SUSTAINABLE BUSINESS DEVELOPMENT PERSPECTIVES

Cycling industry from the perspective of green economy: current situation and the development of the industry

Vladimír Hojdik ¹ , Lucia Šinkovičová ¹

¹ University of Economics in Bratislava, Faculty of Business Management, Department of Business Economy

https://doi.org/10.5817/CZ.MUNI.P280-0197-2022-5

Abstract

The aim of the paper is to analyze and evaluate the current trends in the cycling industry and the current dynamics of the industry as a whole. The intention is also to specify the key factors influencing developments in the cycling industry and to assess possible future opportunities and risks. For the purpose of fulfilling the research aim, mainly data and materials of global economic institutions or consulting companies were used. Worldwide green incentives, popularity of environmentally friendly transportation modes or increased demand for bicycles were the main driving factors that helped the industry to grow in the economies on all continents. Moreover, based on current political, economical or environmental situation, we expect further expansion of the cycling industry, as the full potential of the bicycle transportation has yet to be reached.

Keyword: Cycling industry, Green economy, Environment

1 Introduction

Current incentives by countries around the world are closely linked to minimizing greenhouse gas emissions. Transportation sector, as one of the sectors with the greatest negative impact on the environment, is currently going through a turbulent period. Perhaps the most noticeable changes are visible within the automotive industry, where most investments are directed to electromobility or alternative fuels. Other forms of mobility which are environmentally friendly, especially cyclomobility, have also gained traction (Neun, Haubfold, 2016). This increase in popularity was particularly noticeable during pandemic times in 2020, and the entire cycling industry was riding this positive wave. Increased demand for bicycles was evident, and the number of bicycles sold reached historic highs. Overall, however, the cycling industry has faced, and is currently facing, several complications stemming from unstable global economic situation. In this paper, we address key aspects of the cycling industry from a global perspective and describe key factors that will affect its future direction.

As the central topic of the article is the cycling industry, we consider it is important to further specify this term. Cycling industry or bicycle industry is a sector of the economy that deals with the production or use of bicycles and bicycle components. Blondiau et al. (2016) state that the cycling industry mainly includes the following groups of companies:

• bicycle manufacturers

• bicycle parts manufacturers

• bicycle accessories manufacturers.

There are also other subjects interested within the industry. For optimal function of whole sector, following groups of subjects are also important (Blondiau, 2016):

• distributers

• retailers

• cycling organizations

• organizers and promoters of cycling events

• bicycle service shops.

Companies operating in the cycling industry create complex supply chains. This kind of cooperation is very important, and any disruption of cooperation causes problems on the market – for example, the current shortage of final products (including bicycles) due to the negative effects of the COVID-19 pandemic (Zhang et al., 2018).

The cycling industry as one of manufacturing industries relies heavily on the production, sale and also use of bicycles. There is a generally accepted opinion that bicycle transportation has demostrable positive effects, from different perspectives. The study, entitled "The Benefits of Cycling", states that cycling and bicycle transportation generate benefits worth 150 billion EUR a year worldwide. The vast majority of calculated benefits (90 billion EUR) are positive externalities for the environment, human health and a comprehensive mobility system. On the contrary, the European Commission's states the opposite in relation to motorized road transport, where negative externalities of EUR 800 billion per year have been estimated. The benefits of cycling mobility are most often divided into three major categories (Bullock et al., 2017):

• environmental benefits

• economic benefits

• social benefits (or socio-economic benefits)

Environmental benefits include environmental and climatic conservation, more efficient use of energy resources and positive effects on human health. Economic benefits are associated with opportunities in the business environment, investing in modern technology and saving time and space. Social benefits stem from the improvement of the social ties of the population, greater flexibility in the field of mobility, or even the interconnection of different cultures.

Figure 1

Positive impacts of cycling mobility

Note: according to ECF (2018)

Steenberghen (2007) defines specific measurable indicators to identify the value-added of cycling and bicycle transportation:

• reduction of greenhouse gas emissions, especially carbon dioxide

• reduction of total air pollution,

• noise reduction,

• saving fuels,

• higher life quality and better health of population,

• reduction of work absences due to illness,

• support of bicycle sales and a positive stimulus for the cycling industry,

• development of cycling tourism,

• improvement of road traffic flow and traffic jams reduction,

• saving resources in building and maintaining road infrastructure intended primarily for motorized transport.

