THE WIDER ANGLE. Heading for a new business cycle

Pankaj Munjal, Hero Cycles’ chairman and managing director, believes India is ready for an “e-cycle transportation revolution.” His company’s poised to launch its range of throttle-assisted electric cycles next month in Bangalore and it has huge hopes riding on its newest vehicle. “This will transform Hero Cycles. My dream now is that every bicycle should have a motor and move people efficiently without a fuel bill,” says Munjal.

Munjal sees its new range as a game-changer though he admits big efforts will be needed initially to popularise the e-bicycles. “I don’t think it will sell right away. The concept-selling has to take place,” he says. The new range will have a 25km-30km-range and a top 25-kmph speed and the battery’s built right into the bike’s frame.

Traffic woes

Hero Cycles is the world’s largest cycle manufacturer by numbers and it should have an almost limitless potential for growth, given the size of the Indian market. If that isn’t enough, Munjal is on the side of the angels and can boast his product is eco-friendly and can also boost health and fitness.

But trumping that is India’s appalling traffic which makes bicycle riding hazardous to life and limb. Not surprisingly, Munjal has long been pleading with the central and state governments for cycle-friendly lanes and tax breaks. He notes it’s a huge contradiction that India makes around 19 million motorcycles and scooters annually and only 15 million bicycles. Next door, China makes a humongous 110 million bicycles out of which 80 million are exported.

And there’s another matter that Munjal hopes to change. India is massively late to the e-cycle party with negligible sales compared to China where sales have exploded from 300,000 in 2000 to almost 32.8 million units in 2016, according to statistics portal Statista.

Some 3.9 million were sold in the rest of the world in 2016 with e-bike sales in much of the EU posting double-digit growth. In the West, e-bikes are popular across demographics with the younger generation looking at opting for e-bikes rather than car ownership.

Munjal sees the challenge he faces as unlocking the potential of both Bharat and India. Bharat, in the cycle industry, refers to low-cost, basic black (almost always) bicycles that sell for ₹5,000 onwards. India, by contrast, is about high-value sports bikes like Hero’s Firefox.

Hero Cycles bought Firefox in 2015 to boost its upmarket portfolio. Growth at the lower end has been sluggish and Hero’s been looking for different ways to shake that up. Upper-end growth is much healthier, though from a low base.

Beyond home

How does a cycle company in India move into the fast lane? The answer is Munjal’s been working hard in different directions, attempting to turn his company into a truly global giant. In January, the company opened its £2 million Global Design Centre in Manchester and Munjal now spends a week every month in England. “I like to spend time in Manchester because our design studio people are very creative. Here, in India, we’ve become very focused on what to do and what to deliver.”

Designs from the Manchester centre go to the company’s Sri Lankan plant where they’re manufactured and exported to India and other corners of the globe. Hero bought a 60 per cent stake in Sri Lanka’s BSH Ventures two years ago. Says Munjal: “The high-end bikes made in Sri Lanka were introduced a few weeks ago and we’ve had tremendous response.”

Hero Cycles also has ambitious plans in Europe and is looking at setting up an Eastern European factory. Munjal wants his company to be as big in Europe as it is in India. “My vision is we should take over a company as big as we are in Europe. A €600-million or €700-million company.”

Still, the reason Munjal’s pedalling so furiously is despite efforts of Hero and other players, India’s cycle industry hasn’t achieved anywhere near its full potential. In fact, cycle penetration in India is one of the lowest worldwide at six for every 100 households. Also, the industry’s faced tremendous setbacks in the last 18 months because of the twin blows of demonetisation followed by GST’s introduction. At the village level, bicycles were normally bought in cash.

That’s why, though he’s King of the Cycle industry, Munjal has diversified. And right now, he’s finding faster growth in the automotive industry. Hero’s building transmission systems for top industry players and as well as chassis for companies like BMW and Audi and is in early talks with other big companies.

Hero also has an automotive R&D centre outside London (another reason he’s spending time in the UK). Munjal says the company did business last year worth over ₹1,000 crore and has ₹1,900 crore-to-₹2,200 crore in orders. It’s also embracing the future by building electric-truck transmission systems.

Says Munjal: “On the automotive side, we’ve done well. We grew by 25 per cent. Now growth will be bigger because we’re getting into e-driven mobility.”

A basic need

On a different level, Munjal’s son Aditya is spearheading Hexi, a last-mile transportation startup, focusing, for instance, on metro station to home or office. There’ll be e-rickshaws, scooters and bicycles and the company’s conducting a trial at Lovely Professional University in Punjab. Munjal’s second son Abhishek, looks after Hero Cycles’ production facilities in family hometown Ludhiana.

Still, Munjal firmly believes the cycle industry will keep growing, even if it only picks up speed gradually. He says Haryana Chief Minister Manohar Lal Khattar was interested in his Gurgaon cycle-lane proposal.

By contrast, Delhi’s Arvind Kejriwal thought it wasn’t feasible. Munjal’s also pushing for cycle microfinance. “The bicycle’s a basic need. We’re the one product with no finance. You can buy a cellphone, furniture, a motorcycle or car and pay in instalments.”

He also expects the combination of electric bicycles and more upmarket bicycles will give the company a more high-end image. Ultimately, he’s hoping for 80 per cent top-end sales and 20 per cent lower end.

On the personal front, he says he finds relaxation at work and is always looking at new horizons for growth. “There are milestones today and new goals after that. That gives me a high,” he says. And that also keeps him pedalling away at high speed.

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