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There has been a lot of spending going on. And, as we will see, some firms are spending too much in comparison to the revenue they are generating. It's time for some firms to start cutting their coat to suit the cloth.

Let's start by looking at the revenue side of the equation. Both regions continue to track each other, and the gap isn't really changing. However, when we look at individual firms, we see a different picture.

ChinaRHO Inc.$56,058,395
European UnionRackk City Bikes$54,043,189
European UnionPsiclePath$50,540,929
European UnionPeakPerformanceBros$50,153,000
European UnionJack It Up$38,890,667
ChinaWheelin N Dealin$29,281,461
European UnionMunchy Bikes$25,805,999
ChinaWheelie Cool Bikes$23,180,711
European UnionPedal$21,748,067

The top of the table is dominated by the EU with 4 out of the 6 top slots. That's exactly the opposite of the bottom, where 4 out of bottom 6 slots are held by Chinese firms. 

When it comes to profit there has been some significant changes, The EU's profit has crashed from over  $22m to under $4m. That said, China's profit has also moved down. The firm-by-firm picture is rather different.

European UnionPsiclePath$7,564,089$50,540,92915%
European UnionJack It Up$5,130,534$38,890,66713%
ChinaRHO Inc.$4,741,598$56,058,3958%
ChinaWheelin N Dealin$1,526,905$29,281,4615%
European UnionRackk City Bikes$834,357$54,043,1892%
European UnionPeakPerformanceBros-$2,685,594$50,153,000-5%
European UnionMunchy Bikes-$3,528,010$25,805,999-14%
European UnionPedal-$3,641,414$21,748,067-17%
ChinaWheelie Cool Bikes-$5,004,467$23,180,711-22%

The super-normal profits of yesteryear are gone. No firm is returning anything like 20%, and only two firms PsiclePath and Jack It Up are over 10%. What is really surprising is PeakPerformanceBros; they generated a really tidy amount of revenue but still made a 5% loss.

Yes, there's been a lot of spending going on.

Part of that spending is on capacity. 

Europe has surged ahead building plant. The question, of course, is "Is there too much?"

Looking at the idle time, the answer seems to be "Yes", for the China, and "maybe" for EU.

China seems to have one factory to many (at least). There is going to be some mighty strong competition to try and fill all that spare capacity 

Our analysts would say that Munchy Bikes, Rackk CIty Bikes, PsiclePath and RHO Inc, all have too little capacity. Only PeakPerformanceBros, Kack It Up, and Wheelin N Dealin seem to have the right amount for their actual sales.

European UnionPeakPerformanceBros-$2,685,594$50,153,00060,245
European UnionPsiclePath$7,564,089$50,540,92954,904
European UnionRackk City Bikes$834,357$54,043,18954,587
ChinaRHO Inc.$4,741,598$56,058,39541,720
European UnionJack It Up$5,130,534$38,890,66740,154
European UnionPedal-$3,641,414$21,748,06739,306
ChinaWheelin N Dealin$1,526,905$29,281,46135,756
European UnionMunchy Bikes-$3,528,010$25,805,99931,137
ChinaWheelie Cool Bikes-$5,004,467$23,180,71129,267

The regions are pretty comparable in terms of the number of products; but there are differences. Some worlds have more 'lower cost' bikes and so they've not had to spend so much on R&D.

As an aside, I had forgotten that SmartSims had changed the rules and you can now only develop a couple of bikes at a time. It used to be you could develop as many as you could afford.

Somewhere in China ... someone is spending big on quality (you know who you are Wheelie Cool Bikes and Sugma). That really pulls the average up. Not even Jack It Up in the EU comes close to those levels of quality. Is it really paying off the extra investment?

The European Union seems to be spending about $20m more than China. But, because of the higher Chinese sales revenue, the advertising to sales ratio is, nevertheless, pretty similar across the two regions. That said, firms are spending a lot on advertising; I wonder where 'on the curve' they think they are.

