Brexit price rises - Canyon covers some costs but UK buyers will still pay more

Yes, exactly. Tarrif on the components imported to EU, and another 14% tarrif from EU to UK. 

so the solution could be for Canyon to send frames and components direct to the UK and assemble here. They have a UK presence, but it's just a sales office at the moment.

... I'm not sure that Canyon would move jobs from Germany to the UK to eliminate a UK import tax to UK consumers - unless it were possible to profit from a share of the saving, which in turn would depend on volumes.  Siemens does it with windfarms!

If a Canyon will now cost 14% more in the UK then Canyon will likely lose significant market share to Ribble etc.

Moving any of the assembly process to the UK would reduce that % difference and therefore lead to greater market share.

It all comes down to whether the sums add up for a UK factory.

Rich_cb wrote:

If a Canyon will now cost 14% more in the UK then Canyon will likely lose significant market share to Ribble etc. Moving any of the assembly process to the UK would reduce that % difference and therefore lead to greater market share. It all comes down to whether the sums add up for a UK factory.

TBH they im theory could but they would probably be put off by the corporate tax they would incur. They are more likely to just carry on and cut us loose. If anyone wants to buy a bike their model will still be cheaper if it hits all the other brands that are based in the EU. Even a Trek and Specialzied are built up into complete bikes in  the EU so incur the tax. What you have to ask is, Are all these companies that bothered about the UK over the aggro it causes them? I think Canyon will quite happlily survive as a brand without UK sales. 

There was a road.cc article about this and I think the Specialized spokesperson said that they import directly into the UK so would be unaffected.

Imagine that if they can do it all other similarly sized brands will follow.

I'm not sure I follow on the corporate tax front, why would they pay more tax to have a small factory based in the UK?

UK manufacturers and shops might also decided to adjust the UK prices upwards, because they don't have to compete with the previous cheap prices from Canyon and others.

bluefuzzer wrote:

.... Strange this wasn’t mentioned in the Brexit vote.

If they had said brexit will make cycling more expensive, it probably would have swung the vote further in favour of brexit

The 14% tariff for bicycles to enter the UK is not set in stone.

The government could simply reduce the tariff to zero and the problem disappears.

There would also be the added bonus of cheaper bikes for everyone!

It could, but it hasn't.

That is true but it's only been a few weeks, the whole reason for the rule of origin tariffs between UK and EU is to allow the UK to set its own tariffs that are markedly different from those of the EU.

Zero tariffs on items we do not manufacture make perfect sense.

UK businesses would gain an advantage over EU businesses when selling to the UK and would compete equally when selling to the EU.

Remind me, how long had the Government to think about It?

Draft tariffs have been published, obviously you wouldn't want to announce anything concrete while negotiations with the EU were ongoing.

The government have made the right noises about free trade, let's wait and see if they back that up with some serious tariff cutting.

I understand that and it is a fair point.

In the meantime the Government (including the PM) shouldn't make dishonest statements about there being no increased barriers to trade beween, for example, a German company and a UK company and vice versa.

It does seem that companies who essentially assemble imported components into a bike and slap on some paint are going to be hit hard by the new system. Canyon and Cotic being two recent examples.

Johnson is indeed being dishonest by failing to acknowledge this.

My hunch is that this is actually intentional, the Conservatives have been talking up the idea of free ports, the current situation is one in which free ports would flourish.

If (big if!) Canyon were to move their factory to a free port in the UK then they'd avoid this hassle whilst creating jobs for UK residents.

The numbers might not work for Canyon but there will be lots of companies that could gain significant advantages by moving to the proposed free port areas.

I hope the current situation is part of an overall vision for the future of UK trade and not just a cock up but I wouldn't be surprised if the converse were true!

Tax havens aka Freeports legacy is mixed. Total net employment benefits were small, and the policy was costly. 

The “localised freedom” of low taxes and deregulation can “act like a benign cancer”, rotting “the foundations of the unfree state around it”

And if bicycles move from the the 'freeports' to the mainland, tarifs are still due. 

The entire point of free ports is to simplify exports.

If you're manufacturing in a Freeport area for distribution to the UK you will have no advantages over a manufacturer based in the rest of the UK.

When have the morons in Johnson's government every done anything that makes sense, or benefit the British people? Never. I won't be holding my breath.

it could, if we wanted to reduce the price of bargain basement bikes sent direct from China

That would be another advantage.

I don't believe flooding the country with disposable bikes that are a write off after 9 months as they cost more to repair than to buy is in anyones interest.

If they can pass the requisite standards but only last 9 months that suggests that said standards are not fit for purpose.

The tariffs are irrelevant to your point.

bluefuzzer wrote:

Strange this wasn’t mentioned in the Brexit vote

Hope you are being ironic here!
It was mentioned, loud and clear - but just dismissed as 'project fear'

Yep, my understanding is that VAT in Germany is set at 19% (UK at 20%) so we arent paying German(EU) VAT but they are paying the UK vat and in order to cover this they've popped another 5% on to account for currency fluctuations. 

This doesnt take into account the previous 5% increase which is more attributable to supply and demand. The calculated total 9.21% increase over pre brexit rates is pretty standard for most large manufacturers in the current market e.g Giant, Specialized, Trek etc all of who are seizing their opportunity to squeeze a bit more out of us. 

How is a 9% increase to the customer, when there is a 14% tarrif increase, "squeezing a bit more out of us"? 
It makes it more expensive to the customer, and less profitable for the manufacturer.

German VAT rates are irrelevant here.

Exports are zero rated for VAT.

The issue is UK import VAT (which is unchanged on large purchases) and the new tariffs (which are responsible for the lion's share of the price increase).