Cycle Makers Plan Expansion, Line Up Big-Ticket Investments
Taking a cue from the buoyancy in the market, a number of cycle makers like Hero Cycles, Avon, TII, and others, are aiming to a windfall by either expanding their capacities or enhancing their export markets or even going the extra mile by venturing into e-bikes ( a cycle fitted with a motor).
Hero Cycles, a unit of Hero Motor Company (HMC), commands about 42 per cent of the organized market of bicycles in India. It said it has seen double-digit growth in FY21 over FY20, especially in premium and premium kids. Sensing the bullish sentiment, the company has announced an investment outlay of over Rs 1,000 crore that will be utilized till FY 2023-2024. Spread across 100 acres, the Valley is expected to add a manufacturing capacity of 2 million (SKD bikes) per year with immediate effect and employ over 9,000 people when fully operational. While HMC will spend Rs 350 crore in operationalising it, the vendors will bring in an estimated Rs. 400 crore. Another Rs. 300 crore will be a phased investment by HMC over the next couple of years to fortify its brands, R&D, and distribution across the EU & the UK.
Likewise, another leading bicycle player Avon Cycles has also pledged 100 crore. For 2021-22. The company firmed up its plans to build an additional annual capacity of 10 lakh bicycles by next year for domestic and export market in the premium segment. It has also invested substantially in a bicycle startup, MyByk based out of Ahmedabad which would launch public sharing of bicycles across India.
Homegrown cycle maker TII Cycles, a unit of Tube Investments of India claims to have witnessed a 20 per cent growth in its topline during FY 20. Capitalizing on demand for Indian bicycles in overseas markets, it is gearing up to expand its export base to Europe, America and other first world countries. The company expects its contribution from export markets to double to 30 per cent of its total sales in the next four years. It is also looking to strengthen its portfolio by venturing into e-bikes in August this year.
Pankaj Munjal, Chairman and Managing Director Hero Cycles said, “The demand for traditional bicycles increased by 50 per cent while that for electric cycles went up by 100 per cent. We are seeing demand in the premium & Kids segment as well,". On expansion, Munjal said: "We are making one of the biggest investments in the bicycle industry to set up an E Cycle Valley in Punjab. The Park will establish a complete ecosystem for international component suppliers to localise production and help India eliminate its dependence on premium component imports."
Onkar Singh Pahwa, Chairman& Managing Director at Avon Cycles said, “Buoyancy in demand has reaffirmed our strong belief of good future of bicycle industry in the country. A growth of about 16% was experienced by us which otherwise could have been much more."
Premium & Super Premium Category Report Growth
Even the premium cycle category seems to be clocking growth. As per industry estimates, the premium bicycle segment (Rs. 15,000 - 30,000) is worth approx. Rs. 350 crore and the super-premium segment (above Rs 30,000) is worth approx. Rs 110 crore in India.
Sukanta Das, CEO, Firefox Bikes, affirms, “The premium cycling industry has seen 6X demand in growth. We have clocked a 2X growth last year and we continue to grow at the same rate. Our online sales through our website have seen a 10X growth. We are currently looking at doubling our turnover again in 2022 as the strong demand for bikes that started during the lockdown last year is set to continue for the next two years.”
Trek, which operates in the super-premium segment and has products starting at Rs. 31,699 going up to Rs. 20 lakh for customized high-end performance bikes witnessed a sales surge of more than 300% since March 2020 when the lockdowns started. Navneet Banka, Country Head -Trek Bikes India maintains, “The demand for bicycles continues to be strong and we believe it will remain strong for entire 2022 also. "During the lockdown, we have seen demand for our mountain, hybrid & fitness range of bicycles go up by more than 200 per cent. Since the past two months, demand for our 'performance bikes' has increased almost 100 per cent - these are Trek's high-end performance bikes starting at Rs 1,50,000 and going up to Rs 12 lakh,"
Dip, Recovery & Outlook
Despite lockdowns, staggered unlocking of cities, etc, the overall domestic bicycle market dipped only marginally from 12.81 million units in FY 2019-20 to 12.16 million units. Industry players reckon that the key reasons for this increase in demand has been a greater focus on fitness across all age groups, closure of gyms for extended periods & realization amongst fitness enthusiasts that cycling is a great way to stay fit - while having fun & enjoying the outdoors.
The Indian bicycle industry, which is the second-largest in the world, is classified into four segments – standard, premium, kids and exports. Demand for standard bicycles, which accounted for half of all bicycles sold in 2020, is driven by largely driven by government purchases. KPMG claims that the Indian bicycle industry currently uses 1st generation technology (Steel) and imports 2nd to 4th generation (Aluminium alloy, C-fibre, Titanium material) premium parts
Demand for premium and kids' bicycles, accounting for 40 per cent market share in fiscal 2020, is driven by fitness and leisure needs are seeing the maximum surge. Exports and sales of other kinds of bicycles constitute the remaining 10 per cent of demand. Manish Gupta, Senior Director, CRISIL Ratings, said, “Although sales were impacted in April-May due to the second wave and consequent lockdowns, it has started picking up in June and expected to reach normalcy in July. We expect the kids and premium segment to witness significant growth over medium terms while demand for standard bicycles is also likely to grow after two dull years, albeit on a low base.”
As per a recent report by CRISILcycles sales are likely to touch 1.45 crore units compared with 1.21 crore units last fiscal.
“Given the global boom in bicycles and global inventories at an all-time low, manufacturers of bikes and related components are re-organising supply chains and getting ready to cater to the rising demand and making them more affordable. The cycle industry is expected to re-invent itself by adopting global best practices and setting a benchmark for the Indian bicycle industry, considering the huge domestic demand and export opportunity,” affirms Mohit Bhasin – Partner, KPMG in India.
As Dr. Thakur from AICMA maintains, “From the consumer perspective, infrastructure such as cycle-friendly roads can play a key role in changing perception towards cycling, especially in the cities where motorized vehicles rule the roost. Historically, we have seen the demand for cycles grow with better and safer roads. Besides, having dedicated car-free days and zones, exclusive cycling lanes will remain important interventions.”