.... and look at that cost of manufacturing. European bikes are about $100 cheaper than Chinese bikes (that's weird). In percentage terms, Chinese bikes are about 20% more expensive to produce. There is some differences in cycle time, but is that material ... (no pun intended)

What does matter is that the cost of manufacturing for Sugma and Wheelie Cool Bikes is really high. As already noted, manufacturing in China is really expensive (for all those firms). In the EU, most firms are okay, but a big shout-out goes to Munchy Bikes, who not only have the lowest manufacturing costs of any firm, but also gets classified as actually being a low-cost producer by our analysts.

One way firms are trying to compensate for big spending, is by cutting retailer margins. This is particularly true in the EU. I wish I knew the long-term consequences of that.

So, let's have a look at the the markets. Competition seems pretty fierce. PeakPerformanceBros have been spending big because they've now successfully launched five bikes. No doubt they are hoping to capitalize on that in the year to come.  

Look at all those European racing bikes. Did anyone say "Tour de France"? With 8 models in the segment, sales are over 127,000 bikes. In contrast, in China, there are seven models and sales of 136,000 bikes. It would have been more if RHO Inc had been able to produce another 4,000 or so bikes.

Hmmm, commuters. Psicle might be worried about their lost sales! The could have had much most ...

So how saturated is are the various segments? Good question. So remember, revenue in both regions are about $230m.

The consumer surplus for both worlds is over $600m ... and growing.  That's pretty big, and suggests there is a lot of room for growth. Firms could be 3 times larger than they are. And, given the way people are throwing money at advertising, I don't see the trend in the increase in consumer surplus slowing anytime soon.

Anyway, let's move to the big board. At the top we have PscilePath, JackItUp and RHO Inc

The are three things of note, and they all relate to takeovers. (you did realise you can do takeovers — that's been allowed since 2018)

First, except for PeakPerformanceBros there hasn't been much movement. The plunge in their SHV, has seen many firms move up the rankings by one. So, in many ways, there's not a lot of change.

Secondly,  But look at the revenue generated by PeakPerformanceBros! If I had the money, (PsiclePath, Jack It Up, maybe Rackk City Bikes), I'd be seriously considering buying PeakPeformanceBros; yes, they've some problems but how hard would it be to turn them around?  I doubt they will ever be cheaper.

Up 1European UnionPsiclePath$36.0645%$7,564,089$50,540,92954,9042,000,000$6,208,494$15,956,336
Up 2European UnionJack It Up$28.9827%$5,130,534$38,890,66740,1542,000,000$3,885,992$16,033,155
No changeChinaRHO Inc.$28.3624%$4,741,598$56,058,39541,7202,000,000$3,738,541$15,327,579
Up 1ChinaSugma$26.3429%$4,400,413$48,515,11147,9602,000,000$3,458,676$13,663,924
Up 1European UnionRackk City Bikes$17.867%$834,357$54,043,18954,5872,251,579$47,512$9,293,850
Up 2ChinaSigma$14.47-11%$1,099,806$29,795,24336,6662,000,000$270,690$6,920,634
No changeChinaE.N.T.E.R.T.A.I.N$13.92-15%$773,715$30,308,01342,4342,000,000-$86,392$8,638,381
Down 7European UnionPeakPerformanceBros$12.61-54%-$2,685,594$50,153,00060,2452,000,000-$4,158,849-$9,339,226
No changeChinaWheelin N Dealin$11.84-5%$1,526,905$29,281,46135,7562,000,000$881,833$6,231,350
No changeEuropean UnionMunchy Bikes$6.03-45%-$3,528,010$25,805,99931,1372,000,000-$4,421,910$3,007,780
Up 1European UnionPedal$0.49-94%-$3,641,414$21,748,06739,3062,000,000-$4,814,605-$3,528,300
Down 1ChinaWheelie Cool Bikes$0.01-100%-$5,004,467$23,180,71129,2672,000,000-$21,080,310-$2,477,011

Thirdly, at the bottom of the table are Pedal (EU) and Wheelie Cool Bikes (China).  For those who know what they are doing, either firm could be a good purchase. They'll take a little more effort to turnaround than, say, PeakPerformanceBros, but the upside could be huge (and the management teams seem like good people with whom to work). 

Overall, it looks like firms need to get on top of their spending ... or at least get their spending inline with the revenue they are bringing in.

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