Bike boom - is it over?

[dave303e]

9 minutes ago, 117 said:

When last did you ask for a price on a Titan? Sorry to knock them but they aint cheap either and are also enjoying the high price bracket into 6 figures. I can share a quote with you if you like? 

The 'premium' brands only bring in limited stock so they are not left with too many on the shelves at the end of a season - its us that blame a short supply. And Sworks, in my opinion, is above the premium level (crazy) so you have to be prepared to part with a lot more ronts just to have that sticker on the frame just to be cooler than the kid next door. 

I think if you compare apples for apples on the high end price bracket, you'd find you get many similar spec bikes. The only differece is some have a higher re-sale value than others

The other side of the boom comes in with the 2nd hand market being driven by coin hungry dealers that are riding the wave. Ive seen a friend recently pay about 18k more for a 2nd hand bike than what it was actually worth.. and thats from a well know dealer off this hub. 

The point is that to eclipse the boom it needs to have a hair cut first, and with credit being so readily handed out to any Tom, Brett and Mary - it tends to exacerbate the situation into keeping it boomed. Its crazy, you can get finance for a 2nd hand frame these days... and people take it!

Go watch a movie on Netflix called The Big Short - that'll give you a very good perspective on the boom (its a dark comedy too, so it does have some humour in it), but you'll be able to substitute the characters for brands/suppliers/ dealers to get a better perspective 

Take a titan Cypher RS Carbon Pro R80k vs a Specialised Epic Comp R89k.

The cypher has carbon rims- epic has aluminum

Cypher has a better fork

Cypher has  GX ASX vs GX cable on the epic.

Carbon handlebars and seat post vs the epic alloy.

https://titanracingbikes.com/bikes/cypher-rs-carbon-pro/

https://www.specialized.com/za/en/epic-comp/p/199644?color=320002-199644

So it is 10k more for lesser components? Easy decision for me to go with the titan, far better value for money.

 

[throttles]

Definately @dave303e.. Don't forget the multiuser warranty..

[BuffsVintageBikes]

Well if you listen to the reps, the boom is definitely over. Parts orders down and shops struggling to keep doors open. Some service shops still doing okay but there's so much competition in the retail sector between online and brick for lower prices that LBS are suffering.

The middle class is feeling the pinch, it had to happen sooner or later and luxury items are the first things to get scratched off the shopping list.

[Shebeen]

3 hours ago, Paul Ruinaard said:

Hmm many things - i remember the PC going under $ 1k which was a massive revelation. Tech in general and Moores law etc - the power has steadily increased and the price dropped of all your home goods when compared to what was seen as a luxury. Accessibility to air travel etc etc etc. People commute on aircraft like they used to catch a bus.

Macro trends always dictate that luxury goods also have no inherent value so are really just marketing - diamonds, gold, high end cars, watches etc. All of them tell the time, provide transport or some functionality that can be achieved much cheaper. Same with bicycles, which the Europeans get. the same steel or ally framed road bikes that are a third of the price even nicely specced do 99% of the job for the same task. Its us who is easily conned in to believing there is extra value in luxury. You dont need it.

Great post.

Some stuff has easily got relatively cheaper, A fridge for example 40 years ago was an expense that was probably 4/5 average paycheques and there were only a handful of models available anyway. Now you can buy a decent one from a wide range (the very fancy ones do still cost 4/5 paycheques). The thing is, some widget could go in the compressor after 4 years and the warranty/replacement part doesn't exist so it gets scrapped for another affordable one. the old fridges lasted for decades.

My old roommate from varsity lived on a farm in the groot karoo. His dad once told me about how inflation has affected him. In the 70s, the value of a new hilux was ~40 sheep. now it is ~150 sheep (I forget the exact figures, and you need to acknowledge that the vehicle has got a lot more into it these days). To replace the fencing on the farm would now cost more than what the entire property is worth.

I'd be interested to see what the spending patterns on south africans are for vehicles. For middle class and up I could see us being in the top10 worldwide for buying cars way above affordability levels. 

[LazyTrailRider]

4 minutes ago, Shebeen said:

I'd be interested to see what the spending patterns on south africans are for vehicles. For middle class and up I could see us being in the top10 worldwide for buying cars way above affordability levels. 

Vehicle affordability has always been a fascinating topic for me. As South Africans continue to become gradually poorer in real terms (this is unfortunately the reality) I find myself looking at specifically new vehicles on the roads in and around different neighbourhoods, wondering what the annual income to cost ratio is for each I see. I know it's not as simple as that (there are a million factors which affect each household's affordability besides annual income), but it's a nice starting point for a generalised comparison.

