Strategies of Emerging Markets

The Bicycle Industry And Its Growth DriversIndian vs. Global Industry

Submitted By: Tanvi Gambhir (F10055) Sonia Maria Scolt (F10111) Tanu George (F10117) Alix Gerbet (F10121)

Contents
CHAPTER 1: The Global Bicycle Industry ....................................................................... 4 1.1 The Global Bicycle Market ..................................................................................... 5 1.2 Global Growth- History ........................................................................................... 5 1.3 Major Global Players .............................................................................................. 6 1.4 Global Bicycle Trends: ........................................................................................... 8 1.4 Global Growth Drivers: ........................................................................................... 9 1.4.1 Increasing concern for environment ................................................................ 9 1.4.2 Affordability and Economic Development ........................................................ 9 1.4.3 Innovation in the Bicycle Industry .................................................................. 10 1.4.4 Government Initiatives and Promotional Events ............................................ 11 1.4.5 Rise in Gasoline Prices ................................................................................. 12 1.5 Future Prospects: Global Bicycle Industry ........................................................... 14 CHAPTER 2: The Indian Context .................................................................................. 15 2.1 Indian Bicycle Industry- History ............................................................................ 15 2.2 Indian Bicycle Industry Present ......................................................................... 15 2.3 Major Indian Players ............................................................................................ 16 2.4 Indian Industry Trends ......................................................................................... 17 2.5 Indian Growth Drivers .......................................................................................... 19 2.5.1 Demand in rural India and small towns .......................................................... 19 2.5.2 Lucrative Children and Teenager segment .................................................... 19 2.5.3 Government Schemes ................................................................................... 20 2.5.4 Promotional Events ....................................................................................... 21 2.6 Challenges Faced by the Indian Bicycle Industry ................................................. 21 2.7 Future Prospects- Indian Context......................................................................... 23

CHAPTER 1: The Global Bicycle Industry

A popular means of transportation in various areas of the world today, the bicycle actually evolved from a little wooden horse with a fixed front wheel, in France in the 1790's. This model was improved in Germany in 1817, by Baron Karl von Drais. The model for the modern bike was the "safety bicycle", invented in England in the early 1880's, with a chain, sprocket driving rear wheel and equal sized wheels. The years that followed saw the further development of the bicycle with pneumatic tires, two and three speed hub gears, and the derailleur gears, which was the last major innovation of bicycle design until the 1970's. Bicycles today offer more than just the simple pleasure of cycling. From fitness and trekking to racing, bicycles today cover a much broader spectrum of activities than in the days of their predecessors. The industrys high point, in terms of unit sales, was the so-called "bike boom" in the 1970s. The boom ended suddenly when the industry reached a rapid saturation point and did not have breadth of product choices to sustain sales levels. Today, the industry has a much stronger foundation, with an estimated 2,000 companies involved in manufacturing and distributing cycling products to retailers, and approximately 150 different bicycle brand names to choose from. A wider variety of product is being sold to a wider range of consumers than ever before. Since the "boom," no part of the bicycle has remained unchanged, with fundamental improvements in design and materials being the norm throughout the industry. Todays quality bicycles are more comfortable than ever before, the components more function-specific and reliable, and new and exciting features are introduced regularly. This allows professional retailers many options to match the right bike to each consumer male or female, big or little, frequent or infrequent rider, and statusconscious or not.

As an example of the actual diversity of bicycle sold, please find below the details of the bicycle sales in US from 2005-2010.

1.1 The Global Bicycle Market

The Global Bicycles Market is expected to exceed US$77.7 billion by 2015 (according to a New Report by Global Industry Analysts, Inc.) Moreover, the global market has registered a 4% growth in 2010. According to the NPD group, the global sales totalled 137 billion bicycles in 2010.

