With rising green awareness, health consciousness, and soaring fuel prices, the global bicycle industry is witnessing a boom. Although India’s share in global bicycle exports is less than 1%, Africa seems to have taken a special liking to our cycles. Last year alone, India exported $31.5 million worth of bicycles to Africa, about 18.3% of the continent’s total imports of the product. And if trade analysts are to be believed, this number will only rise going forward. It’s time Indian bicycle exporters pedal their way faster to Africa.

Neha Dewan | @TheDollarBiz 

In the latest Hero Cycles’ TVC, people are seen pedaling their way around rocky terrains in Indian and foreign locales and breeze past rough weather. And, almost everyone – women, children and corporate executives alike – shown in the commercial is a beaming owner of the ‘humble bicycle.’ 

But in reality, are cycles – usually dubbed as the ‘poor man’s vehicle’ in India – finding universal acceptance? And has India really got the potential to emerge as a leading exporter of cycles to international markets?

Part of us

A study by industry body Assocham on the ‘Future of Indian Bicycle Industry’ pegs India as the world’s second largest bicycle producer after China, accounting for about 10% of global bicycle production. With an estimated market size worth $1.5 billion, the Indian bicycle industry produces about 15 million finished cycles annually.

According to All India Cycle Manufacturers Association (AICMA), most bicycle components and bicycle spare parts in India, except for free wheels, are manufactured by small scale industries (SSIs), while large scale units manufacture bicycle frames, chains and rims for captive consumption. The organised sector, on the other hand, dominates the manufacturing of complete bicycles.

The bicycle industry is currently in the middle of endeavours to enhance bicycle exports since the potential for Indian bicycles in the international market is significant. In FY2014, India exported close to 1.3 million bicycles, a majority of them to African countries. In comparison, China is estimated to have exported over 50 million bicycles in CY2013. In India, companies like Hero Cycles, TI Cycles, Avon Cycles and Atlas Cycles account for a majority of total bicycle sales. Hero Cycles is by far the leading player in the segment with almost 35% market share. Among export destinations, India cycles are gaining traction on African roads, along with other destinations like Bangladesh and UK. 

Show me the money

India’s cycle exports business has unique nuances of its own. While high value cycles exported to developed markets like UK offer handsome margins, the entry level ones exported to Africa offer margins in term of duty drawback. For example, for every rupee worth of cycle exports, the government provides 11.7 paise as Duty Drawback (Refer Customs Notification No.98/2013; dated 14th September, 2013) and 5 paise under Focus Product Scheme (Chapter 3 of FTP 2009-14; Appendix 37D of HoP Vol. I). This obviously means that even if one sells bicycles abroad at a breakeven price, a 16.7% profit is guaranteed – something that not many products can boast of!

Although overall numbers look profitable for India’s bicycle exports, which is growing at a CAGR of 17%, there are serious concerns, with cost disadvantage acting as a primary deterrent for exporters. “We are outpriced by 20-30% by our Chinese peers,” G. D. Kapoor, President – Sales & Marketing at Hero Cycles, tells The Dollar Business. In a nutshell, this explains one of the biggest hurdles that Indian bicycle companies looking at exports have to contend with. On an average Chinese cycle prices are at least 15% lower than Indian ones, if not more.

The hub

Several manufacturing units in Ludhiana, which is the epicenter of bicycle manufacturing in India and accounts for 90% of India’s bicycle and bicycle parts production, have shut down in the last few years due to rising imports of cheap cycle parts from China. In addition to this, a 2% central excise duty on cycles and high cost of steel – which roughly accounts for 65% of the total cost of production of a cycle – act as a double whammy. Agrees Nalin Sinha, Founder of Delhi Cycling Club, when he tells The Dollar Business, “The entire frame of a cycle is made of steel. However, rising steel prices are causing a big dent in the pockets of cycle manufacturers. Besides this, the cost of bicycles need to be brought down, especially good quality high-end bicycles...”

The average price of a bicycle that India exported in FY14 was just Rs.2,432, while the same for imports was Rs.3,544 

It’s time for Africa

Data from the Commerce Ministry also validates this trend. In FY2014, Mozambique was the top destination for Indian bicycles, accounting for close to 20% of total exports. Nepal was the second in line at about 16%. Even in terms of growth, while Mozambique saw a 27.71% growth (in terms of volume) in FY2014 as compared to the previous year, number of cycles exported to Nepal actually saw a small de-growth. A distant third was UK, again followed by the African duo of Zambia and Malawi.

Experts believe that appropriate measures can facilitate trade better and boost exports for the industry. “More tax incentives need to be doled out by the government to give a push to the industry. There is also a need for specific financial schemes and insurance schemes on bicycles. A comprehensive analysis and promotion by the government can help facilitate exports to lucrative destinations,” adds Sinha of the Delhi Cycling Club. Newer opportunity areas such as cycle sharing systems in advanced economies, which mainly serve as a platform for short-term bicycle rental systems, also need to be tapped. Across the world, this is a popular practice, with the system also making a recent entry to India.

The road ahead

Kumar Manish, co-founder of Centre for Green Mobility, an organisation promoting walking, cycling and public transportation facilities in India says that there is a huge potential for Indian bike manufacturers to cater to this demand. “Cycle sharing systems act as a perfect mode of transport for last mile connectivity and are a well-accepted practice in developed countries. They offer a healthy alternative to motorised modes of transport. Bicycle manufacturers in India need to reach out to this segment more aggressively by promoting their range of bulk offerings for such platforms,” he tells The Dollar Business.

Although the road ahead may yet seem a bumpy track, small steps can help in creating bigger volumes for the industry. Reimbursing inland freight to reduce the cost burden for exporters is another suggestion that has been floated by industry bigwigs. Needless to say, besides government support, upgrading bike technology by manufacturers and positioning Indian cycles as superior in quality for use in international markets can spur growth of exports to varying degrees. Together, it can all add up to beating the odds and positioning the Indian cycle brand prominently on the global terrain. Are you game?