Reshoring bicycle production in Central and Eastern Europe: What’s the status?

The reshoring of European bicycle production continues to gain momentum as demand grows and supplies tighten. Central and Eastern Europe (CEE) is seeing an influx of big and mid-scale players entering the market. With an untapped workforce and attractive subsidies, Bike Europe explores the current state of e-bike and bicycle production capabilities in the region.

The introduction of anti-dumping duties on Chinese-made e-bikes in 2019, has been a catalyst for change in terms of bicycle production in Europe. This has now been escalated by the well-documented effect of the Covid-19 pandemic on the supply chain and logistics. “The Central and Eastern European (CEE) bicycle production landscape has seen an amazing growth curve,” explains Daniel Antal, founder of Ebikexperts (Marvelo Europe Ltd.), a consultancy firm operating in the region. “Part of this is related to Decathlon and the fact they have set up production prominently in Romania, but there has been a lot of production growth in Bulgaria, as well as in Hungary, Czech Republic and Poland”.

Romania brings in large-scale producers

‘Europe’s biggest bike factory’ is how Bike Europe originally reported on Decathlon’s intentions to construct a facility in Romania in Dec 2019. It soon became clear that bicycle producer, ‘Sport Mechanical Workshop’, based in Timisoara, Romania was the company investing €30 million in the huge new production unit.?Planned to start operations in September 2021, the facility will have an annual output of 1.5 million units after the initial start-up phase.

Decathlon is not alone, in looking towards Romania for additional production facilities. In November 2021, German bicycle manufacturer, Corratec announced that it will start series production of Corratec-branded bicyles and e-bikes at a site on the outskirts of Timi?oara, Romania. This facility will add the production of 300,000 e-bike and bicycles to the output of their current factory in Raubling, Germany. Italy's Campagnolo Group has also been operating in the eastern European country for several years. The 100% Campagnolo owned subsidiary, Mechrom Industry, expanded operations in late 2019 with a new production hall. Meanwhile, Eurosport DHS is an important employer in Romanian city Deva providing jobs to no less than 400 people. The company supplies more than 600,000 bicycles to 600 dealers in 24 countries.

Investment strategy in wake of anti-dumping

“The bulk of investment entering the CEE region is coming from Asia, and of course China,” confirms Daniel Antal. “These companies are attracted to region, first of all due to the attractive domestic and EU subsidies. Hungary for instance, has a low corporate tax rate. Secondly, the region offers a relatively large skilled workforce that these companies can pool from.”

“Local government investment agencies are doing a lot to attract these types of businesses from Asia. There are a lot of subsidies even for mid-scale producers. So, we’re not only seeing the Giant type of manufacturers entering the region, we see a lot of parts suppliers as well as smaller scale producers coming in. When the anti-dumping duties were first implemented, a lot of these smaller/mid-scale Chinese companies tried to circumvent them by trying to find partners in Europe, particularly in the East who had similar operations to their own. But what we are seeing now is that they are really thinking about investing. In China, even mid-scale companies are applying for IPO’s, to raise capital and utilise that money in order to set-up their own factories here. This was the point of the anti-dumping duties, to not only build up the industry in Europe by reshoring, but also attract new foreign direct investment, so that these companies become local employers.”?

Poland a key landing zone in CEE

Poland is one of the key landing zones in the CEE region, and there has been a lot of activity there recently. Europe’s largest bike maker, the Portuguese RTE, announced plans in 2019 for a new facility in Poland. Producing exclusively for Decathlon, the new RTE facility in Poland will be used to supply the French retail giant’s stores in Eastern Europe with close to market production. The facility is scheduled to start operations in January 2022.

The most prominent Asian market entrance into Poland came in 2019, with the Chinese motor manufacturer, Bafang. They opened a production facility in Wroclow, Poland where they intend to produce 600,000 motors and improve the company’s service level in Europe.

