consumers.
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While I have posted many questions here, they are merely questions, not opinions or answers about how the cycling industry could track in years to come. An alignment with the world of car sales would certainly have its fair share of negatives. Undoubtedly, the industry has some work to do to ensure the continued growth in cycling. While the industry figures this out, we as cyclists also need to ensure we facilitate any cycling boom by welcoming anyone who chooses to ride any bike.
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