Hero Cycles in the fast lane

Company to manufacture low-cost, high value-added bicycles

Hero Cycles, the country's largest manufacturer of bicycles is focusing on manufacturing low-cost and high value- added fancy cycles, in the wake of competition in the local and global markets.

While low cost Chinese bicycles are dominating the global market, small and unorganised players have become the cause of concern for the Rs 1,000-crore bicycle major, which at present accounts for 48 per cent of the market.

According to Hero Cycle's Managing Director S K Rai, the company's focus has now been shifted to the manufacturing of fancy and light-weight bicycles, targeting the youth. "Coming out with fancy and innovative options is the only way to tackle challenges," he said.

While the domestic bicycle market in the country is shrinking with a sharp decline in rural market demands, the fancy bicycle segment has witnessed a double-digit growth.

The fancy segment, which accounted for about 10 per cent of the company's total turnover till 1999, now constitutes about 33 per cent of the total sales.

"The overall domestic market declined 10 per cent last year while the fancy cycles segment witnessed an impressive growth," said Rai.

The company, which exports around 12 per cent of the total bicycles manufactured, is experiencing a price war in the international market. "The margins are becoming lower with competition steadily increasing," said the company's Chairman O P Munjal.

The steep rise in input prices have also added to the bicycle manufacturers' concern. "Steel prices have reached $15,000 a tonne from the year ago $ 10,000. Petroleum prices are also increasing," Munjal added. "Our bottom line is always under pressure, though we managed a 12 per cent topline growth last year," Rai added.

Chinese manufacturers with a domestic market for 80 million bicycles per annum, compared with 10 million in India, are in an advantageous position with cheaper petroleum prices and the huge duty advantage due to the most favoured nation status from the USA, according to Rai.

The high transport cost is also eating into the margins of the company. "The freight rate for Delhi to Mumbai is higher than the Delhi-London rate," Munjal said. Hero Cycles manufactures around five million bicycles a year.

It sells its offerings through a 4000-strong dealer network and also exports to 70 countries.

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A new ride

• While the domestic bicycle market in the country is shrinking with a sharp decline in rural market demands, the fancy bicycle segment has witnessed a double-digit growth
• The fancy segment, which accounted for about 10 per cent of the company's total turnover till 1999, now constitutes about 33 per cent of the total sales
• The overall domestic market declined 10 per cent last year while the fancy cycles segment witnessed an impressive growth
• The steep rise in input prices have also added to the bicycle manufacturers' concern, with steel prices reaching a high of $15,000 a tonne, from the year ago $ 10,000. Petroleum prices are also increasing