2 Methods

The aim of the paper is to analyze and evaluate the current trends in the cycling industry and the current dynamics of the industry as a whole. The intention is also to specify the key factors influencing developments in the cycling industry and to assess possible future opportunities and risks. For the purpose of fulfilling the research aim, mainly data and materials of global economic institutions or consulting companies were used. These data were subsequently analyzed and discussed with respect to the defined objective of the paper.

The methodological procedure is primarily based on the use of general scientific methods – namely analysis, comparison or synthesis. In order to meet the defined aim, it was necessary to obtain relevant research data. The most important documents for the research were professional studies and databases of renowned institutions operating in the field of economics, management or market research – studies by the European Commission, Eurostat, PwC and others. The processes of analysis, comparison and synthesis were then executed, which was followed by a summary and evaluation of the current situation from the perspective of the global cycling industry development.

3 Results

3.1 General development of the industry

People use bicycles for several purposes, especially commuting or sports activities. Increasing awareness of the health benefits of cycling has contributed to increased demand for bicycle transportation. Current trends in the field of green transportation and sustainability motivate the public to use environmentally friendly forms of transport, including cycling. Industry stakeholders (mainly manufacturers) are forced to innovate their products (especially bicycles) as they need to meet the needs of a wide range of customers. The growing popularity of bicycle transport has resulted, among other things, in the expansion of shared services (bikesharing) – platforms that help to meet the growing demand for bicycle transport (Handy et al., 2017).

Consumer demand for sporting goods was extremely strong during the pandemic in 2020, especially the demand for bicycles. Transport restrictions also contributed to this – due to lockdowns around the world, there were restrictions on train, bus or public transport, which forced customers to find an alternative mode of mobility.

In 2019, the US bicycle market was worth more than 65 billion dollars. The impact of the pandemic crisis has caused unprecedented changes in the industry, with the most significant being the positive demand shock in countries around the world. Based on analyzes, the global bicycle market grew by 48.55% in 2020 (Grand View Research, 2021).

3.2 Driving factors in the industry

One of the essential factors of cycling industry development is the support of sharing services in the field of cycling. This trend is evident mainly in the US and Europe. Adequate infrastructure is being built, which is becoming a prerequisite for even more intensive use of such services. The promotion of sharing mobility will ultimately affect the growth of the whole cycling industry. Analysts predict that urbanization will be another driving force for the cycling industry. Urbanization is a global phenomenon, and moving of people from the city centres to its suburbs favours bicycle transport as a suitable mode of transport – speed, simplicity, time savings, health, environment are the main motives for the use of bicycle transport (PWC, 2021).

The growing popularity of cyclomobility is also reflected in the innovations of the final products – bicycles. Global manufacturers are currently focusing on their ability to offer bicycles for a wide range of users, regardless of age or fitness. The result of innovative processes is primarily the introduction of automatic drive in the bicycle, specifically electric. It was the electric bicycles which enabled the manufacturers to open up a new market segment, and also to target customer groups that they had not been able to reach before. Sales of electric bicycles have become an important pillar of manufacturers' success due to growing consumer demand. However, manufacturers are also emphasizing other aspects, in particular the continuous improvement of security systems to prevent bicycle theft, improvement of bicycle functionality and design innovations (Maier, 2021).

3.3 Constraining factors of the industry

One of the limiting factors of bicycle transport expansion is wide availability of alternative forms of mobility. Current transport options, such as the use of a car, bus or train, most significantly limit the development of cycling, and are expected to continue to be a limiting factor for cycling.

Another threat for the cycling industry are disruptions of global retail chains, caused by several aspects. One of them is restriction of the trade on some markets. These restrictions have affected countries around the world and have negative impact on the production processes of manufacturing companies (Li, 2019).

