As the markets slow (see how the revenue graph is flattening), its ever more important for firms to be efficient. That said, whilst sales revenue (across both regions) is about $660m, there is still a consumer surplus of about $1bn in each of the regions. There is still plenty of room to grow ... it's just harder to grow.

But as I say, efficiency is ever more important, and firms are definitely responding to that challenge.  Firstly, firms are getting their capacity under much better control. They are figuring out how to get more out of what they have, and how to better predict the capacity they need.

As  result idle time across the regions is down. However, too many firms still have a lot of slack ... being unsure/uncertain of the sales they might achieve, they are keeping idle capacity around in case their sales are (up to 20%) higher. That's a lot of excess capacity; just think, to use that extra capacity (of say, 20%) the estimates for every model bike a company makes would need to be out by 20%. Whilst one or two models might be that wrong, is the firm's forecasting so out on all the models. No, firms are better than that now.

Evenso, we see the cost of manufacturing come down. With a number of firms having costs of production below that of their starting costs; good on you Munchy Bikes, PeakPerformanceBros, Pedal, and Wheelie Cool Bikes who (in no particular order) have COGM per SCU of under $500. A big 'shout out' (do people do that), to Wheelie Cool Bikes who are the cheapest producers by a long way. All these firms have struggled with serious problems and so have put in a lot of effort to learn how to make bikes really efficiently. 

In other expenses, firms are getting a more of handle on advertising.  Well, the EU is starting to rein things in; China is still increasing its advertising in absolute dollars. But looking at the Advertising to Sales ratio, the picture is clearer; but there is still work to be done here. Everyone in the EU except PeakPerformanceBros are still spending too much, and in China only SUGMA and Wheelin N Dealing are really on top of their advertising.

There is a similar story to be told about quality. But in this regard, it is China who are still the big spenders. Analysts think that some firms—Rackk City Bikes, Jack It Up, Wheelie Cool Bikes, Wheelin N Dealin, and E.N.T.E.R.T.A.I.N—are over doing quality.

One of the ways firms are trying to boost their profit is by slashing the margin they give to retailers. This downward trend (that everyone seems to be pursuing), must be having negative consequences.  I wonder if their distribution reach has been sacrificed. 

The net effect of all of this is that the two regions are pretty much worth the same. But that shouldn't be taken as a good thing. As noted, there is a substantial consumer surplus, and even setting that aside some firms had lost wholesale sales (they could have sold more bikes).

FirmLost Wholesale Sales (millions)
Munchy Bikes3.2

That would translate into some good profit ... just look at the margins of those firms.

Rackk City Bikes$16,689,151$88,504,24719%
Jack It Up$7,669,583$60,117,00513%
Wheelie Cool Bikes$938,125$10,108,1539%
RHO Inc.$3,941,611$47,189,8068%
Munchy Bikes$2,161,888$34,859,0886%
Wheelin N Dealin$1,668,437$52,755,3713%

And so that takes the conversation to one of profit. Not only are the regions profitable, but every firm is now making a profit. Well done all. The challenge now is to keep doing that. 

But to return to the issue of efficiency, at the end of the day, in terms of SCU and Profit, the regions are getting better.

This is even more evident when we look at it on a firm-by-firm basis.

Rackk City Bikes$16,689,15164,784$257.61
Jack It Up$7,669,58341,493$184.84
RHO Inc.$3,941,61145,671$86.30
Munchy Bikes$2,161,88836,336$59.50
Wheelie Cool Bikes$938,12517,086$54.91
Wheelin N Dealin$1,668,43760,729$27.47

To refresh you memory, when you took the firms over they were doing $106 in profit per SCU. (But some firms have been 'in the wars' since then).

And so to the leaderboard.

European UnionPsiclePath$51.16$4,816,352$50,281,64472,6672,000,000$2.41$90,130,326$102,322,285$8,014,337$5,754,275
European UnionRackk City Bikes$48.03$16,689,151$88,504,24764,7841,821,637$9.16$85,463,699$87,506,733$16,554,398$32,641,916
European UnionJack It Up$42.39$7,669,583$60,117,00541,4932,000,000$3.83$70,925,290$84,771,391$5,716,178$26,769,636
European UnionPeakPerformanceBros$41.88$12,849,655$85,828,60073,6032,000,000$6.42$71,634,664$83,764,665$10,484,221$37,445,629PsiclePath
ChinaSigma$34.77$6,216,014$61,981,05361,9041,972,425$3.15$67,399,875$68,585,804$6,840,045$28,092,986RHO Inc
ChinaWheelin N Dealin$10.91$1,668,437$52,755,37160,7291,875,125$0.89$20,257,448$20,461,204$482,949$7,498,599
ChinaRHO Inc.$6.17$3,941,611$47,189,80645,6712,000,000$1.97$12,109,228$12,347,268$3,188,681$9,542,282
European UnionMunchy Bikes$3.89$2,161,888$34,859,08836,3362,000,000$1.08$6,372,834$7,770,384$1,488,456$10,960,388Rackk City Bikes
European UnionPedal$1.28$1,548,396$22,474,33931,1362,000,000$0.77$2,555,076$2,555,077$1,244,754$5,115,227
ChinaWheelie Cool Bikes$0.44$938,125$10,108,15317,0862,800,000$0.34$1,220,789$1,220,788$764,133$3,788,532** Sold **

What do you see happening here? Leave your comments below.