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Apr, 02 2015

Peddling fast to financing line

From cars to bikes to bicycles, all modes of transport have their own market share & potential. The bicycle industry is no more synonymous to postmen and milkmen. Children ride them, it’s the best suited exercise medium for the middle class & the upper-mi

Over the last few years, the Indian bicycle industry has been hit hard mainly by two factors; one being the influence of Chinese market and second being the high import duties raised by the Indian government about two years ago. At present, the demand for bicycles in India is not at the expected level. However, lifestyle bicycle has seen a growth but, there is a decline in the standard cycle market.  

Notwithstanding the current scenario, the growth of the Indian bicycle industry is stagnant but, is certainly not down as Stärkenn Sports Pvt Ltd, Exclusive Distributor right holders of global brand Giant bicycles in India and South Asia, puts it, “Last year, India sold 15.5 million cycles, about the same as the previous year and the year before.”

On the overall market, Pravin V Patil, Managing Director, Starkenn Sports Pvt Ltd, states, “The Indian bicycling industry is approximately Rs 4600 plus crore in value with the super premium end of the market accounts for Rs 100 crore in sales. The annual sale for these bicycles is approximately 30,000 units per annum and is growing at the rate of 25 to 30 per cent CAGR. Last year, India sold 15.5 million cycles, about the same as the previous year and the year before. Cycle makers in the US sold about 18 million bikes in 2012 but those in China produced more than 80 million bikes in the same year. The Indian premium bicycle market has been consistently growing at the rate of 25-30 per cent per annum. Overall bicycle market is almost flat at a rate of one to two per cent.”

Not much enthusiastic but hopeful Rajnish Goenka, Chairman, Tobu Cycles Group, says, “For last some time, China hit us but our global market did not fall but yes it is stagnant. China offered cheap and attractive cycles which worked for it. Other major factor which went against the industry, was the government made import expensive due to inflation. But, now things are gradually coming on the track with inflation coming down and people are also realising that the Indian cycles are stronger and durable than the Chinese ones. We have also learnt from our Chinese counterparts- providing decorated cycles with accessory which catches the fancy of the buyers. We are compatible now and the export has also improved.”

Likewise, Hero Cycles Ltd, India's largest bicycle maker, has also lost ground to several Chinese and Taiwanese manufacturers.  The growth rates have been in single digits for five of the past 10 years, and the market actually shrank 3.24 per cent in 2012-13, says latest reports.

Explaining about the present market, Ajit Gandhi, Marketing Head, Firefox Bikes Pvt Ltd, informs The Franchising World, “Definitely, the Indian bicycle industry is stagnant at the moment but the premium cycling sector has seen a good growth. There are mainly four cycle categories-Standard, Fancy, Premium and Hi-end.  While Standard and Fancy cycle market is going down, Premium and Hi-end cycle market is growing. Urban cycling has grown but in the rural area it has witnessed a fall. Even the Standard and Fancy buyers' sales are shifting to Premium and Hi-end bracket.”

Industry needs government support

The Indian players in the bicycle industry have been lobbying for government incentives and against an excise duty that will make bicycles more expensive. 

Expressing his serious concerns in this business, Hemant Shah, who runs six Firefox Bikes franchise stores in Bangalore, quips, “There are a lot of brands in the bicycle industry. You need good money, man and space power to run a cycle outlet. Space is one of the main concerns as you need a big space to store these cycles but real estate cost is so high. The government should bring down import duties to drive the business otherwise it is very tough to remain present in the market.” “Import duties were raised about two years ago by the government and it is a major hurdle in hi-end biking,” points out Gandhi.

Peddling success via franchise mode

All leading Indian and foreign bicycle brands are expanding via the franchise route in the country.  “A business like ours is an owner intensive business. The owner needs to be involved in cycling to be a successful franchise owner. The passion towards cycling is given utmost priority. We believe that the youth today have immense entrepreneurial skills. However, it is the dedication towards cycling that will help them make Starkenn a successful brand,” says Patil whose brand has franchise outlets in as many as 48 cities of India.

The franchise model has suited so well to the cycle companies that many of them are also offering franchisees in manufacturing. “Other than our retail franchise model, we also offer franchisees in manufacturing in which we train franchisees in all aspects and help them manufacture cycles with the latter investing in the business,” shares Goenka.

Fact sheet

= India is the second largest producer of bicycles next to China and produces around 1.26 crore bicycles every year

= Two kinds of units are there in the Indian bicycle industry-unit manufacturing bicycle parts, components and accessories and units manufacturing complete bicycles. Bulk of the parts and components are manufactured in the small-scale sector and complete bicycles are manufactured in the organised sector.

(Excerpts taken from a NIIR Project Consultancy Services study)


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