European Bicycle Industry Trends in 2024
While there are a few articles hitting the web, predicting bicycle industry trends for 2024, some of the hottest topics aren’t covered to the extent they need and deserve. So here is an overview of the trends we are going to address in detail:
- Is the market bouncing back?
- Is cycling finally getting the political attention it deserves?
- Can recruitment and staff challenges be solved?
- Will sustainability efforts really kick off?
- Can digitalisation and AI save the day?
After reviewing cycling industry developments 2023 last week, let’s start with the question everyone is asking each other:
Is the bicycle market bouncing back in 2024?
2023 saw a full-blown bullwhip effect take the industry by storm. It perfectly timed the delayed arrival of products ordered in 2020/21/22 with overly positive planning and normalising demand. As a result, liquidity bound in inventory caused multiple renowned brands to enter insolvency. It seems that sales performance in spring (and with it the weather) will be a deciding moment for companies who are holding on for dear life right now. A bit more consolidation can be expected.
The predictions for 2024 are mixed. Brands are skipping the model year and are mainly looking towards 2025 for new products and innovations to hit the market and reignite consumer appetite for a new ride. While some predict that 2025 will come with renewed market stability, others are expecting a recovery time of another 3-5 years.
So what can we expect in a market that continues to be in distress? For most companies we expect cost-cutting initiatives to define the year to come. Saving money on marketing and operations – aka becoming more efficient – will be the focus. Nonetheless, if a brand has the financial means, they might go all out in a time where others are pulling back. Decathlon’s move to push Van Rysel further up professional racing and thereby into the higher cost segment is a prime example.
Finally, there are two areas that could expect above-average growth compared to the rest of the industry. One is maintenance, as ridership is remaining on a high level and users are looking to update and repair their current vehicles. While this comes to the dismay of some retailers, others will surely take this opportunity to build a sustainable workshop business. The second growth factor is leasing. Data provided in the Market Intelligence Group of Cycling Industrie Europe (CIE) showed that leasing in most European countries was responsible for 4-5% of sales in 2022 with a lot of room for growth.
Is cycling finally getting the political attention it deserves?
The adoption of the proposal for a European Declaration on Cycling in 2023 marked a milestone in the efforts of putting cycling on the political map as a viable, sustainable and competitive urban mobility solution. This might seem strange to someone from outside the industry – cycling has been around for more than 200 years – of course it’s part of the mobility mix. However, if you look at funding, policies and support schemes, the industry is often left behind other, arguably less sustainable, modes of transport. As such, a commitment of the Commission to improve infrastructure and safety, strengthen the resilience of the sector, invest in job creation and collect cycling data is a significant achievement to anchor cycling in EU policy, especially with European Parliament elections coming up in 2024.
However, these commitments from European politics also means that the industry needs to “get its shit together” (excuse my expression). There are a few points in the Declaration that the industry needs to address in 2024 to ensure the long-term support the EU has committed to.
This includes:
- professionalise and digitalise processes to become more resilient to supply chain disruptions that are only going to increase in the future;
- build up a strong production base to create jobs and drive economic value in Europe;
- ensure that vehicles and their components are safe and secure to use (which they mostly already are);
- collect relevant data to measure improvements and the impact of the sector; and
- become sustainable not just in using bicycles, but also in the production, reuse and recycling of them.
While all of this is promising, we believe that the effect on the implementation of the commitments across Europe on a national and local level will take longer than the 365 days 2024 has to offer. Of course, there are regional differences. France is sprinting ahead in providing additional financial incentives for people to buy and use bikes, while the cargobike subsidy in Germany was paused. In general, the populist threat in many countries – first and foremost Germany itself – is likely to move politics into more right-wing waters to capture the conservatives and appeal to protest voters. As the reversal of cycling lane investment in Berlin has shown in 2023, cycling serves as an easy victim of this shift to the right – also in 2024.
Can recruitment and staff challenges be solved?
Some say that once you are working in the cycling industry, you never leave. And I can see why. People are motivated, passionate and you can build a strong and supportive network of enthusiasts. But when you dig a bit deeper you hear people saying that the industry needs more professionalism, more business acumen, and more skilled people. Cycling is competing with other industries for talent across all departments, whether it is sales and procurements, or production and engineering. But there are three unique hurdles the industry faces.
Number one: the bicycle is turning into a highly technical and technology-driven, safety-relevant device, no matter if you are looking at ebikes, performance bikes, or heavy-duty cargobikes for last mile deliveries. So no matter what department you are working in, you need a certain degree of technical understanding. This might deter potential candidates from entering the industry, as they do not possess and need elaborate training for specialist knowledge.
Number two: payment and earning potentials. To be completely honest, we couldn’t find reliable quantitative data on this, so we are basing this analysis on conversations we’ve had. The talk on the street is that salaries in cycling are far away from competitive for comparable positions within, for example, automotive or tech.
Number three: diversity remains a promise. No matter which vertical of diversity you look at, the cycling sector is probably not performing well in it. There definitely has been change in the last couple of years as the historically white male dominated industry has become aware of this problem and is starting to talk about ways how to fix this. There are already exciting initiatives on the horizon with a German chapter of women in cycling kicking off in January 2024. But the question is if amongst cost-cutting measures and liquidity issues, DEI will be prioritised within companies. My gut says no.
