New-found craze for cycling leads to acute shortage of premium bikes, even as sales jump 250%

"We are in an acute shortage now, there is no bike in the market," says Hero Cycle's Managing Director Pankaj Munjal. In conversation with CNBC-TV18, Munjal, who has been in the business for over 30 years, says that he has never seen a time like this.

For instance, orders for Chinese-made Shimano Gearboxes, which power most geared bicycles, have risen to such an extent that the company will be able to fulfill them only by March 2021.

"My friends in Japan - Shimano - are sold out until March 2021. In our German operations, we are sold out, there's no material and very big shortage. In England, I would urge my team to unlock monies from here and now they're out of material. In India we are ramping up production as best as we can taking care of COVID precautions," Munjal adds.

Premium segment cycles are selling the most -- road bikes with gears and electric bikes upwards of Rs 10,000 to Rs 15,000. Hero Cycles says it is seeing buyers making purchases for recreation, fitness and even cycling. "It is people like lawyers, merchant bankers -- these kind of people did not buy a cycle earlier. It was a very different buyer profile,” Munjal explains.

For many working professionals, cycling happened only three to four months ago. "I started to cycle firstly because gyms were shut. Everyone was also getting lazy, and so was I -- sleeping late etc. Cycling got me back into my routine of waking up in the morning. I cycle with a group that's fun too. You're exercising, you've got that out of the way by 7.30-8 am, and then you can get on with your work," Nikhil Sahani, a cyclist with the Delhi Riders' Club and a lawyer says.

"When we started riding, we were just 10-11 people. The main reason was that gyms were shut, and we wanted to work out with social distancing. Cycling is a good workout and you also maintain social distancing. Now we have a strength of 79 members, a mix of boys and girls... Even if people have started going to work and travelling has increased, we have changed the timing. We now start earlier to avoid the traffic, start at 6 am and finish by 8 am,” Ankoor Pasari, businessman and founder of the Delhi-based riders' club says and adds, "I hope we continue to cycle, it is a compulsion now. It is a habit that we can't change."

Now, this is good news for cycle makers like Hero.

"We were making about 400,000 bikes a month or 4.8 to 5 million bikes a year. That's what it was the previous time. Out of this 4 million, we would make about 80,000 premium bikes. These 80,000 premium bikes would average from Rs 6000 to Rs 40,000 from various price points and brands. This has gone to 2 lakhs. It is a 2.5 times jump, from June after COVID. This 250 percent growth is big," Munjal reveals.

He adds, "These are supply-led numbers. The demand figures are impossible to gauge. We have a lot of unfulfilled demand . We have a lot of problems with supplies and our suppliers' suppliers too, so that part is creating bad shortage now. We are not able to produce for unfulfilled demand. What we have done is 4.5-4.7 lakh bikes, but the mix has changed very positively. Our average selling prices have gone up, our margins have gone up, the premium brands are growing."

Hero Cycles says this trend could be an inflection point. It hopes the 5 billion dollar Indian cycling industry, which has been struggling with low penetration and stagnant demand in the mass market segment, will explode -- with the premium segment leading the way. To this end, Hero Cycles is banking on its new manufacturing facility, which will be operational by the December 15 and account for 10 percent of its global production capacity, to keep the wheels spinning.