Significantly, the industry’s slide began in 2004, the year of the last general election.
Rising costs, aspirations
There was a time when most rural households had at least one bicycle.
Recent trends are, however, throwing up surprising results, says Dhanda, who is also the president of the All India Cycle Manufacturers Association, an industry lobby. “With rising income, the better-off rural masses are turning to scooters and motorcycles.”
And even as they see the local market shrinking, bicycle makers find themselves at a disadvantage to Chinese firms in the export market because their costs are higher. India’s bicycle exports have fallen from a high of Rs960 crore in 2004 to Rs650 crore in 2007 after several African nations, India’s biggest market apart from West Asia, reduced imports to protect the domestic industry.
Local firms depend on children or government’s populist programmes to push sales.
The children’s bicycles segment of the market is growing by around 18% a year. Several foreign companies such as Sri Lanka’s Lumala and the US’ Firefox Bikes Pvt. Ltd and Trek Bicycle Corp. are present in this market. At around Rs1.9 lakh, Trek’s high-end bicycle costs as much as the least expensive car currently available in the market, the Maruti 800.
“We are saved by the children, and now the government programme,” says Omkar Pahwa, managing director of the Rs325 crore Avon Cycles Ltd, which produces 1.5 million bicycles a month. The company saw its export margins drop by 3% last year, but domestic sales grew three times “because of government buying”.
Hero Cycles saw exports drop by 7.2% last year, according to S.K. Rai, its managing director. The company sold nearly five million pieces to the government last year.
Survival strategies
Domestic companies have been importing cheaper bicycle parts from China to stay competitive. Some are also diversifying into fitness equipment, sports retailing and electric bikes.
TI Cycles, part of the Rs9,000 crore in sales Murugappa Group, plans to enter sports retailing and produce electric bikes. Hero Cycles, the country’s largest manufacturer of bicycles (it makes around five million of them a year) and part of the Rs18,850 crore Hero group, and Avon Cycles, have already launched their electric bikes.
Electric bikes are powered by electricity and need to be charged at regular intervals. They combine the cost and environmental benefits of a bicycle with at least some of the utility of a motorcycle.
Under Indian law, cycle manufacturing is reserved for the so-called small-scale industry. Some experts say this has hurt the industry.
“The most severely hit are the cycle-parts vendors as steel and rubber tube prices have increased more than three-fold,” says S.S Walia, editor of Indian Bicycle Channels, a monthly magazine brought out from Ludhiania, a bicycle manufacturing hub.
Some firms, however, have managed to succeed by turning themselves into high-precision engineering workshops.