Let's use my baseline: I drive a car which cost roughly 1/4 my annual income. I financed 50% of it at first because I only had about 70% of the cost available in cash I was willing to free up at that stage, but after a year the figures weren't making sense so I paid it off. Regardless, the 25% of annual is a comfortable cost to me.

When I see people in their late 20s driving new Polos (which now cost R300-R400k), my brain by habit converts it to "surely this person can't at their age be earning R1.2m-R1.6m/year?" This habit also kicks in when I see someone I know who is a director of a fellow software dev house in his brand new Disco 5 (which are now R1.5m-R2m): I think "hang on, is he making R6m/year?"

Yes, again I know it's not that simple because base living costs as a percentage reduce as you earn more, but then I'm also thinking "he's not parking that Disco 5 in the garage of house which only costs R4m..."

My wife has said several times I need to start an podcast series where I chat to people (anonymously) about the cars they drive and what their financial situation looks like to be able to afford it, from cheapies to ultra-luxury vehicles. I think it could be a fascinating read/listen!

[mikkelz]

Balloon payments. 🎈🙈

[LazyTrailRider]

6 minutes ago, mikkelz said:

Balloon payments. 🎈🙈

Cashflow is very different to overall affordability. Even with a 30% residual (R210k) and a R100k cash deposit, a R700k "family crossover" is almost R10k/month over 72 months. Say it's worth R210k after 72 months, when the person trades it in they have zero, so they've lost that R100k they put in. Basically, it's not repeatable unless they had enough income to not need the residual in the first place...

The question is actually: How are people paying for R1m vehicles *while* also saving for retirement? Just paying for it and continually being in a finance loop is one thing, but where does the investment income come from?

[The Ouzo]

13 minutes ago, LazyTrailRider said:

Vehicle affordability has always been a fascinating topic for me. As South Africans continue to become gradually poorer in real terms (this is unfortunately the reality) I find myself looking at specifically new vehicles on the roads in and around different neighbourhoods, wondering what the annual income to cost ratio is for each I see. I know it's not as simple as that (there are a million factors which affect each household's affordability besides annual income), but it's a nice starting point for a generalised comparison.

Let's use my baseline: I drive a car which cost roughly 1/4 my annual income. I financed 50% of it at first because I only had about 70% of the cost available in cash I was willing to free up at that stage, but after a year the figures weren't making sense so I paid it off. Regardless, the 25% of annual is a comfortable cost to me.

When I see people in their late 20s driving new Polos (which now cost R300-R400k), my brain by habit converts it to "surely this person can't at their age be earning R1.2m-R1.6m/year?" This habit also kicks in when I see someone I know who is a director of a fellow software dev house in his brand new Disco 5 (which are now R1.5m-R2m): I think "hang on, is he making R6m/year?"

Yes, again I know it's not that simple because base living costs as a percentage reduce as you earn more, but then I'm also thinking "he's not parking that Disco 5 in the garage of house which only costs R4m..."

My wife has said several times I need to start an podcast series where I chat to people (anonymously) about the cars they drive and what their financial situation looks like to be able to afford it, from cheapies to ultra-luxury vehicles. I think it could be a fascinating read/listen!

Since I'm in the industry let me comment.

The banks will still only let you installment be 1/4 of your monthly income, but people are going with maximum RV values on their purchases or financing over 96 months. So your 400k polo is R6.5k per month, so they are only earning just over 300k per year.

They are however also pretty much maxed out with all other expenses so if any further outlay is required they are screwed.

 

But there is a big shift in spending patterns on vehicles. More people are going for the cheaper makes. Renault next door to us is pushing our Kwids and Kigers at an alarming rate. Yet everysingle person that walks across from them to us will comment on how crap the renault is, but they will still buy the renault over the honda because its cheap.

[The Ouzo]

1 minute ago, LazyTrailRider said:

Cashflow is very different to overall affordability. Even with a 30% residual (R210k) and a R100k cash deposit, a R700k "family crossover" is almost R10k/month over 72 months. Say it's worth R210k after 72 months, when the person trades it in they have zero, so they've lost that R100k they put in. Basically, it's not repeatable unless they had enough income to not need the residual in the first place...

The question is actually: How are people paying for R1m vehicles *while* also saving for retirement? Just paying for it and continually being in a finance loop is one thing, but where does the investment income come from?

check with those people, I can pretty much guarantee they have no retirement savings and are relying on the company pension/provident fund.

 

And you are right, the way they are financing is not sustainable. They can get away with a couple of cycles, but it soon catches up to them. Especially if they use this buying method on cars with rubbish resale values.

