The bicycles industry has clocked a negative growth of 8 per cent in the current financial year. The industry is overtaxed. It is worth $1.2 billion and annual production stands at 15 million units. Hero Cycles, TI Cycles, Avon Cycles and Atlas Cycles are four key players and account for 90 per cent of the country’s total bicycle sales. Around two million units are exported; West Asia, Africa, US and Latin America are the main export destinations.
Can we put up a better show?
CHINA WAY AHEAD
Perhaps, a comparative analysis with China will make the picture clear. With 1.34 billion people, China just has 8.06 per cent more population than India. But if we look at bicycle penetration, India’s figure stands at 90 units every 1,000 people, compared with 149 units for every 1,000 people in China. China is clearly far ahead.
The export picture is more grim. China’s bicycles industry is worth $8 billion and produces 84.5 million units annually. Of the total production, China exports 50.7 million units, compared with India’s 1.8 million units.
This makes China’s export business a whopping 25 times higher than India. We can rake up better numbers. But certain problems need to be addressed.
Bicycles remain the most important mode of transport in rural India. The 2 per cent excise duty that was levied in last year’s Budget pushed this most eco-friendly mode of transport slightly out of reach for the common man.
For a person with an income less than of Rs 100 a day, an increase of Rs 70-80 for a cycle can make a difference. Loans are not available to buy bicycles in our country. One can purchase a bike making a down payment Rs 2,000, but to purchase a cycle one has to make the payment upfront.
The industry honestly hopes that in the coming Budget, the additional burden will be removed. The Government also has an incentive in doing so. Lower prices will stimulate affordability and thus demand. Lower excise duty collection will be compensated by higher sales volumes.
The other challenge is to compete in the global market. The global bicycles market is worth $61 billion. As many as 130 million bicycles are sold every year globally and 66 per cent of them are made in China. However, the bicycles industry in India continues to decline vis-à-vis GDP growth. This, for obvious reasons, has adverse effects on employment.
The Indian bicycle industry faces a cost disadvantage. The areas of disadvantage vis-à-vis China are cost of capital, cost of power, duty drawback and freight subsidy. Chinese cycle prices, as a result, are at least 15 per cent lower than those of Indian cycles. China rules in the global stage primarily because it has a favourable export policy and better infrastructure. To boost the industry further, the Government can negotiate with EU for Most Preferred Nation status for export of bicycles to Europe. There is an urgent need to focus on infrastructure development in cities to promote cycling.
Under a green initiative, the Government should promote cycling as an environment-friendly means of transport, thereby reducing congestion and pollution, especially in big cities. Also, the Government can run campaigns which could show our nation in a positive light, stating that we have a low carbon footprint, as compared with other nations.
In the Netherlands and the UK, there are designated cycling lanes; the Government should apply a similar concept, at least in metro and Tier-1 cities.
To be at par with China, the Government needs to consider higher duty drawback from 12.3 per cent to 15 per cent of FOB price. Alternatively, a bonus incentive of 2 per cent of FOB price, as is applicable to select industries, can be considered.
(The author is President, AICMA, and Co-chairman-MD, Hero Cycles.)