22 Sept 2016
Mainland Exports Set to Suffer as Russia Goes Cycle Self-Sufficient
Although Russians are now clearly bike-crazy, Chinese exporters may be set to lose this rapidly growing market.
With moves toward adopting a healthier lifestyle becoming ever more evident across Russia, bicycles are suddenly back in fashion. With their cardio and body shaping benefits well known, demand for cycles has soared, as have purchases of sportswear items and other forms of training equipment.
In line with this, a number of municipal authorities have invested in the provision of sporting facilities in the courtyards of residential buildings. At the same time, tax incentives have been made available to businesses willing to subsidise fitness centre fees for their employees. It is bikes, though, that have emerged as Russia's favourite means of keeping fit. Currently, more and more urban residents are opting to cycle to work, while bikes have never truly gone out of fashion in the more rural areas.
In Central Moscow, this renewed enthusiasm for bikes is partly down to reconstruction work that has seen the city reinvented as cycling-friendly for the first time in its 1,000-year history. This has seen the capital follow in the wake of a number of other Russian cities – notably Omsk, Ufa, Saratov, Naberezhnye Chelny, Novgorod and Kaliningrad – that are already home to an extensive network of cycle lanes.
Taken together, these developments have resulted in a surge in demand for bicycles. At present, Russian consumers are buying some five million bikes a year, with only around 45% of these manufactured domestically.
Of the domestically produced bikes, the two most important manufacturers are Velomotors, producers of the Stels brand, and Forward, with its self-branded range. Overall, the Stels range is more diversified, with Forward specialising in sports and folding bikes. A relatively small number of bikes are also imported from Belarus, although these are poorly regarded compared to both domestic output and those bikes imported from further afield.
The remaining 55% of the current level of demand is largely met by bikes imported from China. Overall, mainland cycles account for 40% of all sales in the sector, with the balance made up by premium and upmarket brands imported from elsewhere.
In addition to completed cycles, Russian manufacturers also import a significant number of bicycle components from China, specifically aluminium parts – largely because Russian equivalents are either not available or are more expensive. Unlike in the case of the EU and Mexico, there are also no anti-dumping regulations in place with regard to the import of Chinese bikes to Russia, with little prospect of such measures being introduced in the near future.
Overall, the extensive use of aluminium in the bike frames and wheel rims produced by Chinese manufacturers makes their output highly competitive with the locally produced alternative. Earlier this year, however, Velomotors signed an agreement with RUSAL, the world's largest aluminium producer, with regard to sourcing such components locally.
As a consequence, aluminium bike frames and wheel rims are now being manufactured in the town of Zhukovsky, some 35 miles outside Central Moscow. Later this year, a new bicycle factory will also come on line in the Krasnoyarsk Region, an area known as Russia's Aluminium Valley.
As a consequence, it is expected that the market share of locally produced bikes will grow by 10% next year. At the same time, Russia is also set to begin exporting aluminium frame bikes to the EU, as well as to the Baltic States and Eastern Europe.
At present, affected manufacturers in Southeast Asia are recommended to explore the possibility of switching to supplying their trading partners in Russia and the Eurasian Customs Union with children's bikes and scooters. For the present, these market segments are not set to be affected by the shift in domestic manufacturing practices.
Leonid Orlov, Moscow Consultant