1.2 Global Growth- History

The global production of bikes increased dramatically beginning in the early 1970s. After nearly doubling from 1950 to about 1970, worldwide bike production grew by a factor of six from just over 20 million units in 1970 to 130 million units by 2007. The following graph depicts the same:

1.3 Major Global Players

Although bicycles are produced in dozens of countries, the top five producers- China, India, the European Union, Taiwan, and Japan - are responsible for 87% of global production. China: China alone had some 58 percent of the global market in 2004. The following year, 2005, was a record year for the production of bicycles in China with a 16% increase in the production of bicycles and E-Bikes to a total of 80,430,000 units produced, of which about 65% were exported. The Peoples Republic of China makes two out of every three units made globally. That is a huge 66%. Moreover, 86% of the bicycles sold in the US are imports from China. China alone accounts for a large share of the growth in the world bicycle market. From 1949-1979 during the first three decades of Communist rule, people in China aspired to own three durable goods: a wristwatch, a bicycle, and a sewing machine. According to the website Chinability, by 1981, there were 135.9 bicycles per 100 households in urban areas. Though even that level of bike ownership left ample room for growing demand with a market penetration of 45 percent on the individual level for a family of three. In rural areas a year earlier in 1980, there were still only 36.9 bicycles per 100 households.

As a clear sign of the pace of Chinas rapid economic growth, it took just four more years until 1984 for bike ownership in rural China to reach a level of one bicycle per household. In addition to economic development enabling higher rates of market penetration, rising per capita incomes also give up-and-coming Chinese the means and motivation to replace old bikes with better, new models. One result of Chinese residents move up the economic ladder and bicycle food chain has been strong growth in the world market for so-called e-bikes. Asia Pacific: Asia-Pacific dominates the bicycles market worldwide. The region represents the largest as well as fastest growing market for bicycles in the world, exhibiting a Compound Annual Growth Rate (CARG) of more than 6.0%. Europe: The European bicycles market is supported by several city governments that laid out bike-friendly roads to encourage cycling. With growing demand, many large cities in Europe including Barcelona and Paris initiated programs such as bicycle loan facility. United States: The US represents other prominent market for bicycles, where they are primarily used for recreational purposes. The U.S. bicycle industry generated $6 billion in sales in 2010. The size of the industry has remained remarkably stable since 2003, with sales between $5.8 billion and $6.1 billion each year Adult bicycles represent the largest product group in the global bicycles market. Sales of adult bicycles are projected to reach US$29.2 billion in 2012. In terms of growth, sports bicycles represent the fastest growing product group, registering a CAGR of more than 6.0% over the analysis period. Please find bellow a sum up of the world players in bicycle market in 2007.

1.4 Global Bicycle Trends:

Bicycles provide three distinct advantages that include price, performance and environment protection. Bicycles are considered as environment-friendly products and the latest electric-power bicycles are recognized worldwide as a green transport vehicle. The bicycle industry moved forward in terms of product quality, production automation and techniques by introducing, absorbing and comprehending sophisticated equipment and technologies available globally. However, the role of bicycle that was once deemed as an indispensable item has come down drastically during the past decades because of significant improvements in living standards of people across the world. In recent times, bicycles have become less important in day-to-day life, potentially leading to fading out of most of the demand thereby resulting in major transformation in the industry. But compared to other products

of the past that faded out of consumers life, bicycles continues to exist in the market with newer concept, getting new development arena in a different era.

1.4 Global Growth Drivers:

The global economic recession had an adverse impact on the bicycle revenues worldwide. The market, nevertheless, is expected to recover in 2012 and post substantial growth in ensuing years, driven primarily by 1) Eco-friendly characteristics 2) Innovation in Bicycle Industry. 3) Surging popularity of cycling as a leisure activity and increased affordability. 4) Governments support across the world is also aiding bicycle industry through various bicycle promotion projects and policies: For example, in India, an event called Cycle India 2010 gave a big boost to this sector. It was a week-long charity event that witnessed worldwide participation. The event started on January 3, 2010 from Mysore and ended on January 10, 2010 in Hyderabad. 5) Finally, sharp increase in gasoline prices is also compelling people to adopt cycling for commuting short distances in cities. Each of these factors has been dealt with, in detail, in the following section 1.4.1 Increasing concern for environment At least part of the increase in world bike production is due to an increasing concern for the environment. Since 1970, considerable progress has been made in advancing climate change science and convincing public opinion that global warming and environmental degradation are relevant problems for most of the worlds people. And, bicycles, owing to their eco-friendly nature, have been promoted heavily as alternatives tackling the existing environmental issues. 1.4.2 Affordability and Economic Development Rather than an Eco Indicator of efforts at environmental conservation, the dramatic rise in the global demand for bicycles is as much or more a function and sign of the rapid