The development of the cycling industry may also be limited by the current prices of products – especially bicycles. Consumer demand, trade restrictions, a pandemic situation or uncertainty have caused record prices of bicycles as well as electric bicycles. Their price is too high for many potential customers to accept it and buy the product (Bullock et al., 2017).

An important fact is the quality of electric bicycles, especially electric drive capacity and battery life. Since the electric bicycle also uses battery power, it is clear that this energy must then be recharged. Charging is most often done by connecting to the power supply. Recharging an electric bicycle may not be a problem for users at home, but complications occur when the user is in the field. The potential solution could be a long-term investment in infrastructure and charging stations for electric bicycles, but at present the number of charging stations is very small, which is also proving to be an obstacle in the minds of potential customers (Liu et al., 2019).

3.4 Global markets situation

In the Asian region, the value of cycling industry reached almost 23 billion USD in 2019, mainly due to the fact that there are countries with large production capacities in Asia – China, India or Japan. In addition to production potential, the growing demand for bicycles from Asian consumers also plays a role. The Ministry of Economy, Trade and Industry of Japan (METI) reports that the value of bicycle production increased from 556.6 million to 579.6 million USD between 2017 and 2018, what is 4,1% increase (UNIDO, 2019). National and continental federations also play a role in promoting cycling - for example, the Asian Cycling Federation (ACCASIA) seeks to promote cycling through sporting and recreational cycling events and thus increase the motivation of the population to use bicycles for transport purposes (Fortune Business Insight, 2021).

Also in Europe there are growth expectations for the entire cycling industry over the next decade. In some European countries, a positive attitude of government institutions to the development of the necessary infrastructure can be observed. Building of cycle paths or construction of charging stations for electric bicycles are nowadays evident especially in Norway, Germany or the United Kingdom. It was in the British Isles in 2020 when the government proposed a massive investment into the cycling infrastructure worth of 2 billion, reflecting on the public demands in the context of the growing popularity of recreational and outdoor activities. Such investments are expected to further support the cycling industry as a whole, as cycling opportunities will be more accessible again (Fortune Business Insight, 2021).

The growth of cycling industry in the North American region is currently heavily driven by consumer demand. In the USA and Mexico in particular, an increase in customer consumption of outdoor equipment and bicycles can be observed. According to data presented by US government economic institutions, the outdoor equipment market reached a value of almost 460 billion USD in 2019. A separate category is the electric bicycle market, which is expanding rapidly in Canada and the United States and is an important pillar for the expansion of the whole industry. (PWC, 2021)

In South America, the growth of the cycling industry is based on imports, mainly to Argentina and Colombia. Between 2017 and 2018, the volume of bicycles imported to Argentina increased from 17.1 to 22.1 million units. Similar trend has also been reflected in Brazil, where bicycle transport is already preferred option for urban transport, and where the sales of folding city bicycles increased rapidly (Fortune Business Insight, 2021).

3.5 Bicycle production in the EU countries

In 2019, a total of 11,4 million bicycles were produced in the countries of the European Union. This is a 5% increase compared to 2018 and a 10% increase compared to 2014. In the last decade, the highest number of bicycles were produced in 2015 – a total of 13,7 million units, which was 17% more than in 2019 (Eurostat, 2022).

Among the EU countries, the largest producer in 2019 was Portugal, where 2.7 million units were produced. Italy ranks in the second place with the production of 2,1 million units while Germany follows as the third biggest producer with 1,5 million units of bicycles. Poland (0,9 million) and the Netherlands (0,7 million) complete the elite five countries from perspective of bicycle production. The following table clearly illustrates the development of bicycle production in the countries of the European Union in recent years (Eurostat, 2022).

Table 1

Bicycle production in selected countries of European Union

Note: according to Eurostat (2022)

The data show that the situation in the monitored countries has been changing over the last 5 years. A big change can be observed in Portugal, which is the current leader in bicycle production. While in 2015 Portugal produced 1,5 million units, in 2019 it was over 3,1 million units, what means that production volume increased more than 100%. We can also see a significant expansion of production between 2015 and 2019 in Slovakia, where it was an increase of almost 42%. Same applies also for Czech Republic – the volume of bicycles produced between 2015 and 2019 increased by about 13%.

