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Slash in prices: Industry divided over Hero’s plan to launch cheapest bicycle

On April 25, at a meeting of United Cycle & Parts Manufacturers Association (UCPMA), Pankaj Munjal, MD of Hero Motor company is learnt to have announced that in the next 60 days, the company will be slashing prices of black roadster bicycle by Rs 500.

Written by Raakhi Jagga | Ludhiana | Published: May 17, 2018 12:57:15 am
A Hero Cycles plant in Ludhiana. (Gurmeet Singh Photo) Slash in prices: Industry divided over Hero’s plan to launch cheapest bicycle. (Photo: Gurmeet Singh)

Even as the bicycle industry is growing at a tepid 2 per cent against an over 10 per cent growth for cars, a recent announcement by Hero Cycles to slash the prices of traditional black bicycles by Rs 500, or about 16 per cent of the price tag of such bikes, has effectively divided the small industry in Ludhiana’s manufacturing hub.

While Hero Cycles — the world’s largest manufacturer that builds one in 20 bikes sold globally — says it aims to launch country’s ‘cheapest’ bicycle to reach out to the poor, most industrialists are of the view that reducing the price might not be a viable option and that quality might have to be compromised to achieve the reduced price tag.

On April 25, at a meeting of United Cycle & Parts Manufacturers Association (UCPMA), Pankaj Munjal, MD of Hero Motor company is learnt to have announced that in the next 60 days, the company will be slashing prices of black roadster bicycle by Rs 500.

“India stands out as the second largest bicycle manufacturer in the world after China, and in fact 90 per cent of the bicycles are manufactured in Ludhiana. However, while China’s market offers bicycles at a rate of just 3 per cent of its annual per capita income, in India, bicycle prices make up 15 per cent of the average per capita income. Further, 95 out of every 100 households own a bicycle in China, while only 46 do so in India. So, we need to tap the new markets for which prices need to be slashed to attract the rural poor customers,” Munjal said.

While Munjal did not reveal the exact price of the bicycle, he stated that it will be less by Rs 500. Currently, the black roadster is available in the range of Rs 2,800-3,500. Though Munjal did not give any specific date for the, his announcement has not gone down well with Ludhiana’s bicycle manufacturers.

Kewal Krishan Seth, MD of Seth Industrial Corporation and Chairman of Federation of Industrial & Commercial Organization (FICO) said: “I don’t think that slashing prices are possible. If I am asked, I will not be able to do any slashing. With the given market conditions, we cannot afford to reduce prices as steel prices have ranging between Rs 15,000 and Rs 20,000 a tonne in the past 4-5 months. Rate of a rubber tyre has been increased by Rs 3.5 while tube’s prices have increased by Rs 1.5 a tube. Hence, reducing prices is practically not possible. Rather I am thinking of increasing the price by next month. However, I will definitely work on improving the quality…”

“Micro industry will be ruined if this step is taken. It will be detrimental for the small scale industry as Hero determines the entire bicycle market and hence small unit will not be able to follow them,” Seth added.

However, ID Chugh, director of Atlas bicycles, said: “Let the model come in the market. If they slash prices, others will have to follow to stay in competition.” When asked about the reaction of small industrialists, Chugh said: “If you need to reduce prices, certainly, some compromise in quality needs to be done. However, we are just waiting for Hero’s model to come out.”

Onkar Singh Pahwa, MD of Avon Cycles, said: “We will wait and watch the market. Let the product roll out, accordingly we will decide as what to do next.”

FICO’s president Gurmeet Singh Kular concurred. “I don’t think that such a slash is possible. Bicycle units are already under losses. Let’s see as what happens after two months. However, we are demanding a regulatory commission to be set up to control the ever rising steel prices as steel is the main raw material in bicycle manufacturing.”

Meanwhile, UCPMA members raised the issue of lack of cycling lanes in the country due to which many are discouraged from cycling on roads. Inderjit Singh Navyug, President of UCPMA, said: “Even Ludhiana, the bicycle hub has no cycle lanes. If more bicycles are to be sold, people also need to have cycle lanes to ride bicycles so as to stay safe.”

Last year, bicycle units had increased prices by Rs 80-90 across models. Munjal had said that global cycling market is expected to grow at a compound annual growth rate of 4 per cent until 2022 buoyed by technical advances in cycle optimization – gears, carbon frames, etc.

Also, bicycles, often termed as a poor man’s ride, attracts 12 per cent GST and 18 per cent GST is levied on raw material.

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