economic development that has occurred around the world since 1970. At a tiny fraction of the price of cars, bicycles become affordable to much larger portions of the populations of developing countries long before cars do. As of 2009, private car ownership in China remained at just 26 million units in a country of 1.3 billion people with a long-standing one-child policy. The timing of the sharp increase and divergence in bike and car production aligns well with a particularly productive time in the worlds economic development. Over the period 1970-2009, the average increase in the Human Development Index (HDI), which correlates closely with per capita income levels, for countries around the world was a healthy 44 percent. 1.4.3 Innovation in the Bicycle Industry In addition to economic development, new trends in popular culture and innovations in the bike industry are other important drivers of the growth in world bike production that seem to have limited environmental connections in most cases. Schwinn Sting-Ray The introduction of the Schwinn Sting-Ray and other socalled wheelie bikes with large front wheels and banana-style seats kicked off a boom period in the popularity of biking in the U.S. during the 1960s.

European-style derailleur-equipped Sport Bikes The availability of lightweight, smooth-shifting European-style road bikes also helped fuel Americas renewed interest in biking and Bike Boom of the latter 60s and early 70s.

BMX dirt bikes In the 1970s in the U.S., BMX dirt bikes and racing became popular as teenagers sought to imitate professional motocross racers popularized by the movie On Any Sunday. The BMX movement lasted a decade and accounted for one-third of all bikes sold in the U.S. in 1982.

Mountain bikes and extreme adventure sports During the 1970s in California, Joe Breeze, Gary Fisher, Charlie Keller, and Tom Ritchey were the leading figures in the development of modern mountain bikes. In 1979, Fisher and Keller started the Mountain Bikes Company using Ritchey frames. By a year later in 1980, they were awash in sales of their new high-end, off-road bikes. In 1983, Fisher founded Gary Fisher Mountain Bikes and the National Off-Road Bicycle Association. In 1993, Trek Bicycle Corporation acquired Fisher mountain bikes. (To learn more about the history of mountain biking, check out the documentary Klunkerz: A Film About Mountain Bikes. Homemade creations called Klunkers that adventurous types used to bomb down rough mountain fire roads were the precursors to modern mountain bikes.)

Hybrid bikes Hybrid bicycles are a more recent iteration that combine features of road bikes and mountain bikes. Hybrid bikes are purpose-built to suit the needs of commuters, shoppers, and casual bike riders. They are designed to be more comfortable and rider-friendly than their more specialized mountain and road bike cousins.

Lance Armstrong and the Tour de France The colorful stories around Lance Armstrongs domination of the worlds most famous bike race inspired a whole new generation of Lance followers and weekend bike warriors. After recovering from cancer, Armstrong went on to win the grueling 21-day, 2,000-plus mile tour six consecutive years from 1999 to 2005. 1.4.4 Government Initiatives and Promotional Events In recent years, many world cities have been promoting biking as a way to help alleviate troublesome traffic congestion, air pollution, and other environmental ills related to increasing urbanization. From 2006 to 2010, the city of Amsterdam in the Netherlands, which boasts some of the worlds highest cycling rates, planned to invest more than $160 million in bicycle paths, parking, and safety. In Copenhagen, Denmark, where 36 percent of commuters biked to work by 2006, the city planned to invest $200 million in