While production has increased in the above-mentioned states, there are also countries with opposite trend – and most notably Italy. In 2015, Italy was by far the largest producer of bicycles with more than 4,7 million manufactured units. In the following years, there was a significant slump to 2,1 million units in 2019, which means an almost 56% decrease in production volume. Among the other countries where the production has decreased there is Poland, Netherlands, Bulgaria, Romania and Hungary – we can see that the number of bicycles manufactured has decrased, but the decline is not as sharp as in the case of Italy.

4 Discussion

Cycling industry has found itself in unstable times, which bring together wide variety of opportunities but even threats. The numbers of global bicycle sales, however, support the optimistic view to the future, and we think that there is still a lot of potential for market saturation. Nowadays, potential customers have many opportunities for bike purchase, and even people with health problems may use electric bicycles. Global pressures for increased use of green transportation modes caused that electric bicycles emerged as potentially the strongest segment of cycling industry, which also translated into higher popularity of cycling transportation (Wrighton, Reiter, 2016).

Although we are currently observing an increase in sales of electric bicycles, expectations of experts to the future still favour using of conventional bicycles (without automated propulsion). The production of conventional bicycles is much less demanding than the production of electric bicycles, especially in terms of costs involved. Moreover, conventional bicycles are associated with lower repair and maintenance costs (Van den Steen et al., 2022).

However, the electric bicycle segment will continue to grow, mainly due to the increased availability of technologically modern electric bicycles on the market. The application of new technologies and innovations to electric bicycles means an increase in attractiveness from the point of view of potential customers – modern electric bicycles significantly reduce the effort expended and they may be used not only for transport but also for recreational activities.

Cycling industry development has been influenced by many factors, but among those with the highest impact we could include following (PWC, 2021):

• consumer’ investments to bicycle and accessories

• open-air leisure as part of healthy lifestyle

• investments to dedicated cycling lanes and infrastructure

• increased preference of endurance sports

• bike sharing systems diffusion

All of previously mentioned factors partially contributed to cycling industry change, especially after critical year of 2020, when the outbreak of pandemic disrupted well established processes. During the COVID-19 pandemic people avoided public transportation and were encouraged to use alternative transportation modes, including cycling. Thus, the demand for bicycles and accessories increased and people started using bicycles more frequently. Cycling, together with some other outdoor activities gained traction in times of social distancing, when the majority of sport facilities were closed (for example gyms). Preference for cycling is a consequence of current lifestyle, as people are negatively affected by screen-time fatigue – cycling is a way how spend time open-air and escape from computers or other devices. Bike-sharing saw an increase in cities worldwide, partially to avoid public transport but also to use sustainable transporation modes. All things considered, we can state that cycling industry as a whole is on of the sectors, which were positively impacted by COVID-19 outbreak (Maier, 2021).

5 Conclusion

In the paper, we characterised specifics of cycling industry and presented the current situation on various markets. The main objective of the paper was to determine and discuss key factors influencing the development of the industry. We can conclude, that despite turbulent times, cycling industry is among the sectors which were not seriously harmed by the spread of COVID-19 pandemic. Worldwide green incentives, popularity of environmentally friendly transportation modes or increased demand for bicycles were the main driving factors that helped the industry to grow in the economies on all continents. Moreover, based on current political, economical or environmental situation, we expect further expansion of the cycling industry, as the full potential of the bicycle transportation has yet to be reached.

Acknowledgement

This paper is the partial output of following scientific grants: grant VEGA no. 1/0646/20 „Diffusion and consequences of green innovations in imperfect competition markets“ (50%) and the internal grant project of the University of Economics in Bratislava (Faculty of Business Management) no. I-22-109-00 called “Sustainable transport and its impact on the business environment of Slovak republic“ (50%).

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Corresponding author

Ing. Vladimír Hojdik, PhD.

University of Economics in Bratislava

Faculty of Business Management

Department of Business Economy

Dolnozemská cesta 1/b

852 35 Bratislava

Slovenská republika

e-mail: vladimir.hojdik@euba.sk