Current Tariff Legislation is Hurting our Industry

Several major product categories that are sold within the Australian bicycle industry are subject to import tariffs. These are federally imposed taxes paid for by the importer.

But because importers need to make a sustainable profit, they must pass these higher prices on to the retailers and that ultimately makes these goods more expensive for Australian consumers to buy.

Tariffs are supposed to protect local manufacturers from overseas competition. Whether you agree with this concept or not is largely a political decision.

In my opinion, history has shown that the lower the barriers to international trade, the more jobs are created and more prosperity that ensues for both the exporting and importing nation.

But the bigger problem for our industry comes when there is no minimum threshold in the legislation to determine what constitutes a reasonable level of local manufacture that warrants protecting.

In the case of ebikes, which has also been the case with other bicycle industry product categories, a tariff may be in place, but if there is no local manufacture or local manufacturers do not ‘rock the boat’, then a tariff concession order can be made so that importers do not have to pay that tariff.

But if a manufacturer subsequently starts Australian production or an existing Australian manufacturer decides to take action, they can apply for that tariff concession order to be revoked.

So, as we’ve just seen with the case of ebikes, there’s nothing to stop a company, Stealth Electric Bikes, that claims to have sold just 90 of the relevant street legal 250 watt ebike model in Australia over the past year (being 30% of their estimated 300 total production), applying for an existing tariff concession order to be removed. This means that many thousands of imported ebikes are now subject to a 5% tariff that did not have to be paid previously.

I hasten to add that Stealth made a logical decision that made economic sense for them. Stealth have acted entirely within their legal rights and this opinion piece is in no way a criticism of Stealth, or any other company that chooses to exercise legal rights. The problem is not with them, but the federal government regulations.

The bottom line is that Australian consumers will are now paying anything from about $150 to $700 more for their ebikes, depending upon their retail value.

This has a significant effect on our industry and I would argue a net negative impact upon jobs.

How many people would be employed for a year to make the 90 ebikes that now have a 5% price advantage? A bare handful at most.

But importing versus local manufacture is not an ‘all or nothing’ scenario when it comes to value added. Firstly the locally manufactured bikes have imported components, so not all of their value is created locally. According to Stealth’s website, the Stealth P-7 retails for between $5,400 and $6,000 depending upon the specifications chosen by the customer. Even if the imported components which include the wheels, fork, drivetrain and brakes, came to only 10% of the total value and everyone bought the highest priced version, that would still only equate to $486,000 of locally generated business ($6,000 per bike less 10% = $5,400 x 90 bikes)

Meanwhile, the difference between the landed and retail cost of imported ebikes is typically around 50%. So half of the final retail price creates local income and jobs within Australia in terms of wholesale and retail margins, storage, freight, assembly and on. Not to mention future servicing and sales of parts and accessories.

Based upon data that we previously published here 20 Australian ebike importers imported a combined 27,500 ebikes last financial year. We don’t know the total number imported from all the companies who did not take part in the data collection and we don’t know the number imported from those countries where the tariff concession order was in place (mainly Europe and Taiwan) but I suggest that reasonable estimates are that it would entail about 20,000 bikes with an average retail value of $4,000.

If the local value add is 50%, that’s $2,000 per bike or $40,000,000 in total, which is 82 times more than the value add from the 90 locally manufactured ebikes sold in Australia.

So we’ve adversely impacted $40,000,000 of local economic activity to protect just over 1% of that amount, $486,000. That does not make good economic sense.

To make matters worse, there is currently no requirement for the government to consult with our industry before taking such a harmful step of revoking a tariff concession order. In fact, industry members received minimal advance notice which gave them no real time to budget for the serious adverse impact of this change.

So now the federal government is now milking our industry for millions of dollars per year in additional tariffs, all of which goes into consolidated revenue and none of which is coming back to us, either directly or through strategic funding to grow cycling.

This ebike tariff is on a game changing product that is not only boosting the viability of our industry, but is a great answer for many of our nation’s most expensive and growing problems such as declining health, increasing obesity, keeping our ageing population mobile, increased traffic congestion and climate change to name just a few.

Our federal government certainly should not be taxing such a beneficial product. Not only should they remove the tariff permanently, but they should be following the lead of other, more enlightened nations and be offering incentives for people to buy more bicycles of all kinds, not only ebikes.

Yes, we’re a small industry compared to others and it’s hard to get our voice heard by the decision makers in Canberra, but we need to successfully campaign for import tariffs on all bicycles to be removed. Then we would no longer be at the mercy of any single Australian manufacturer, however small, being able to adversely impact the entire industry without warning.