Hero Cycles’ Pankaj Munjal: 'E-cycles will become a common mode of delivery in the future.'

The pandemic has brought back the focus on the need for effective, sustainable and affordable personal mobility. An exclusive interview with Hero Cycles' CMD.

By Nilesh Wadhwa calendar 03 Jun 2021 Views icon197728 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

The pandemic has brought back the focus on the need for effective, sustainable and affordable personal mobility. Pankaj Munjal, CMD of Hero Cycles, the largest bicycle maker in the world, shares his views on the Indian cycle market, new trends, opportunities, challenges, a new Rs 200 crore investment and future plans. 

How has the Covid-19 pandemic impacted the Indian cycle industry?
Much like the rest of the world, Covid-19 has boosted demand for cycles in India as well. High-end fitness and lifestyle cycles have witnessed the most significant jump in demand as more people turned to cycle for fitness and recreation this year. However, a number of factors have contributed to supply shortages of components and raw materials, preventing manufacturers from producing to their full capacity.

The lockdown-induced supply disruption initially was followed by border tensions with China and the resultant restriction of imports from that country. In recent months, the farmer's agitation prevented the movement of freight trains and further led to supply shortages.

All in all, the Indian bicycle industry could have leveraged the demand surge better if supplies had been seamless. Nevertheless, it has also induced a shift towards greater self-dependence for component manufacturing and backward integration. At Hero Cycles, we are working to become completely self-sufficient so as to own the entire chain of production to prevent such supply chocks in the future.

How big is the Indian cycle industry and what is your market share?
The Indian bicycle market (organised and unorganised market) is estimated to be approximately 18 million to 20 million units. Hero Cycles has a share of approximately 42 percent in the organised market.

What is your total manufacturing capacity and current utilisation?
Hero Cycles currently has a manufacturing capacity of six million units, with almost 90 percent of capacity utilisation achieved. We are looking to add significant capacity through the International Cycle Valley project in Punjab, which is set to become operational in March 2021. The state-of-the-art Hero Industrial Park being established will add a manufacturing capacity of two million (SKD bikes) per annum immediately to Hero Cycles.

What are the new trends that have emerged in the Indian cycle market?
There are many new trends, some of which are mentioned below:

- The demand for e-cycles has jumped in the post-Covid world, so there is greater interest in the electric cycle market. Apart from consumers, even several e-retailers are looking for co-opting e-cycles to be used by delivery persons. In the near future, we can see e-cycles becoming a common mode of delivery.

- Rise in recreation and fitness biking has led to an increased demand for bicycles in these hi-end categories. Fitness and health bikes have emerged as a promising category. Increasingly, cycling is emerging as a recreation and leisure activity, cycle groups are evolving in cities, there has been a greater push towards cycling infrastructure thanks to the government’s ‘cycle4change’ campaign. All these factors have laid the ground for a promising shift towards increased bicycle usage in cities.

- We have also noticed an uptick in the girls category as well where more and more girls are nowadays preferring unisex bicycles (especially in urban areas) rather than conventional girls bikes.

What is the average ticket price for Hero Cycles? And has there been any change in the post-Covid-19 scenario?
Hero Cycles’ branded portfolio excluding electric bicycles has seen broadly a 20 percent increase in average selling price (ASP). But a major shift in ASP is due to price increase as a result of escalated prices of raw materials and changes in the supply chain that we undertook and which is built in the MRP.

Hero Cycles commands a strong presence not just in India, but also globally through partnerships and acquisitions. Do you plan to acquire more companies to further drive growth?
Yes, strategic acquisitions have been the bedrock of our expansion strategy in Europe. Over the past few years, we have acquired Insync Bikes (erstwhile Avocet Sports) in the UK, and HNF in Germany. These acquisitions have helped us get access to a large and growing European market. We will continue evaluating to further this strategy to drive further growth. Our plan is to have a large market in Europe and integrate it fully with our manufacturing facilities in India.

