# How much does the bike manufacturer make?



## mchristie (Jun 7, 2007)

Can anyone tell me..

When a bike is manufactured and sold, how much profit is the bike company making?
For example, it the bike is sold to a dealer for 1000$, how much would it have cost the company for everything that went into manufacturing the bike?

Thanks


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## bikesdirect (Sep 9, 2006)

mchristie said:


> Can anyone tell me..
> 
> When a bike is manufactured and sold, how much profit is the bike company making?
> For example, it the bike is sold to a dealer for 1000$, how much would it have cost the company for everything that went into manufacturing the bike?
> ...


I think you are looking for amount from cost of manufacture to retail selling price
Is that correct?

Most bikes in LBS sell for about 3 times the cost to manufacture the bike. There are lots of distribution costs along the way; like with most products.


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## MB1 (Jan 27, 2004)

Cost and profit are 2 different things.

You can figure the invoice cost to the distributor (bikes are generally sold through distributors although once in a while on some models the distributor is the manufacturer as in the high end Treks) is going to be about 1/2 to 2/3 of the cost to the bike shop who might add on another 1/3 if they are lucky and good.


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## ibhim (Oct 28, 2002)

Difficult to answer as most are privately held corporations, trek, cannondale, etc, so they don't have to publicly report earnings.

Some are easy - Airborne/Flight - bankrupt.
Others financial difficuties/issues become news items - American Bicycle Group (Litespeed, Merlin, QuantaRoo, Real Design) cash infusion by private capital group.

Publically held bicycle groups are part of a larger corporation so need to take a look at their contibution to the corporation. Huffy went from an independent, sold to Russell Corpotation (Russell Athletics, Spalding, Brooks) in 2004 which then was acquired by Berkshire Hathaway in 2006. Another example, Pacific Cycle is owned by Dorel which has everything from child car seats to office furniture. Pacific Cycle is their Recreational/Leisure Division.

Recreational/Leisure
Pacific Cycle: Pacific Cycle is a leader in the design, marketing and distribution of high quality, branded bicycles and other recreational products. Popular brands include Schwinn, Mongoose, GT, Roadmaster, InSTEP and Playsafe. 
Market Position: Through Pacific Cycle, Dorel sells more bicycles than any other North American company with a 30% share of total US bicycle sales, including 44% of the bicycle sales in the mass merchant sector. With 88% market awareness, Schwinn is an American icon dating back to 1895 and has a reputation for delivering high quality bicycles. The division markets its higher price-point, branded bicycles to retailers who are increasingly going in a brand direction.
Pacific Cycle is building on its base of recreational products with items such as Schwinn gas-powered motor scooters, back yard recreational products, a line of efficient electric bicycles and electric ride-on-toys.

Which leads to their profitability contribution to Dorel...
• Pacific Cycle’s third quarter revenue was up 2.3% to US$81.3 million while earnings from operations declined 10% to US$6.0 million.
• For the nine months earnings from operations rose 35.2% to US$27.1 million. The year to-date progress underlines the benefits of Pacific’s strategy of strong and exclusive branding.
http://www.dorel.com/press/2007/DII_Q3_07_FS_vf.pdf


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## danl1 (Jul 23, 2005)

It is unanswerable. 
The company itself doesn't have a perfect answer, only some averages.
Given a company that involves itself with R&D, and the answer is muddy at best. You don't know how much it cost per bike until you go out of business.
There is no single answer. The very top-line bikes have surprisingly small margins, as do the very cheap ones. The meat in the middle is where the money (as a percentage and as a total $) comes from.

All considered, margins are likely in the low teens. Less, they couldn't stay in business. More, and everyone would be making bicycles.


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## bikesdirect (Sep 9, 2006)

danl1 said:


> It is unanswerable.
> The company itself doesn't have a perfect answer, only some averages.
> Given a company that involves itself with R&D, and the answer is muddy at best. You don't know how much it cost per bike until you go out of business.
> There is no single answer. The very top-line bikes have surprisingly small margins, as do the very cheap ones. The meat in the middle is where the money (as a percentage and as a total $) comes from.
> ...


Correct - no perfect answer
but the rule of thumb for years has been 3 times FOB is about right for MSRP
so what an importer pays for the bikes times 3 is close to what the consumer pays.
Does not work on every model; so higher; some lower; but that is about average

I have no idea why this question is out there
but that is about the ratio


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## bikerneil (Nov 3, 2007)

I agree that it's a tough question to answer. When you say "cost" are you considering the bike company's insurance costs, medical benefits for its employees, workers compensation insurance, advertising costs, cost of inventory, cost of obsolete inventory, theft, salaries, taxes, rent, and then all the material costs?? I would be surprised if their gross margins are much over 10%.

That's like asking how much does Starbuck's make on a cup of coffee. Fact is their biggest expense is not the coffee beans.... it's the medical insurance for their employees.


