Rad Power Bikes has gone from a handful of employees to 75 as swiftly and smoothly as an electric bicycle climbing Capitol Hill, but the Seattle company and others in the growing e-bike sector now face the financial equivalent of tacks scattered on the roadway.
A new round of 25 percent tariffs imposed by the Trump administration on numerous imports from China is scheduled to take effect Thursday.
Rad, which designs its bikes here but has them built in China, says it will soften the financial pain for consumers by absorbing nearly half the blow itself. Its $1,499 bikes will cost buyers $200 more as of Aug. 23 – but the other $175 required to pay that 25 percent tariff will come out of Rad’s pocket.
It’s a significant hit all around, said co-founder Mike Radenbaugh. “Our margins decrease, our customers are more reluctant to purchase, and we have to spend more on marketing” to woo those customers.
What frustrates Radenbaugh and his fellow founder Ty Collins is that in their view, the tariff on their product is not protecting a significant U.S. manufacturing base or forestalling a Chinese advance to dominate some new sector of technology – the arguments generally given for the Trump administration’s widening tariff battle with China.
“All the technology in electric bikes is mature technology already,” said Radenbaugh, so “there’s no connection to what they are trying to achieve.”
Radenbaugh and Collins, age 28 and 30 respectively, say their business model of selling directly to consumers without dealers or middlemen enables a good balance between quality and price.
“We’re bringing in a low-cost affordable form of transportation, approachable to the vast majority of people,” Radenbaugh said. “We’ve cracked the code with manufacturing overseas where there’s an efficient supply chain, and 100 percent localized customer service and technical support.”
The market has been receptive: Rad Power Bikes says that after sales grew 350 percent last year, it expects to top $50 million this year despite the scheduled tariff crimping the final months.
Radenbaugh won’t give specific numbers but says the company has sold “tens of thousands” of bikes and “greatly outsells” any U.S. competitor in a field that grew to 300,000 bikes last year. A bit of math suggests that $50 million in sales of $1,500 e-bikes would amount to more than 33,000 units.
But the tariffs will be “very impactful for 2019,” he says. And other e-bike sellers, with dealers who must also pass along their increased costs, could suffer even more, Collins said.
Not everyone in the industry is equally anxious, including Jim Turner, founder and president of Colorado-based Optibike. “I don’t think it’s going to impact us,” he said, because while his company’s bikes incorporate some imported parts, “we build and assemble them here.”
He acknowledges he’s going after a different crowd with e-bikes that start at $3,995 and include an Elite series ranging upward from $11,990. “We’re more of a boutique, trying to build a high-performance bike rather than a mass-market bike,” Turner said.
Rad’s co-founders say building their more affordable bikes in the U.S. is not a viable option. “There’s never been any supply chain that’s domestically based for electric bikes, there’s no infrastructure, there’s no trained labor,” says Radenbaugh.
This past week reports surfaced that new talks are planned between mid-level U.S. and Chinese trade officials, for the first time since June.
Meanwhile, PeopleForBikes.org, an industry lobbying group that’s also supported by REI, is collecting signatures on a petition asking for e-bikes to be removed from the upcoming round of U.S. tariffs.
But Radenbaugh, who said the U.S. Trade Representative gave perfunctory treatment to earlier input from the e-bike industry, is not optimistic that any of those efforts will change the outlook anytime soon.
“It’s just hyper-unlikely because of the political climate,” he said.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.