bike facilities between 2006 and 2024. In Freiburg, Germany, 70 percent of local trips are made by bike or public transit or on foot thanks to regular, annual investments in bicycling infrastructure dating back to 1976. In Australia, the state of Victoria, which is home to Melbourne, the countrys second largest city, amended planning laws to require all new large buildings to provide bike parking and other facilities such as lockers and showers. As of 2008, the 50 largest U.S. cities had plans in place to double their bicycle and pedestrian routes. 1.4.5 Rise in Gasoline Prices The rise in gasoline and fuel prices has triggered the sudden surge in demand for ebikes. E-bikes use a battery-powered electric motor to assist riders with pedaling. They can typically go as fast as 15 to 20 miles per hour (24 to 32 km/h) or more. Depending on the country, e-bikes are often classified as bicycles and not subject to the level of regulation or laws that can restrict the ownership and operation of cars and other motor vehicles. Electric bicycles, or e-bikes, have accounted for a large portion of more recent growth in world bike demand and output, with production doubling from 2004 to 21 million units in 2007 Electric bikes require less work on the part of riders and make it easier to negotiate inclines, tolerate biking in hot weather, and, generally, bike under other more strenuous conditions. They also make biking more accessible to many countries growing populations of aging residents. According to Hu Guang, Deputy General Manager of leading Chinese e-bike manufacturer, Xinri (which means new day in Chinese), Motorcycles are too dangerous, cars are too expensive, public transportation is too crowded, and pedal bikes leave you too tired. So people buy e-bikes. Hopefully, some buyers also have other motivations, but the environment is still notably absent from this explanation. In 2008, China bought 21 million e-bikes, compared with 9.4 million autos. In 2009, China had about four times as many e-bikes on the road as cars. As of early 2010, there were estimated to be a total of about 120 million e-bikes on Chinas streets and

bike paths. In 2009, about 60 percent of Taiwanese Giant Manufacturings 300,000 ebike shipments went to mainland China. In Germany, sales of e-bikes nearly tripled in 2007. Analysts forecasted 2010 sales of roughly one million e-bikes in Europe and 300,000 e-bikes in the U.S., about doubling the number sold in the U.S. in 2009. E-bike sales have also been growing rapidly in the Netherlands and India. Like other bicycles, e-bikes are an attractive alternative to cars in more ways than one. In addition to carrying far lower price tags and facilitating mobility in crowded urban areas, they also cost far less to operate and keep on the road. Its an unlikely coincidence that the divergence of bike and car production occurred just about the time of the 1972-73 Arab oil embargo that led to a dramatic and sustained increase in gas prices. Several sources point to a direct, eye-opening correlation between energy costs and motorized vehicle usage. The chart below from Jim Puplavas
Captains Log shows the interesting relationship between vehicle miles traveled and oil

prices.

The oil crisis also led to a pronounced reduction in car and engine sizes in the U.S.

1.5 Future Prospects: Global Bicycle Industry

The outlook for the future in bicycles is very positive, though stability is the story of the recent past. The bicycle industry is a seasonal business that can be impacted by unusual weather, as well as an industry that relies on discretionary spending impacted by economic conditions. Industry sales of bicycles seem to be stable as well as accessories and service. Moreover, as explained, trends related to the green movement, environmental sustainability, the need to address health problems related to inactivity, and higher gas prices also bode well for the future of human-powered transportation.

CHAPTER 2: The Indian Context

2.1 Indian Bicycle Industry- History
Bicycle was first seen in India in the year 1890. Import of cycles, however, started only in 1905 and continued for more than 50 years. Complete ban on imports was announced by the Government in July, 1953, but cycle kept on simmering in the country till 1961. In 1890, the selling price of an imported bicycle was around Rs. 45/-; in 1917, during the First World War, the price jumped to Rs. 500/- but dropped considerably, month by month and came down to Rs. 35/- or so (U. K. makes) to Rs. 15/- or so (Japanese models). It would be interesting to note that in 1919, five persons in Punjab imported cycles and used them on The Mall, Simla. These included one Bishop, two military men and two contractors. Under special permission of the Governor, they were allowed to use cycles on 'The Mall' only for one hour a day. They imported B.S.A. Cross Bar Cycle from U.K. and that destined one hour would be watched by hundreds of people every day. Later, a firm was formed under the name of Singh & Co. with shops on Railway Road, Jalandhar and Bazaar Vakillan, Hoshiarpur, which imported bicycles in the year 1930 onwards.