How much are you investing in R&D, and what are the new technologies that are emerging in the cycle segment?
Most of our investment currently is to upgrade our manufacturing lines and systems and add more capacity. Innovations in cycle manufacturing a constant phenomenon and Hero is the only company in India which has a vision to be global and constantly striving to invent. For example, manufacturing of electric bicycles in form of Hero Lectro, premium bicycle components in form of spur, alloy frame development. We are furthering our capabilities through our new plant at the Hero Industrial Park to serve customers in Europe and the rest of world.

While the pandemic has hurt many sectors, the personal mobility sector is witnessing growth. Is the same true for Hero Cycles as well?Yes, the cycle industry at large and Hero Cycles in particular posted quick recovery after the lockdown. A number of factors have turned people towards buying bicycles. At the time of a pandemic, the need for a safe alternative to public transport led many people to turn to using bicycles. Similarly, as visiting gyms and other public workout programs became risky, more and more people started taking to cycling to maintain their fitness goals. The cycle industry has, therefore, witnessed robust growth this year.

The past few years have seen a number of entrants in the electric two-wheeler space including e-bicycles. How are you competing against them?
The electric two-wheeler space is still a niche segment in India and new ideas and products have started sprouting in the sector. Apart from major companies, a series of start-ups have also emerged in this space. The electric two-wheeler category has electric motorcycles, electric scooters as well as e-cycles. Hero Lectro specialises in the latter which is a unique category that combines the health benefits of traditional cycling with the benefits of motorised transport. E-cycles are also relatively more cost-effective as compared to the former two categories and our target audience is the rider who is health and fitness conscious as well. Hero Lectro also has a very wide portfolio of electric cycles suitable for different needs and requirements.

Given the fact that the electric age is now dawning upon us, the competition is definitely going to be fierce, but we are highly prepared and several steps ahead in the game.

As an industry veteran, what is your short-, medium- and long-term outlook for the bicycle industry?\
In the short and medium-term in a pandemic-affected world, the cycle industry will continue to enjoy robust growth. However, more interesting prospects for the sector lie in the long-term. Much like the psyche change that happened in Europe 40-50 years ago when cycling became mainstream, India is pregnant with a similar shift.

We are already witnessing its effects on the ground. Several cities have actively joined in the government’s cycle4change campaign and have announced plans to put into place dedicated cycling infrastructure. This shift will consolidate in the long term and we will see a greater surge in demand for cycling in urban India.

While it’s difficult to ascertain the continuity of these increasingly overwhelming trends, we are hopeful that this change is a behavioural change and not just a short-term trend.

What are the new investment areas for Hero Cycles?
Our focus remains unified and all our energy is focussed on development of the Hero Industrial Park. Approximately Rs 200 crore is parked only for this project.

Do you see cycle sharing apps and B2B customers as the key drivers for the growth of electric cycles in India?
Yes, these categories are going to be among the major drivers. As cycling infrastructure consolidates in multiple cities, the need for improved last-mile connectivity will certainly engineer cycle sharing, cycle renting apps and public bicycle sharing systems.

Similarly, as mentioned above as well, delivery services are also showing interest in deploying e cycles for the delivery personnel. We are hoping to see more such trends in the coming years.

In June 2020, Atlas Cycles shut shop, and one of the reasons cited by various people was due to the import of cheaper parts from Bangladesh and Sri Lanka, which had flooded the Indian market. Is there any change in the tariff structure?
Yes, cheap imports have been a concern for the domestic industry but customs duties on bicycle-related imports are already significantly high in India. So, to counter the cheap imports, what is needed is strengthening our indigenous manufacturing capacity to produce multiple categories of components and parts. We will have to improve our backward integration and produce more cost-effective components.

What are your plans and target for this year?
To begin with, we are augmenting our manufacturing capacity by two million units, as the Cycle Valley project – Hero Industrial Park unveils. We will achieve complete integration of our manufacturing facilities with our design and engineering centres in Europe to have a truly integrated manufacturing system.

We would like to request the government to make cycling a major element of its pollution-fighting efforts. Many cities across the world have greatly benefited by mainstreaming cycling. India, unfortunately, has failed to do so despite growing interest among people to adopt cycling in their daily lives.

Governments at different levels must initiate cycle- promoting measures including car-free days and dedicated cycling tracks to encourage more people to cycle to work. Lowering GST to five percent from the current 12 percent can help make cycles more affordable. 


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