By  Ranju Sarkar

A woman needs a man like a fish needs a bicycle
-Gloria Steinem

Fortunately, people do-need bicycles, that is. So, the Ludhiana-based Hero Cycles, the world's largest manufacturer of cycles, turns them out in style: 5.2 million a year, 14,247 a day, or around 10 in the time it took you to read this sentence.

That the rest of the world needs bicycles and Chinese ones at that has been evident for some time now. In 2000, India exported nearly 10 lakh bicycles; Hero (estimated turnover for 2000-01: Rs 948 crore) did 4 lakh (a lot of cycle exports are in the form of parts as most third world countries don't allow bicycle imports). In contrast, China exported 20 million bicycles. But in the domestic market, Hero was (and is) king. The company boasts a 45-per cent share of the Rs 1,500-crore market for bicycles. Still, when the first Chinese velocipede-variants imported by, among others, the Calcutta-based United Cycle Company and the Ludhiana-based Advance Exports hit Indian shores late last year, Hero couldn't afford to ignore them. True, Advance's imports were essentially bicycles for children brought in at $8.11 and $14.62 and sold at prices between Rs 750 and Rs 1,100 after factoring in import tariffs (40 per cent), and other overheads, but Hero's sprightly 73-year old CEO Om Prakash Munjal is quick to recognise them for what they are: ''It's a threat and we have to be on our toes.''

The Chinese Challenge

But does Munjal need to lose his sleep over Chinese imports? The standard-manufacturers even call the segment that-black or green roadster priced below Rs 1,100 accounts for 75 per cent of the 10.8 million cycles-a-year Indian market. Manufacturers from our neighbour to the north can't really match that.

Chinese roadsters sell for $22-27 in African markets where they compete with exports from India. Even if the landed costs of Chinese roadsters are $22 (Rs 1,051), they will cost more than Rs 1,500 at the retail level, taking into consideration import tariffs and other overheads. Says L. Ramkumar, President, TI Cycles: ''In standard bicycles, the Chinese are not very competitive. Even if customs duty comes down to 20-25 per cent, we don't see a major threat.''

Things aren't that simple in the segment companies call 'specials'. Advance Export's Tejwinder Singh, for instance, has priced the 12-inch-wheel children's cycle imported from Hangzhou Children's Bicycle Factory at Rs 750. A comparable offering in Hero's stable comes with a tag of Rs 1,315.

The story is the same at the high-end. United Cycle charges Rs 3,290 for the 26-inch-wheel mountain bikes (with 21 speed-gears and suspension) it has imported. Hero's corresponding offering, the Swing 21 retails at Rs 3,800. Says Sishir Ghosh of United Cycle (the man is also a Hero-dealer): ''Indian manufacturers will lose out in the non-roadster segment. And the competition (from imports) will increase if import duties come down further.'' Adds Mulchand Airi who runs one of Ludhiana's large bicycle dealerships: ''If the Chinese cycles are cheaper and of better quality, they will capture the market.'' And with the Government committed to reducing tariffs to a uniform 20 per cent by 2003, that just could happen.

The import of specials will continue. Large cycle dealers in Mumbai and Bangalore are considering the Chinese option and Mumbai-based dealer Metro Exports has already imported one container-load of cycles. And, that, warns Ramkumar of TI, could hurt: ''Imports will definitely disturb the market. Even if 500 cycles are imported in a market of 5 lakh, it's enough to bring down the price point.'' While that will pinch companies like TI, which is the market leader in the specials segment, it won't spare Hero. Margins on roadsters are low (between Rs 40 and Rs 50) and it is the specials (which account for 30 per cent of its sales) that bring in the moolah.

The Protagonist's Response

Hero's response has taken the form of the Uphaar-range of specials to be launched in May, 2001, at a price-point that will enable it compete with Chinese imports. And Munjal has set his R&D department on a value-engineering chase that he hopes will result in some cost-reduction. There are other things industry-maven recommend Hero do. Like burn some money in brand building and upgrade its post-sales service network.

Focusing on exports could help but it won't be easy: Chinese exports have eaten into India's share of the market; and Hero's exports in 2000-01 will total just Rs 105 crore. Indian exports account for a few lakhs out of the 10 million cycles the US imports every year in the sub-20-inch-wheel segment; Chinese exports account for 75 per cent.

It's not as if Indian cycle manufacturers like Hero have nothing on their side. There's distribution: 3,000 dealers who in turn feed 20,000 sub-dealers. There's logistics: the dealers assemble the cycles, which means companies can ship upto 400 cycle kits in a truck; imports come in built-up condition and travel 160 in a truck. It's on factors like these and its fabled ability to operate on wafer-thin margins that the company that has reported profits for 35 years running will have to depend.

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