We're paying the tariffs, says Guardian Bikes CEO

that's correct 94% of all the bikes sold in the United States are made in China so China has a very concentrated supply chain for bikes our bikes are made of 65 unique parts and there's 40 unique vendors that come together and make all the different components to make the bike so moving to another country just really isn't an option for us and and most people in the bike industry right now simply because it takes a coordinated move of that whole supply chain to move to a different production base which is going to take years and and obviously millions of dollars of investments right and your point is even if you said okay fine that's what needs to happen it's not clear whether that's what needs to happen or if there's going to be some large ordeal and then the meantime tariffs on bikes have gone from correct me if I'm wrong 11% up to soon to be 41% and how much of the canoe is that being passed on to the consumer yeah that's correct it'll be 41% as of the new round that new 5% increase as of October 1st we've raised our retail prices 10% but you know we've been in a whipsaw of all these tariff changes going on so we've passed on some of that cost to the customer we've absorbed some of the costs ourselves but yes the biggest problem is because of the uncertainty I find myself checking the news every day just to know what my landed costs are going to be next quarter and the biggest problem with that is because there's so much uncertainty a lot of the manufacturing players in the industry the the factories that make all these parts and the bike itself they're hesitating to make any investments anywhere else to build factory production in another place because they don't know if these tariffs are going to go away this year or this is going to be a long-term thing so the uncertainty makes it so that actually the path to moving is a lot harder to do so how is that uncertainty Brian spilled over to your other spending whether it be hiring workers or people to staff stores or or what not sure so we're a very fast-growing startup company in the bike business so we're growing in about three hundred percent year-over-year and any fast growing business the biggest challenge is is planning and cash flow planning and the biggest input to that cash flow planning is your inventory in your product costs so because we've had such uncertainty with what our product cost is going to be the following quarter we've really had to be a lot more conservative with our hiring plans with the amount of money that we're putting into things like innovation and marketing and growth and just had to take a much more conservative approach to make sure that we have enough cash there on the balance sheet to absorb any of these increases that that may or may not happen I'm not looking to sucker you into a political debate but when you hear people say that the Chinese are paying these tariffs what is your reaction number one and number two do you have any reaction that some of the money that is being collected in tariffs from industries like yours is then being transferred to help other industries like soybean farmers yeah sure so you know I can tell you from the front lines of this that it's companies like ours that actually pay the tariff bill in fact US Customs actually takes the money directly out of our account automatically every time we have an import so we're the ones paying the tariffs that the challenge again is that I think the belief is that these tariffs are going to cause you know a major move out of China and inflict some pain on China because industries are moving out of China but like I mentioned and sorry oh right some are you don't you smart is very difficult to do that but sure yeah if you're making something like a t-shirt or even a tennis shoe something that doesn't have a complex supporting supply chain underneath it it's a little easier to move but in cases like ours where you have a very concentrated supply chain in lots of different parts that come together to make the final product the uncertainty of where the tariffs is gonna be actually just creates a situation where that path of investment that's needed to deducible you the farmers are getting help and you're not well you know I'm glad the farmers are getting help I wish that everything was you know an even plane but we're living in in a world right now that is it's it's just not quite even but you know we're trying to compete as best we can every day and do the best we can with what we have do you see any possibility under which this could be an existential threat to your business for us I think we'll make it through again we've had to slow down spending we've had to slow down investment but I'm sure you know as somebody that that know what it's like to run a small business there are plenty of small businesses that aren't gonna have quite as much pricing power and probably are going to left be left out of business through you know living through the whipsaw these tariffs you