I recently came across an extremely insightful article by Mr. Pankaj Munjal, Chairman and Managing Director, HMC, A Hero Motors Company, about the Indian Bicycle Industry and the unique challenges it faces. So if you ever wondered why we do not have enough Indian cycling brands available in the market today, perhaps this may provide some answers. Here are my notes and takeaways.
COVID-19 related challenges
The Indian bicycle industry (like many other industries globally) is facing COVID-19 driven material scarcity
Technology Related
Lack of cutting-edge technology creates a need for import dependency for sourcing high-end components. Furthermore, due to the lack of local cycling-specific testing and R&D facilities, manufacturers have to send bicycles to locations like Hong Kong to meet the testing requirements of the European and UK markets. This eventually contributes an increase to the overall cost of a bicycle
Economical Factors
High GST of 12% drives costs and hurts adoption from end-users
Infrastructural
Lack of safe cycling networks for pedal and electric bicycles impacts end-user adoption
Market Penetration
Per capita bicycle penetration is merely 9 percent. When you compare this against the international benchmark of 110 percent in the Netherlands, it does appear quite minuscule
Competition from China
Chinese bicycles currently cost 15 percent less than Indian bicycles due to lower capital costs, freight subsidies, and energy costs. In addition, the average value addition of Chinese bicycles are three times more than Indian bicycles. This has a direct impact on Indian export markets and import substitution. Hence China dominates the majority of supplies in high-end bicycles and premium components to Europe, the United States, Latin America, the Middle East, and Africa (LAMEA).
Amongst all the above challenges faced by the Indian bicycle industry, there are also some unique opportunities which can help boost growth and adoption
COVID-19 related opportunity
While COVID-19 has hurt material supply, it has also lead to halt in imports from China which is a potential opportunity for the Indian bicycle industry to capitalize
The Sheer Scale of Indian market
As per TERI Study, merely 50 percent substitution from 2W and 4W to bicycles within the distance of 8 Kms can bring a total annual benefit of Rs 1.8 trillion (1.6 percent of India’s annual GDP).
Opportunities with Economic Policy push
As per the last census, 48 percent of the rural population walk to work for 2-10 km distance. That is because most cannot afford the upfront purchase of a bicycle. This is where a push for micro-financing schemes for bicycles can help boost the Indian bicycle industry.
In the next post on this topic, let’s look at whats the specific asks of the Indian cycling industry from the 2022 India budget – the “Cycling-push” package