2.2 Indian Bicycle Industry Present

With an annual turnover of more than 12 million bicycles, the bicycle industry is one of the established industries in India. The country's position is that of the second largest bicycle manufacturer in the world, next only to China. India has seen a tremendous increase in the number of bicycle manufacturers and bicycle exporters in the recent past. Today, the Indian bicycle manufacturing and bicycle spares industry is well accepted and is also widely recognized for its quality standards in international markets. Most bicycle components, spares and bicycle accessories in India, except for free wheels and single piece bicycle hubs, are manufactured by the Small Scale Sector (SSIs), while the large scale units are permitted to manufacture bicycle frames, chains

and rims for captive consumption. Manufacture and export of complete bicycles fall within the purview of the Organized Sector. The size of the Indian bicycle industry stands at US $1.2 billion. The number of units (finished bicycles including all segments)
India is the second largest manufacturer of bicycles in the world with 12 million units annually. In value term that is US $1.2 billion Global bicycle production is around 130 million units. Thus, India produces a little over 9% of the world s bicycles. Hero Cycles is the largest bicycle manufacturer in the world. Major exports from India are to the Middle East, Africa, the US, and Latin America. A bicycle dealer in Patna, Bihar, sells around 10,000 bicycles in a month.

Some Quick Facts-

produced is around 12 million, according to an industry source. Of this, the number of units exported annually is about two to three million, which points to a huge demand in the domestic market. According to figures from the Engineering Exports Promotion Council, in 2007-08 India exported bicycles and components worth US $185.42 million. The Indian bicycle industry is currently in the midst of making endeavors for enhanced and increased bicycle exports since the scope for export of Indian manufactured bicycles in the international market is significant.

2.3 Major Indian Players

The Indian bicycle market comprises four major playersHero, TI, Avon, and Atlaswho also export to the Middle East, Africa, the US and Latin America. Most of the big players started operations between the mid-1940s to mid-1950s. The oldest and the largest one, Hero Cycles from the stables of the Hero Group, started as early as 1944, but stabilized its production only after 1956. It has a 48% market share in the Indian bicycle industry. An annual sales volume of over 4.8 million has made it the largest bicycle manufacturer in the world. Hero Cycles rolls out around 18,500 units every day.

Started Brand(s) Production (million units)

Hero Cycles 1944 Hero 4.9

TI Cycles 1949 BSA, Hercules 2.8

Avon Cycles 1948 Avon, Buke, Apsara 1.7

Atlas Cycles 1951 Atlas 1.2

2.4 Indian Industry Trends

Driven by the perennial demand in rural areas, favorable government schemes and a booming childrens segment, the bicycle industry is on a roll. Summer vacation in schools and colleges across India is also another boom time for bicycle retailers. For instance, in a big city like Delhi, a retailer, on an average, sells 250 bicycles during the months of April, May and June. These are mostly in the children and teenager segment that for long has been a money-spinner for bicycle manufacturers. The sales figure in this segment could even touch the 500 mark, depending upon various schemes and discounts to lure customers. Add to this the standard bicycles, womens bicycles, mountain terrain bicycles (MTBs), and so on, and you have a market large enough to be considered a huge opportunity. Within the bicycle industry, the standard modelwhich is recognized as the one usually driven by the labor class dominates with a share of around 50%. This segment still has a huge potential for growth as this basic model is hugely popular. This is because this model is still used for commuting and transporting goods.

On the other hand, in urban areas there has been a shift of preference from standard models to other types, with urban consumers using a bicycle more as a means of fitness and recreation. Today people, especially urban adults, are becoming more and more aware of the consequences of global warming, health issues, pollution, and so on. As a result, it is observed that they are taking to greener modes of transportation like bicycles and electric scooters. Hence, there has been a considerable shift in the perception of bicycles from a mode of commuting to a recreation/personal mobility solution. The spares market is estimated to be larger than the cycles. With the growth in specials category with gears, the demand for accessories will grow and will be an opportunity area in future. -Raghuram, Senior Vice President, Bicycles and Fitness, TI Cycles, the bicycle manufacturing arm of the Murugappa Group. New Age Markets are also evolving in the country. Some popular bicycles that have caught the interest of this market are Electric bicycles, Fitness machines like exercycles and Innovative sports bicycles. An exercycle is an exercise bicycle with saddle, pedals and some form of handle bars arranged as on a bicycle, but is used as an exercise equipment rather than transportation. It is basically used for general fitness, cardiovascular exercise, during trainings for cycle events etc. Major bicycle manufacturers like Hero Cycles, TI Cycles and Avon also manufacture a fitness range. Electric bicycles (e-bikes) are also catching on in the cities. Avon is actively involved in its production. Accessories like bicycle helmets, knee guards, elbow guards, sippers, shoes, tires, bells, fancy baskets and carriers for womens bicycles are also increasingly being sought after.

