With the dawn of new year, prices of bicycles are all set to increase following a shortfall in demand as vendors have not lifted finished goods owing to minimal cash flow in the market (demonetisation effect) and escalating steel prices (raw material for cycle manufacturing) ₹4,000 to ₹6,000 per tonne.
As stocks of finished goods have piled up, manufacturers of cycles as well as its parts are forced to curtail production by half, and now the increasing prices of steel (essential raw component for cycle making) have served up a double whammy for the domestic cycle industry.
SK Rai, managing director of Hero Cycles, said: “The prices of steel sheets, a major component for cycle manufacturing, have increased by ₹8,000 per tonne. Around 80% of cycle manufacturing is dependent upon the raw material and if it keeps shooting through the roof like this, it will be difficult to prevent a price hike. The cycle making firms will not be absorbing the burden alone and hence, it will be translated to customers in the form of increased prices of cycle.”
President of TI Cycles Arun Alagappan also indicated that a price hike of cycle is on the cards. He said, “The prices of raw material have been increasing at a rapid rate. If the prices of steel do not come down by January, we will be left with no choice but to increase the prices of cycle. As of now, it is difficult to calculate how much it will cost an average buyer, but it is certain that there will be a hike in cycle prices after January.”
The burden of price hike of cycle will hit business prospects of manufacturers operating at small and medium scale who have been witnessing a shortfall in demand post demonetisation. As there is minimal business activity in the market, the traders will be forced to sell finished goods at lower rate while increase in their input cost (increased steel prices) will make it difficult for them to thrive.
There are more than 4,000 small and medium cycle manufacturing units in Ludhiana which employ more than 2.5 lakh workers and manufacture around 50,000 bicycles in a day with an annual turnover of around ₹7,000 crore. The hub of cycle manufacturing, Ludhiana also exports bicycles to European and Asian countries.