European producers opting for production facilities in Poland include Dutch special needs bicycle producer Van Raam, who expanded production capacity with a new facility in Wykroty, Poland in early 2021. Austrian kid’s bicycle supplier Woom moved its production from Asia to Poland in 2020 to “produce close-to-the-market… and the European market is currently by far the largest for Woom”. Wheel and component manufacturer DT Swiss, also operates a Polish division, DT Swiss Polska SP, which continues to expand its production facilities.?

Poland’s largest domestic bicycle manufacturer, Kross, has an annual capacity of 400,000 bicycles and e-bikes. In 2019, the company moved the Mutlicycle production line from the Netherlands to Poland following a take-over.

European frame production

Poland, alongside Portugal (Triangle's) and Bulgaria (Cyclegets), is the third European country with its own aluminium frame production. With a capacity of 1,500 units per day and 400,000 annually, AG Motor’s robotized aluminium frame factory is located in the East of Poland.?“For bicycle manufacturers in Europe we can reduce the lead-times from 180 days when sourcing in Asia, to only 30 days,” explained, AG Motors CEO and owner Wies?aw Marek during the opening ceremony in 2019.

“Localisation of frame production is a key motivator in the segment,” explains Daniel Antal. “You try to bring your suppliers close to you and try to insource as much of the production process as possible. Part of that is the frame production. In the past, Italy was the largest steel frame producer of bicycles and that totally disappeared with the shift to China and the appearance of aluminium frames. I think that is now coming back, and together with that, we really need to get back to our desks and learn how to design and build and manufacture frames again.”

Bulgarian Bike Valley going from strength to strength

The opening of Bulgaria’s first aluminium frame production facility near capital city, Sofia, was an important addition to the Bulgarian Bike Valley. The CycleGets factory has an operating capacity of 200,000 units. The country’s main domestic manufacturers, Leader 96, Maxcom and Cross have all invested in new production facilities recently. Leader96 invested €1.7 million in the reorganisation of its production, including a new semi-automatic powder painting shop, a new warehouse for finished goods and additional production lines. Whereas Cross has opened a new painting facility and four dedicated e-bike assembly lines.

Maxcom’s focus is on its OEM assembly operation, and in particular servicing high-end brands operating in Europe such as Bianchi, Stevens and HF Christiansen’s Winther. In July 2021, the Bulgarian bicycle manufacturer, signed an agreement with Austrian motorcycle and e-bike manufacturer, Pierer Group, for the investment of more than BGN60 million (€31 million) in a new e-bike factory in the country. This investment will make Maxcom one of the larger e-bike manufacturers in Europe.

Hungary attracting well-established players

Hungary has a history of attracting big bicycle industry names. The Dutch Accell Group opened a Hungarian subsidiary, Accell Hunland Kft., in 2001. Today, this facility manufactures almost exclusively e-bikes, with 98.5% of the annual production of 270,000 units being electrically powered. In November 2020, Accell Hunland celebrated the 3 millionth unit coming off the production line of the factory in Hungary.

In 2018, the Taiwanese Giant Group announced that it would expand its footprint in Europe by establishing a second production facility, the other being in the Netherlands, and this would be located in Hungary.?Speaking at the time Robert Esik, President of the Hungarian Investment Promotion Agency (HIPA), said “Giant’s presence in Hungary also gives the opportunity to build a strong supply chain with the involvement of local suppliers, thus contributing to the strengthening of the national bicycle industry.” Located 80km north of Budapest, the facility began operations in the second half of 2020. The total investment is expected to be €48 million, which will be invested in three phases.

Governments actively supporting a bicycle industry hub

“The Hungarian government sees the bicycle industry as a very interesting strategical sector to focus on,” confirms Daniel Antal. “The government investment agency, HIPA, wants to attract businesses to the country to form clusters, as a hub or ‘valley’ of bicycle production with many suppliers covering the whole sector. Agencies like this are now getting to understand that a bicycle is made of 100’s of parts from a multitude of suppliers. They are not only cherry-picking the producers to come in, but also that the suppliers are localised too.”

