New Delhi: For four years, the Indian bicycle industry has pedalled along at a leisurely rate of growth, but companies in the business are now putting on a burst of speed ahead of elections in key states this year and the general elections next year.
Some state governments have begun to distribute bicycles for free to schoolchildren and the poor to pull in votes. And the leader of one party, which has the bicycle as an election symbol, has promised to do more not just for the people but also for the symbol if he is voted to power—free bicycles for students.
Such announcements have buoyed an industry plagued by sluggish demand and falling exports, the result of high raw material costs and stiff competition from China in the global marketplace.
Pedal power: A file photo of activists at a BJP rally. Political parties have begun to distribute bicycles for free to pull in votes. AFP
In June, the Bharatiya Janata Party-led Karnataka government announced a Rs90 crore plan to distribute 435,000 bicycles to eighth-graders, a programme extended only to poor families earlier.
Last month, N. Chandrababu Naidu, the former Andhra Pradesh chief minister and leader of the Telugu Desam Party, whose party symbol is bicycle, announced he will distribute bicycles for free to students if he is voted to power.
For the first time, Bihar recently floated a tender for 200,000 bicycles.
And several other states, including Tamil Nadu and Maharashtra, are providing bicycles for free to schoolchildren.
The poll cycle
The bicycle industry’s growth has been unprecedented this year primarily due to elections, said Satish Dhanda, managing director, Sadem Industries, a bicycle manufacturing company. He is also the chairman of Engineering Export Promotion Council, a trade body governed by the country’s commerce ministry.
Orders for 1.4-1.5 million bicycles have already been placed by various state governments this year, up from 1 million last year, Dhanda said.
A bicycle can cost between Rs2,300 and Rs5,000.
Tamil Nadu alone has placed an order for 650,000 bicycles in the past three months. The tender was won in equal parts by the country’s four biggest manufacturers— Hero Cycles Ltd, Atlas Cycles (Haryana) Ltd, TI Cycles and Avon Cycles Ltd—who together control 85% of the market.
Chhattisgarh, which will go to the polls this year, plans to distribute 70,000 bicycles to girls belonging to the so-called Scheduled Castes and Scheduled Tribes this year, up from 60,000 last year when Atlas Cycles won the tender.
It has also widened the beneficiaries’ net to include all below the poverty line, or BPL, families this time.
These numbers contrast with those of the past four years, when domestic sales of bicycles remained stagnant at 12 million a year. And one-fourth of this is made up of bicycles imported from China.
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.
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.
Spark Engineering Ltd, located in a 2-acre plot in Ghaziabad, bordering New Delhi, saw sales grow 40% a year to Rs20 crore in 2007-08.
The company exports 80% of the cycle parts it makes—freewheels and shift gears—to Germany and the rest of Europe, supplying to the world’s best cycle brands such as Mifa, Panther Werke and Prophete.
“We have to constantly innovate to stay in business,” says Pradeep Aggarwal, director, Spark Engineering.
A significant proportion of the working population even in cities—postmen, newspaper deliverers, snack sellers, construction workers and so on— cycle to work every day.
Their cause hasn’t been helped by roads that have no clearly marked lanes for bicycles, making their daily commute a hazardous affair.
In recent terrorist attacks in Bangalore and Jaipur, bombs were found planted in bicycles. That could crimp demand if more cities and states ask buyers of new bicycles for proof of identity as New Delhi already does.
“This will create a problem because a majority of the people who need a cycle, say in a village, do not have any such proof,” says Ishwar Chugh, director, Atlas Cycles, which produced 250,000 cycles last year.
Still, those who have to, and those who want to, use bicycles, even in cities.
Postman Brahmanand Maji in New Delhi prefers to commute on a cycle. “It’s easier to distribute mail on a cycle.”
And Jesim Pais, a teacher at the New Delhi-based policy research body Institute for Studies in Industrial Development, owns a car and a scooter, but cycles to work 4km away, after dropping his two-year-old daughter at a neighbourhood creche. “I just find it more convenient to use a cycle than a car,” says Pais.
Still, India doesn’t have a cycling culture, says Ludhiana-based Avtar Bhogal, who exports axle hubs to Europe. “In Europe, you can expect a chief executive of a company to ride to office. In India, a politician rides for publicity for one day and the media is all over about it. Then, everyone forgets.”
In June, Madhya Pradesh chief minister Shivraj Singh Chouhan, a member of the Bharatiya Janata Party pledged to ride a cycle to work once a week to protest a hike in fuel prices announced by the Union government.
He stopped his pedal-pushing protest last week.