Mountain bike and component price trends

Over the last year or two you’ve probably noticed that mountain bikes and components are getting more expensive. Industry insiders have told us costs jumped around 20% or more last year and the basic prediction is that more cost increases are coming. In the end manufacturers pass on many of these cost increases to consumers but not all – even the manufacturers are being hit hard by the price hikes.

If you’ve been reading this blog for a while you know I’m a bit of an “armchair economist” and so today I thought I’d lay out my case for price stabilization and possible slight decreases in MTB prices in the coming months and years. If you hated economics in high school or college you may want to skip this post but I’ll try to keep it “high level.”

Prices for things like mountain bikes are set by the intersection of supply and demand. Mountain bike frames and components are mostly metal (steel, aluminum, titanium) so prices of those materials will affect manufacturing costs. Over the last few years Asia has been booming (China in particular) and the supply of metals like steel and aluminum have been sucked up by massive building projects. Many of those projects are now on hold around the world meaning metal supplies are rising – good news for manufacturers buying metal for bikes.

Since most mountain bikes come from Asia there is also a tremendous shipping cost involved in transporting bikes to the US and when fuel prices were high it wasn’t uncommon for bike shipping cost increases of 50% or more last year. That fuel cost increase was passed on to bike companies who then passed the buck to consumers. At the moment fuel costs are back to reasonable levels so we should start to see shipping costs stabilize. Keep in mind, however, that lead times for new mountain bikes are HUGE. That means the 2009 bike you buy today was actually designed in 2007 and manufactured and shipped in 2008. Look for fuel cost savings on 2010 models.

On the demand side we’re seeing steady decreases due to a couple of factors. First, when gas prices were $4.50 a gallon everyone and their grandmother was looking into buying a bike to use for quick errands. Manufacturers recognized this and switched to producing more commuters and cruisers and fewer mountain bikes (supply side). Retailers could charge full MSRP because bikes were hot – but that’s cooled a bit now. Who needs a commuter bike when a gallon of gas is under 2 bucks?

The slowing economy is also affecting demand for mountain bikes as people put off large purchases and make do with their current rigs. It’s good news for those with the cash to spend and I know I’m glad I bought my new bike in January – it’s the least I can do to help the economy 🙂

So here’s my prediction for 2010 mountain bike prices: no increases and up to 5% decreases in some places. Anyone from the industry care to weigh in with an opposing prediction for 2010 model pricing?