Motorbike manufacturers face peculiar new challenges in 2021
We’re used to the cost of bikes being affected by the fancy tech on board and little else but now a combination of increasing raw materials costs, shipping difficulties and problems securing parts could lead to increases as firms battle to meet demand.
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Unsurprisingly, Covid-19 is the root cause that’s creating a butterfly effect of knock-on impacts. Right at the start of the manufacturing process, industries of all types were being hit by rising costs.
Aluminium has ballooned from £1075 a tonne to £1433, iron ore has nearly doubled and rubber prices are up by over 100%. It’s all thanks to high demand for the materials, particularly in China, allied to reductions in supply due to the pandemic.
Siddhartha Lal, MD of Eicher Motors – the parent company of Royal Enfield – warned of price rises in their home market, saying: "We will probably increase prices again in April… raw material costs have gone up faster than our ability to hike prices."
It’s not just raw materials that are causing concerns; a global shortage of computer chips has driven up prices due to a huge spike in demand. Home users as well as businesses have been buying laptops left and right for home working, while staying at home has given some households more money to spend on new phones, TVs and games consoles.
All these things have conspired to create a shortage of semiconductors that’s impacting every business which uses them.
Yamaha’s annual report for 2020, forecasting the company’s prospects for 2021, says "potential risks include the possibility of soaring transportation costs amid a global shortage of shipping containers and a scenario where a dearth of semiconductors affects procurement of component parts" and there are similar cautions in reports from Honda and Suzuki.
Yamaha’s caution over shipping containers reflects a problem that’s hitting industries all over the globe. An increase in demand for goods – particularly gadgets from China – along with lockdowns leaving empty containers stuck in Europe and America has seen prices soar.
In the last four months, the cost of a 40ft container from Asia to Europe has more than tripled, with reports that a standard 40ft container, priced at around £1400 last year, can now cost £6000 or more. There have even been reports of cartel-like behaviour, with some operators asking in excess of £10,000 per container.
At the moment, the prices announced for new 2021 models haven’t generally reflected a significant increase over their 2020 predecessors, but the longer the problems with transport and supply continue the harder it will be for manufacturers to maintain that stance.