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## terzo rene (Mar 23, 2002)

Fact is that's not a fact. Salaries are more than the medical insurance and all other benefits put together. Retail rent, especially for a more upscale storefront like starbucks, is generally at least double benefit costs too.

Manufacturers can generally maintain a higher gross profit over time because the costs of entry into the business, and therefore risk in doing so, are so high. Starting up an internet retail store is one thing, building a modern factory is another altogether and margins will tend to reflect that disparity.


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## Kerry Irons (Feb 25, 2002)

*Nonsense numbers*



bikerneil said:


> That's like asking how much does Starbuck's make on a cup of coffee. Fact is their biggest expense is not the coffee beans.... it's the medical insurance for their employees.


So, you're saying that they pay more "per hour" for employee insurance than they do in actual wages? How could that be? Typically, "fringe benefits," which includes insurance, vacation, pension accrual, etc. are around 30-40% of base pay. For every $100 the employee earns, the company has to set aside/pay out between $30 and $40. There's just no way that medical insurance costs could be a bigger number than wages, especially considering that a place like Starbucks would tend to have a high percentage of part time workers (i.e. people who don't get benefits). 

It's makes a great story to state these things, but it can't be true.


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## Forrest Root (Dec 22, 2006)

What they make is whatever is left from all the money they've received after they've paid all of their expenses.


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## jhamlin38 (Oct 29, 2005)

Good question. Unfortunately, I don't think they make enough. Of the bike, that is. Itd be noce if more of the brands made more of their own product, rather than sub it out


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## acckids (Jan 2, 2003)

I bought my 2006 Trek Pilot 2.1 for $1300. Due to a new young shop employee, I was able to see the screen showing the dealer cost was $914. So, how much did Trek Inc make? Only they know and they ain't tell'in.


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## roadgalatin (Aug 25, 2007)

How much does a manufacturer make? Lets take a Look..where is the Colnago Dream made? Where is the Orbea Orca produced? Where is Kestrel Evoke made? Italian frame companies, spanish companies, even Kestrel which began in Arkansas relocated. Well there is a reason that most bikes are being produced in Taiwan and China..they make ALOT. Heck there are a few manufactures that make numerous carbon bikes all in the same factory for different companies...take for example Giant, Token, BH..all the same factory just using different companies geometry. Dont get me wrong..there are some nice framesets being made in the east but I just leave feeling a little disenchanted..when you want an Italian bike..you want it made in Italy. I ride Look (381 and a 386) both actually produced in France. Here is another kicker..even Looks are for the most part being produced in Tunisia and also Asia. There is a reason..because its more cost effective.


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## Forrest Root (Dec 22, 2006)

roadgalatin said:


> How much does a manufacturer make? Lets take a Look..where is the Colnago Dream made? Where is the Orbea Orca produced? Where is Kestrel Evoke made? Italian frame companies, spanish companies, even Kestrel which began in Arkansas relocated. Well there is a reason that most bikes are being produced in Taiwan and China..they make ALOT. Heck there are a few manufactures that make numerous carbon bikes all in the same factory for different companies...take for example Giant, Token, BH..all the same factory just using different companies geometry. Dont get me wrong..there are some nice framesets being made in the east but I just leave feeling a little disenchanted..when you want an Italian bike..you want it made in Italy. I ride Look (381 and a 386) both actually produced in France. Here is another kicker..even Looks are for the most part being produced in Tunisia and also Asia. There is a reason..because its more cost effective.



I'd be disenchanted, too, if I made the same unstubstantiated claims about how much manufacturers make. You have no idea how much they make. As mentioned elsewhere, here, a manufacturer has a lot of parties that have to be paid, a lot of expenses.


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## roadgalatin (Aug 25, 2007)

What is "unstubstantiated"??? is this another term for being argumentative


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## Cruzer2424 (Feb 8, 2005)

mchristie said:


> Can anyone tell me..
> 
> When a bike is manufactured and sold, how much profit is the bike company making?
> For example, it the bike is sold to a dealer for 1000$, how much would it have cost the company for everything that went into manufacturing the bike?
> ...


Hmm... So I was told by an industry employee that a part that retails for $700 ... after it lands in the US after being shipped/manufactured/taxed.... etc etc... costs the company roughly $240. 

and no, i'm not telling what company, or what part.

I'm sure you can extrapolate about what a bike would cost...


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## bikesdirect (Sep 9, 2006)

Cruzer2424 said:


> Hmm... So I was told by an industry employee that a part that retails for $700 ... after it lands in the US after being shipped/manufactured/taxed.... etc etc... costs the company roughly $240.
> 
> and no, i'm not telling what company, or what part.
> 
> I'm sure you can extrapolate about what a bike would cost...


This is hard to answer without knowing which part
There are some parts that have retail list of $700 that cost UNDER $100
There are others that would cost closer to $200 -- but $240 would be kind of high


Really question is: what can you buy it for - I would think

happy trails


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