Global demand for bikes has boomed since Covid-19. Toby Woods, Pie’s London-based senior investment analyst for Global and UK & Europe funds, explains why the sector is providing excellent investment opportunities for Pie.
Did you buy a bike during lockdown? If you did, you weren’t the only one. The bike industry is struggling to meet demand from consumers, and global growth in the sector has soared since the Covid-19 pandemic began.
Two key drivers
During lockdowns, bikes provided a great way to exercise for both individuals and the whole family, without having to worry about social distancing. With gyms, parks and other family exercise areas off limits, bikes were good entertainment. For many globally, bikes were also a great way to commute without using public transport.
There’s still a shortage
The whole industry has been constrained by a lack of supply for components since last summer.
The problem is simple; the supply chain, which predominantly originates in China and Taiwan and lesser so in Italy, is geared for a certain volume of bicycles and it cannot react quickly to the surge in demand. Production is not keeping up with demand, and the backlog will continue through 2021.
Still tipped for growth
Even as lockdowns around the world come to an end, hopefully in the next six months with the roll out of the vaccine, we still believe bike demand will remain high. Why?
- E-bike development is still in its infancy, but e-bikes are now a realistic option for commuters regardless of social distancing requirements. E-bikes are more affordable now, and battery technology has significantly improved to make them more viable. E-bike penetration in most EU countries is around 10%, but about 50% in the Dutch and Belgian market.
- There are government incentives for cycling. In the UK there is the ‘cycle to work scheme’ which means you can buy a bike and spread the cost over a 12-month period. Similar schemes operate across Europe.
- Infrastructure spend around cycling remains high across all major cities in Europe thanks to the EU’s Green Deal (turning climate and environmental challenges into opportunities) and others.
- A social shift to using cycling for environmental and health reasons, especially from the millennial generation. This has been a long term tailwind for the industry which is unlikely to change.
Where is Pie invested?
We’re invested in global bike companies to take advantage of growth opportunities. Pie’s invested in Taiwanese bike manufacturer Giant, the world’s largest. Giant has experienced growth driven by demand for regular bikes, as well as e-bikes. In February 2021, group sales increased by 42% compared to the previous year.
Giant saw a temporary halt in production in early 2020 but it quickly restored manufacturing to prior levels without too much disruption. The company is doing well because of its breadth; geographically it sells to all parts of the world, it has a large product range (traditional bikes and e-bikes) and it’s a supplier to other brands for various components (such as carbon fibre brakes and aluminium bike frames).
Pie’s also invested in leading European bicycle company Accell. Accell owns the Haibike, Winora, Ghost, Batavus, Koga, Lapierre, Raleigh, Sparta, Babboe and Carqon brands. E-bikes account for almost 60% of sales. The future of ebike demand will be the primary driver of the company’s fortunes. As well as Giant and Accell, Pie’s also invested in Shimano, the largest global producer of bike gears.
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Information is current as at 30 March 2021. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.