Uphill ride for Indian bicycle hub as imports flood in

Cheap imports from China are threatening the survival of Ludhiana’s bicycle industry in western Punjab state, and have taken some of the air out of Prime Minister Narendra Modi’s ‘Make in India’ campaign for more domestic manufacturing and job-creation.

Once one of the leading manufacturing hubs in India, the town’s most famous industry is rapidly becoming little more than an assembly point for bikes smuggled through Bangladesh and Sri Lanka from China.

This will have deep implications for India’s US$1.5 billion bicycle industry as it loses ground to regional competitors. The country contributes a little over 10% of the world’s annual bicycle production.

Workshops in Ludhiana initially began importing parts to keep costs down, then found it cheaper to ship in entire units. Industry leaders say more than 3,000 jobs have disappeared in the past 18 months as more factories basically become retail outlets.

And they won’t be coming back, even though India is witnessing strong growth in demand for bicycles.

Chinese firms supplied bicycle imports worth $14.7 million in 2016-17, or almost one-third of India’s total imports of $43.4 million.

India’s bicycle exports to China were always low, but have now plummeted further as production declines. The shipment value was just $13,700 in 2016-17, down from $90,900 in 2012-13.

United Cycle and Parts Manufacturers Association (UCPMA), an umbrella association grouping the 4,500 bicycle and parts workshops in Ludhiana, reported that at least 20 parts manufacturing units have shut down and another 200 have downsized.

These 200 units manufacture more than 12,000 bicycles daily, says UCPMA vice president Pradeep Wadhwan.

“There are at least 20 units manufacturing chains, spokes and chain rollers that were shut down due to the heavy losses due to Chinese imports,” he said.

Government accused of inaction

Industry insiders claim that in addition to shipping bicycles direct to India, Chinese firms are also using the South Asian Free Trade Area (SAFTA) to dump duty-free cycle parts in India through trade routes in Bangladesh and Sri Lanka.

Imports of bicycle parts from Sri Lanka jumped to $11.5 million last year from just $3 million in 2013-14, while those from Bangladesh increased to $6.34 million last year from $4.6 million four years ago.

Angry traders have accused the central government of failing to take action to stop the entry of Chinese imports through SAFTA countries.

Badish Jindal, president of the Federation of Punjab Small Scale Industries Associations, said the government has been contacted several times regarding the misuse of the free trade route.

“Cheap goods manufactured by China enter India easily without any duty. China, through Sri Lanka and Bangladesh, is sending these goods and ruining the Indian economy,” he said.

“China, through Sri Lanka and Bangladesh, is sending these goods and ruining the Indian economy”

Ludhiana’s bicycle hub began in 1956 when O.P. Munjal ​and his brothers established Hero Cycles, now a giant of the industry.This encouraged a host of small parts manufacturers to set up in the town.  In the 1970s Hero Cycles started mass-producing the Roadster bicycle, which became the poor man’s mode of transport across India. The town was transformed into the centre of India’s bicycle industry. 

At its peak in 2009 Ludhiana produced over 50,000 cycles a day, but this has fallen to 35,000-40,000. Gurmeet Singh Kular, president of the Federation of Industrial Commercial Organization and the owner of a cycle manufacturing unit, said the imports of Chinese cycle parts had dealt a deep blow to the Indian cycle industry.

“While the cycle parts, including brakes, spokes, pedals among others, cost anything between Rs 50 (US 78 cents) to 200 (US$3.11) in the Indian market, all these can be procured below Rs 30 (US 46 cents) from Chinese markets, he said. “Cycle manufacturers prefer cheap parts over costly Indian-made goods, even if the quality suffers.”

Kular said he had laid off 20 laborers due to the fall in production.

Small parts manufacturing units usually supply “mother” units like Hero Cycles and Avon Cycles, which assemble and brand the final product. But faced with severe competition from Chinese imports, many of these small suppliers have become dealers and now put their own stamps on imported Chinese goods.

Most of the workers employed in the industry in Ludhiana are migrants from the poorer Indian states of Bihar, Uttar Pradesh, West Bengal and Odisha.

Ramesh Kumar, 42, from Bihar, was working at a parts manufacturing unit in the Focal Point district of Ludhiana when he lost his job in 2016. For two months he had no work and soon exhausted all of his savings.

“I was told by the owner of Lovely Bicycles in Focal Point that he was cutting down the workforce due to decreased manufacturing over the years. We were a total of 35 people who worked at the unit but only 24 remain,” says Ramesh.

Poor the main victims of layoffs

Jindal said many of the 3,000 workers have had lost their jobs had left town. “While some of them might have found work in other industries, many of them have gone back home and enrolled themselves in government-run rural employment-guarantee programs,” he said.

The bigger manufacturers like Hero Cycles and Avon Cycles still employ at least 4,000 workers at their Ludhiana units, but even they have had to cut back. Hero Cycles laid off 312 workers in June, 2017, triggering protests from entrenched employees.

The company claimed that they were not able to keep pace with technological changes, but this was rejected by workers. They say the company didn’t need them because it had switched to cheap imports.

“All those who were laid off worked in the bicycle frame-manufacturing unit,” said Vinod Kumar, a member of the Center of Indian Trade Unions. He says that most of those who were laid-off by the company now earn a living selling fruits and vegetables on carts.

Another hurdle for the industry is that Indian consumers are themselves switching to Chinese bikes because of their lower cost and better appearance. The bikes’ lightweight carbon frames are an added attraction.

Raman Sood, who runs a wholesale medicine shop on Pindi Street in Ludhiana, recently bought a Chinese cycle for his daughter. “While an Indian-made, high-end cycle costs anywhere between Rs 6,000 (US$93.60) to 8,000 (US$124.70) a Chinese cycle costs Rs 4,000-5,000 (US$62.39 to US$78),” he said.

The bottom line is that Ludhiana’s bicycles, like many other Indian products, simply cannot compete against Chinese imports because of their higher manufacturing costs. This is the case even on their home turf, let alone in Chinese markets.

High costs of infrastructure and capital and the slow adoption of technology have become a disadvantage. ‘Make in India’ might provide a temporary reprieve, but as Indian cycle makers are discovering, only a competitive advantage can secure their future.