CHANDIGARH:  The ongoing slowdown has hit the bicycle industry of Punjab, which produces over 90% of bicycles in the country and as meltdown has started hitting exports from Ludhiana.

The trend had started from 2007-08 itself as bicycle exports, which stood at Rs 807 crore in 2006-07, went down to Rs 746 crore in 2007-08, a decline of about 8%. According to bicycle manufacturers, the year 2008-09 would see bicycle exports falling down to a level of Rs 500-Rs 550 crore.

SK Rai, managing director of Hero Cycles said, “The global meltdown has gripped the domestic market as well. The bicycle customer will benefit from the slash in prices of steel, rubber, nickel, plastic etc.”

Onkar Singh Pahwa, managing director of Avon Cycles says that “steel prices, which were in the range of Rs 45 a kg, have come down to Rs 26-27 a kg which would only mean reduction in the cost of cycles”.

To add to the meltdown woes, the currencies of different countries had depreciated vis a vis dollar. Leading buyers mainly from Latin American and African countries have withheld their new orders as their currencies had depreciated by 30-50% against dollar. Similar is the case with buyers from Brazil, Mexico, Argentina, Ukraine, Peru and African countries.

With general slump causing slowdown in the demand for bicycles in domestic market, the industry has also been compelled to reduce bicycle prices by 3% to spur the demand. In fact, cycle industrialists of the region have come up with offers, decreasing the price of the basic models. This is in sharp contrast to the trend earlier this year when cycle manufacturers had hiked the prices of cycles by a minimum of Rs 350 per unit during January to September 2008.

Sales have dropped drastically too and buyers seem to be adopting a wait and watch policy expecting still better offers. The industry has also come up with offers for dealers to enhance sales. Hero, Avon and Atlas are offering gifts and cash discount on different models of bicycles.

Cycle manufacturers say that industry cut down bicycle prices by Rs 50 per unit to stimulate the demand but it has little impact on sales which continue to slide.

The industry’s woes were further compounded when the Centre reduced the duty entitlement pass book(DEPB) scheme. With this the export incentive was reduced from 8 to 6% on November 5. Bicycle manufactures say that exports from Punjab are likely to fall by about 30% in 2008-09 in view of the global meltdown and fluctuation in different currencies vis a vis dollar rates.

Courtsy Financial Express