[Steven Knoetze (sk27)]

19 minutes ago, mikkelz said:

Balloon payments ARE FROM THE DEVIL. 🎈🙈

.........finished your sentence for you.

 

[daveno7]

On 7/26/2022 at 12:25 PM, BigDL said:

Over here, the bike shops are saying that they cannot fulfil the demand at the higher end. I was chatting to a shop owner the other day who says that custom builds are most affected, often because of not being able to get one or two components.  A mate of mine took delivery of his new bike on the weekend from Ribble. It was supposed to be delivered in March, but was delayed because they couldn't get some of the Ultegra parts to build the bike. At the same time, it seems that the biggest growing industry in the UK is Charity Food banks 

the cost of cycling oriented materials etc...be they spare parts and clothing etc has gone higher and higher.....most brands and sites are appearing to go for the top end of the market here...but they're is stock at lower price levels because people don't have the money to spend....things are tight up here in the northern hemisphere as well...

[LazyTrailRider]

Thanks for the inside info @ouzo

6 minutes ago, ouzo said:

So your 400k polo is R6.5k per month, so they are only earning just over 300k per year

😶 I spent that much on a car payment when I was earning 4x that... Which very interestingly ties in with the sense I get that a large percentage of the population finances vehicles valued at least equal to their annual income, when my baseline is flipped around.

Crazy.

Edited July 27, 2022 by LazyTrailRider
Typo

[Rowl]

25 minutes ago, LazyTrailRider said:

Vehicle affordability has always been a fascinating topic for me. As South Africans continue to become gradually poorer in real terms (this is unfortunately the reality) I find myself looking at specifically new vehicles on the roads in and around different neighbourhoods, wondering what the annual income to cost ratio is for each I see. I know it's not as simple as that (there are a million factors which affect each household's affordability besides annual income), but it's a nice starting point for a generalised comparison.

Let's use my baseline: I drive a car which cost roughly 1/4 my annual income. I financed 50% of it at first because I only had about 70% of the cost available in cash I was willing to free up at that stage, but after a year the figures weren't making sense so I paid it off. Regardless, the 25% of annual is a comfortable cost to me.

When I see people in their late 20s driving new Polos (which now cost R300-R400k), my brain by habit converts it to "surely this person can't at their age be earning R1.2m-R1.6m/year?" This habit also kicks in when I see someone I know who is a director of a fellow software dev house in his brand new Disco 5 (which are now R1.5m-R2m): I think "hang on, is he making R6m/year?"

Yes, again I know it's not that simple because base living costs as a percentage reduce as you earn more, but then I'm also thinking "he's not parking that Disco 5 in the garage of house which only costs R4m..."

My wife has said several times I need to start an podcast series where I chat to people (anonymously) about the cars they drive and what their financial situation looks like to be able to afford it, from cheapies to ultra-luxury vehicles. I think it could be a fascinating read/listen!

I'd definitely want to know how peeps 'afford' those shiny new D5s or the Defenders. I unfortunately can't and would have to consider 10yr old D4s to be able to afford the same type of car.

 

To relate this to bicycles, how many new mid to high-level bikes are being financed? A new R100k+ bike surely means that a person earns 10x that per year hopefully? How frequently do these bikes get swapped etc? I know of two people in my circle who financed bikes🤨

[Rowl]

4 minutes ago, daveno7 said:

the cost of cycling oriented materials etc...be they spare parts and clothing etc has gone higher and higher.....most brands and sites are appearing to go for the top end of the market here...but they're is stock at lower price levels because people don't have the money to spend....things are tight up here in the northern hemisphere as well...

The cycling apparel and clothing market being a good example for me, the cheapest Ciovita sportfit cycling shirt is R1k, pre-pandemic it was in the region of R5/600. I feel this is both supply and demand side inflation in play.

[DIPSLICK]

no conversations about new bikes and X amount makes sense anymore IMHO

financed or paid cash, I have some new bikes and a couple of steel frame pimped  Ritcheys and Niners,,,, I use the old steel bikes by far the most, I have said it a few times this time I will stick to it,,,,no more new bikes,,,it makes no sense, 

 

[daveno7]

1 minute ago, Roul said:

The cycling apparel and clothing market being a good example for me, the cheapest Ciovita sportfit cycling shirt is R1k, pre-pandemic it was in the region of R5/600. I feel this is both supply and demand side inflation in play.

when I was coming back into SA...I always compared prices...SA has been always been a  bit more for parts etc...but having some Ciovita kit...I think it was worth it...the balance of getting affordable cycling kit v expensive in SA has always been tricky...but prices as you said...the supply and demand factor...as a rule SA has been limited by choice...its a balance...