Looking at all of these challenges, the prediction for 2024 is a clear “no” – recruitment and staffing challenges cannot be solved, and are likely to become worse.
Will sustainability efforts kick off?
The bicycle itself is sustainable, but production and transport in a global, fragmented supply chain are a considerable source of CO2 emissions and pollution. In addition, material circularity and recycling offer considerable, untapped potential for negative impact reduction. There are two observable trends for 2024: regulation forcefully pushing forward impact measurement, and industry/company initiatives increasing transparency and accountability.
In terms of regulation, the EU Battery Directive, Carbon Border Adjustment Mechanism (CBAM) and CSDR regulation will affect a considerable number of companies in the European and global cycling industry. What might become most decisive is the carbon accounting method the EU is enforcing for the Battery Directive and the following Battery passport, as it is likely to serve as a basis for future policies in this space.
On a company initiative level, the media recently reported that the number of CSR reports is increasing. For example, Trek has published their Life Cycle Assessment (LCA) of their Marlin model, Schwalbe published their second CSR report last year, and Hermans Bike Components is making advances in in-house material recycling to reduce waste. In 2024, it’s likely that more brands are joining the trend, especially since it is the first year that the Climate Commitment co-developed by Shift Cycling Culture is taking stock of the extent signatories followed their pledge of disclosing their carbon impacts by measuring Scope 1 and 2 Greenhouse Gas (GHG) emissions, in accordance with the GHG Protocol. This pulse check will give a better idea as to where the industry is at.
Both on a regulatory and initiative level a few important things are happening, but whether they will move the needle is questionable. We’ve had a few discussions in our team, as we are preparing to push sustainability initiatives forward. Scepticism exists for the same reason that we believe DEI won’t be a priority this year. With the economic situation getting tougher, demand normalising and liquidity remaining tight, the investment appetite of companies into sustainability initiatives is likely to be low. And with some regulations only coming into effect in 2026/7, companies will push investments as far out as possible. Nonetheless, we hope that early adopters and innovators will grab the opportunity and (1) take on the mindset that these costs are just like any other cost of doing business, and (2) they will have to make the investment anyways, and the earlier, the better to take on a pole position and be more competitive.
Can AI and digitalisation save the day?
Generative AI hit the streets and took off in the last year – and is developing into a tool used by every business around the world. In his newsletter “Data Driven VC”, Andre Retterath outlines an overview of the development of software and AI and shows how we are likely to transition from manual work, to software, to AI:
The cycling industry is no exception – AI will enter our daily work processes. And rather than viewing it with suspicion or fear, companies must embrace and leverage the technology to stay competitive. In our view, digital tools and AI for the cycling industry have one main benefit: make our job easier and faster by (1) taking over manual, repetitive tasks; and (2) displaying, connecting, processing and analysing large amounts of data to show us the results, insights, and recommended course of action. However, this means there is one thing companies need: reliable data from their products, processes and business partners. And that’s where we believe the industry needs to start, both on a general and at company level.
In general, we need more data on cycling behaviour, cycling infrastructure and demand developments. This was also clearly outlined in the EU Cycling Declaration, and discussed many times in the working groups of industry associations. Here, AI can help to analyse industry developments, and thereby uncover low hanging fruit and gaps where policies and support programmes can be applied.
On a company level, we need to start with digitalisation to improve data quality and fill gaps in product, transaction, and master data records. This includes each and every actor in the supply chain. In an ideal case, relevant data is also shared up- and downstream of the supply chain so that information generated at consumer level can help – for example – inform component suppliers to calculate their LCA or improve product performance. Once a good data level is reached, we can apply AI to analyse trends and process large amounts of data to solve complex tasks and generate insights. Imagine an AI processing technical specifications of components or materials to give you a set of bills of materials optimised by price, lead time, or sustainability within seconds. While we don’t believe that an AI will construct a viable, safe, and technically sound bike completely by itself, it is a powerful tool for product managers to drastically reduce their development and research time. Or think about a mechanic, who is looking for a replacement part that is consistent with the bike mode and the machinery directive. With the right set and amount of data, AI or a software could provide a list of suitable alternatives within seconds.
Interestingly, Andre Retterath concludes in his article that “companies selling AI solutions will need to shift their business models as they’re no longer selling into IT departments, but start competing with HR budgets.” What does that mean? Software and AI are here to get jobs done and reduce the workload of yourself, your colleagues, and your employees. In an industry that is looking at a talent shortage partly resulting from people needing specialist knowledge, AI is offering a huge opportunity to fill that gap. This is not to say AI will replace humans, not at all. But you might be able to get more done with less or the same amount of expert people. An AI can monitor supply chain risks across the world, or process procurement and production data to flag risky inventory movement early on. You will always need a human to monitor and add that pinch of gut feeling across processes, but with the right amount and quality of data, AI can and will change the way we work in the industry. And the foundation for this needs to be built in 2024.