“OEM manufacturing is also growing in the CEE region,” Antal continues. “We are often approached by Asian companies to try and find large manufacturing capabilities. A lot of times the scale in which they would like to enter the European market, is not possible in current European operations. For example, 100,000 units+ annually. If the capacity isn’t there for them to do it, they think, ok, then we have to do it on our own. Then they set up their own company, with own staff, etc.”

Production output on the rise in Czech Republic

Domestic and foreign investments have also been on the rise in the Czech Republic. Local manufacturer of e-bikes, Crussis Electrobikes annoucned plans to double its production capacity in 2021 with a new facility on the outskirts of Prague. Crussis Electrobikes, which entered the e-bike market in 2013, has grown?to become one of the largest e-bike producers in the Czech Republic.?The country’s largest manufacturer, Bike Fun International (BFI), changed hands in late 2020. The company has?steadily grown its annual output to 200,000 bikes, both under its own brands, Rock Machine, Superior and Frappe, and in contract manufacturing. In the 2019/2020 fiscal year, BFI sold a total of 172,639 units; 117,474 units were for OEM’s and 55,165 units were for private label sales. The manufacturers are currently planning to expand their production capacity located in Kop?ivnice.

German distributor Hartje has invested in more production capacity, with the opening of an all new e-bike factory in the Czech Republic. “With our own location in the Czech Republic, we have created optimal conditions for e-bike production for years to come,” explains Hartje Managing Director Dirk Zwick.?In the long run, the company expects to produce 90,000 e-bikes per year.

Technological developments in the Baltics

In the Baltics, Lithuania’s only e-bike and bicycle factory, Baltik Vairas, has invested heavily in the modernisation of its e-bike production with an all-new assembly line, where 31,000 e-bikes were assembled in 2020. To increase its total e-bike and bicycle production capacity to 400,000 units, the company planned to invest a further €1.5 million in 2021. The manufacturer’s e-bike production share has hovered around 20%, but this number is expected to grow to 50%. The company exports 99.3% of its production, mainly to Germany, the Netherlands and Denmark.

Driven by the high demand for internet-of-things (IoT) devices for electric scooters and bikes, Estonia’s Comodule opened its own factory near its headquarters in Tallinn. This allows the company to produce up to 20,000 telematics devices per month. “In terms of innovation, western European nations are powerhouses in that historically, and I think they will continue to be the main divers,” explains Daniel Antal. “But that said, you see some interesting things coming from the CEE region, if you look at Greyp for instance, where there is a lot of local know-how.”

Benefits of the CEE region

“In the projected figures for the next 8-10 years, if we maintain this 80% locally produced/assembled e-bikes, then a 60,000-90,000 people workforce is going to be needed across the board, Europe-wide,” confirms Antal. “As mentioned, RTE is not only expanding in Portugal, but also coming to Poland. Accell Group is in Hungary, and it wouldn’t surprise me if Pon Group also looks towards the region. Obviously a big factor is the wages. A line worker in the region would have a salary of €1300-1500 gross, whereas in Gazelle, in the Netherlands, for example this is likely to be double. This is very attractive to a lot of the investors entering the region.”

“Of course, companies are coming to the CEE region to maximise their profits, and not pass any savings on to the end user. We are seeing now with the price of raw materials and energy resources, that these are triggers for companies to try and reduce their production costs. One of the ways to do that is to manage the things you can control such as price of wages in the assembly process. The supply chain issues of the last couple of years has triggered a new way of thinking of how we set up our supply chain and particularly in a complex product like a bicycle. There is a lot opportunity to have parts production in the Europe and the CEE region can certainly play more of a role in this development,” concludes Daniel Antal.

Daniel Antal originally presented some of his material at the Ebike Future Conference in November 2021.?