Those who were buying 2-wheelers are now purchasing bicycles

Hindu Business Line
Mr Pankaj C. Munjal, Managing Director of one of the oldest bicycle manufacturers in India, is upbeat about the growth in demand for the ‘common man's vehicle'. The 49-year-old head of Hero Motors Ltd and Hero Cycles Ltd graduated in science and went on for specialised training in automotive manufacturing at General Motors Institute, Flint, US.

In an interview with Business Line, Mr Munjal talks about his company's journey so far and future plans. Edited excerpts:
How has the journey of your business been so far?
From a modest beginning of mere 639 bicycles in 1956, Hero Cycles now produces over 18,500 cycles a day and has an annual turnover of Rs 1,700 crore. The company employs close to 5,500 people and is the market leader, with 48 per cent share of the Indian market. Our manufacturing plant in Ludhiana is the largest bicycle manufacturing plant in the world with an annual sales volume of over 5.4 million cycles.
What kind of vehicle do you think an average Indian wants to buy?
There are two segments of bicycle buyers in India. One is a typical roadster. The customer in this segment has a monthly income of, say, Rs 5,000. He is the bread-earner of the family and for him after roti, kapda aur makaan (food, clothing and shelter), transport is a basic necessity.
The second category looks for recreation – kids and sport lovers. A kid grows on a cycle. Also, there is immense growth in the market for sporting cycles.

What are your strategies for the rural and urban markets?
We are working with various companies involved in microfinance in rural areas. Our microfinance activities have already started in Allahabad and Azamgarh. We provide support to companies by making available products in remote areas. We have tied up with Sonata Finance and similar arrangements are under process with other companies.
As far as differing strategies for the two markets are concerned, for the urban market, we make stylish bikes with versatile features, showcased in fancy showrooms. These are light aluminium bikes. For the rural market, our steel content is high. More than 50 per cent of our sales are in rural India.

What are your competitive advantages in the bicycle market?
We are known for fair bargain and reliability. Our huge service network is a big plus. In the current Indian market size of 12 million cycles, we sell 5.4 million cycles.

Being an environmentally-friendly mode of transportation, do you get any subsidy from the Government?
Far from getting subsidy, we actually get taxed by the Government. For a product purchased by a person earning Rs 5,000 a month, there should be some relief from local sales tax and VAT. Unfortunately, this is not the case.

Do you derive any synergy from your operations at Hero Motors?
The whole supply chain, from raw materials to customers, is a learning curve. Our learning from various auto component makers, knowledge of alternative metals, gives us insights into the automotive ways of working and applying them for cycles.

Any expansion plans?
We have two new plants coming up, one of which will be in this year and the other in the coming fiscal. One of the plants will most probably be in Ludhiana, since we have lot of land there.
Also, we will soon launch a premium bike for the Indian market, which will be an entry-level bike in the international market. We will be setting up facilities in the US and the UK. We are holding a conference in November, where we will launch a new brand for our urban customers. We have already filed for intellectual property rights.

In these times of auto slowdown, what are the consumer sentiments?
In these times of interest rate hikes and cost-push inflation, people who were purchasing luxury cars are buying small cars. Those who were buying two-wheelers are now purchasing bicycles. So, the demand has definitely gone up. The market has grown 15 per cent year-on-year between April-July 2010 and April-July 2011. We use to sell 17,500 cycles till last year. We have added another 1,500 to our basket.

Finally, which is your favourite bike?
The Genius, definitely, is my pick. These are aluminium bikes, which have had a soft launch and have got fabulous response. Available at Future Group stores and priced at Rs 20,000, we are currently selling 38-40 units in a month.