Higher bike tariffs will drive cross-border shopping, says Dorel CEO
The Canadian Press
MONTREAL - Bike manufacturer Dorel Industries (TSX:DII.B) says Ottawa's decision to increase tariffs on hundreds of products will drive increased cross-border shopping.
Chief executive Martin Schwartz says the company won't be hurt because it sells bikes and juvenile products on both sides of the border and will simply pass along the increased costs to Canadian consumers.
The Conservative government announced in its March budget that effective Jan. 1, 2015, tariffs will increase on 1,290 product classes from 72 countries, including China, South Korea and India that previously enjoyed general preferential tariff status.
The change is expected to cost consumers $333 million a year, or more than $1 trillion through 2018.
However, the move will protect some domestic manufacturers, including bike makers in Quebec where production recently suffered a blow with Raleigh's decision to close its plant in the community of Waterloo.
Dorel manufacturers its line of bikes, including Schwinn and Canondale, in China, Taiwan and Indonesia.
Schwartz says Canada accounts for less than 10 per cent of its overall bike sales. Revenues in its recreation and leisure segment were US$928.4 million of sales in 2012 on a currency-adjusted 10 per cent growth in bike sales.
Although the government is increasing tariffs on bikes, it will permanently eliminate all tariffs as of April 1 on baby clothes and sports and athletic equipment (excluding bicycles).