2.5 Indian Growth Drivers

Some of the growth drivers for the Indian Bicycle Industry are: Huge demand in rural India and small towns Childrens segment Government schemes for school-going poor children Gaining popularity of Events that boost bicycle usage in India Increasing health/fitness consciousness in urban areas Requirements for zero-emission solutions for polluted traffic routes India becoming a low-cost manufacturing hub Higher density of suppliers and dealers

2.5.1 Demand in rural India and small towns The demand in rural India and small towns is one of the biggest growth drivers for the bicycle industry. To put this into figures: a distributor/supplier of TI Cycles BSA and Hercules brand in Patna supplies more than 10,000 bicycles to all the nearby village areas, including the city on a monthly basis. With no roads in place, no affordability, the bicycle is the most preferred option for commuting. One will hardly see motorcycles, scooters on the lanes here, says Vikas Kumar Binjrajka of VV Marketing, a bicycle dealer in the Muzaffarpur town in Bihar. Maximum demand is for standard bicycles here as they are the most trusted models. An average price of every unit sold here is around Rs 2,500. On the other hand, an average life of a bicycle is three years. Hence, the demand for its spare parts is even more than the bicycle itself, he adds. The rural market is far from saturation. It is believed that the replacement market may generate annual sales of three million bicycles in the near future. 2.5.2 Lucrative Children and Teenager segment In the urban market, the children and teenager segment is growing very fast. This segment has shown a healthy growth and is likely to continue growing in the future too. The kids and teenagers segment is witnessing a robust growth. The average price of a

bicycle sold in the urban market is around Rs 4,000. Prices depend on suspension, gears, accessories, etc, which all kids want in their bicycles. 2.5.3 Government Schemes Government schemes are also helping in driving growth. Most state governments have special schemes that involve gifting bicycles to people, mostly children, in the economically weaker sections of the society. Such is the impact on this industry that the government is one of the biggest customers for bicycle manufacturers. State governments invite tenders for supply of bicycles and the big players get to make the most of it. The central and state governments are believed to have ordered around 1.5 million bicycles in 2008 to hand them over to poor children under various social welfare schemes. An industry source estimates that the figure could go up to 2.5 million units in 2009. States like Maharashtra, Madhya Pradesh, Bihar and Jharkhand are among those suppling bicycles free of charge to poor school-going children. There are more such examples. According to the Pudducherry government, Due to long distance and shortage of transport facilities, poor students are in great need of bicycles to go to schools. By getting cycles, students need not walk more and hence energy is saved and more time is available to concentrate on studies and the students can also reach the school in time. By using the cycles, more work may be attended [to] in a shorter time. Thus, a new scheme was formulated to distribute free cycles. In a year approximately 10,500 cycles (each cycle of Rs 1,385) are supplied to the boys and girls studying in IX standard in government and government-aided schools. The Assam government has made a provision for Rs 24 crore in 2008-09 for providing bicycles to about one lakh girl students living below the poverty line. The Haryana government has supplied bicycles to certain schools under the Sarv Shiksha Abhiyan scheme. The bicycles are to be provided free of charge to those girl students who have to walk more than 2 km to school.

The Tamil Nadu government also runs schemes to encourage higher education among the Scheduled Castes/Scheduled Tribes, Scheduled Caste converted Christians studying in classes XI and XII in government and government-aided schools, under which free bicycles are distributed to students. Despite the slowdown, the bicycle industry is booming, thanks to government tenders for more bicycles. Even the second-tier suppliers and smaller vendors supplying to the big four are full with orders. 2.5.4 Promotional Events Bicycle events also boost sales for the Industry. Several events are being organized across the country to increase awareness about the use of bicycles. For example, every Republic Day, an annual cycle rally is organized in Pune by the Pune Cantonment Block Congress Sports Committee in association with the Ekta Mitr Mandal, a self-help group. It is a 22-lap cycle race with people participating from all over the world. In Chandigarh an annual cycle day is observed by holding a cycle rally. This is organized by the Chandigarh Tourism Department in association with the Society for Tourism and Entertainment Promotion. A proposed event called Cycle India 2010 is also likely to give a big boost to this sector. This will be a week-long charity event that will witness worldwide participation. The event will start on January 3, 2010 from Mysore and will end on January 10, 2010 in Hyderabad. Another growth driver is environmental awareness. This is driving many in urban areas to choose bicycles as a mode of transportation in the neighborhood. The desire to adopt healthy lifestyles has also helped in bolstering this market.

2.6 Challenges Faced by the Indian Bicycle Industry

The Indian bicycle industry is also facing some challenges. The biggest dampener is the demand for motor bikes. Changing socio-economic patterns, increasing purchasing power along with the available financing options, the Ludhiana is the hub for bicycle manufacturing in India. middle class, lower middle class, and also to some extent the poor class has shifted their mode of commuting and transport to motor bikes in urban areas. Even school and college-goers prefer riding their own motor bikes and scooters over a bicycle. More than 25,000 cycles per day are manufactured in Ludhiana alone. The city is home to over 1,500 factories making bicycles and components, providing employment to 0.25 million people and today it is a jewel in the crown of India s industrial cities. -All India Cycle Manufacturers Association. The use of motor bikes is increasing in the rural areas too with better finance facilities and availability of these motor bikes. In big cities, the increasing number of automobiles on congested road has made it riskier and more difficult to ride bicycles. With no option of separate cycling lanes, bicycle users in the urban areas face tremendous risks while commuting. Also, it becomes easier and much where destinations are further away than in villages. People from villages and small towns are moving to metros and other cities for work and this factor has translated in the long term to more people switching over from using bicycles to motor bikes. Sources in the industry say that shortage of funds is another problem in this sector. Funding is not available to players who wish to expand their production units. And even if it is available, it is at a very high cost. more comfortable to ride a motor bike than a bicycle in big cities

Other difficulties at the global level include the competition from China, besides rising steel and rubber prices. To summarize, below mentioned are the major challenges the industry faces, today: Increasing demand/popularity of motor bikes Increase in migration of people to cities Long commutes to work in big cities No dedicated cycling tracks in cities High risk involved while commuting by bicycle Low awareness of cycling as a sport in India Lack of funds for expansion of infrastructural facilities High costs involved in setting up better quality manufacturing units Competition from China and other low-cost manufacturing destinations Rising prices of raw material such as steel and rubber

2.7 Future Prospects- Indian Context

There are a lot of cycling enthusiasts in the country who are into serious cycling. There has been a gap in the availability of performance bicycles in the country for quite some time. TI Cycles has filled this gap by introducing high-end bicycles from leading international bike manufacturers Bianchi and Cannondale. Cannondale, a US-based sports bicycle manufacturer, has also made an entry into the Indian market. The super-luxury segment is now opening up for Indian customers. The launch of the Rs. 2 Lakh bicycle by TI Cycles in partnership with Bianchi, an Italian bicycle manufacturer, is a case in point. TI Cycles estimates the size of this super-premium segment will help it rope in sales of over 5,000 units annually. These high-end bicycles will range between Rs.17000 and Rs.2 Lakh per unit. Hi-tech engineering and use of expensive materials like titanium and carbon fiber that absorb vibration, for a smooth ride, make these bicycles expensive. The high-end accessories market is also up for grabs. These include helmets, apparel and shoes.

It is expected that in times to come the bicycle industry is set to grow faster. The replacement and the spare parts market will become a major growth area. The accessories segment is also in for good times. However, demand in rural areas is likely to stay stable, yet good enough to support the existing growth. In urban areas, the leisure market is yet to be tapped fully and there is huge potential here. The children and teenager segment is quite lucrative as well. The All India Cycle Manufacturers Association wants the government to frame policies that popularize the use of cycles in cities and towns, keeping in view the overcrowding of roads, increasing pollution due to auto vehicles and increasing cost of imports Congested and central areas in the cities and towns should be declared as cycle areas and entry of vehicles should be lawfully banned.