Asia Bike invests in E-Bike Production
COLOMBO, Sri Lanka – This month Asia Bike is starting the production of electric bicycles. Sri Lanka’s largest bicycle producer and exporter has built a new facility for its e-bike assembly operation which involves a multi-million investment as the company also started to produce alloy frames here for meeting the needed 60% local content requirements.
Headquartered on the outskirts of Sri Lanka’s Capital, Colombo, Asia Bike operates two bicycle production facilities. The ‘mother’ unit is located at Panadura while the second plant opened a year ago at Horana. Here is where the company is starting its e-bike production this June.
Investment in e-bikes
“We have earmarked an investment of USD 3 million (2.6m euro) in the electric bike project. The production is starting in a dedicated unit at Horana. We will introduce a range at the upcoming Eurobike show,” said Naqeeb Isthiark, General Manager of Asia Bike Industrial Ltd in an exclusive interaction with Bike Europe at the new Horana plant. This facility has sufficient space to house the company’s e-bike unit next to the existing bicycle assembly operation as well as the alloy frame production. Asia Bike is the only producer of alloy frames in Sri Lanka. Part of this production is exported to India, to one of this country’s key OEMs.
On e-bikes Asia Bike is targeting the low-to-mid price ranges of 400 to 600 US dollar. They are exported import duty free to all EU member states as Sri Lanka benefits from its Plus status within EU’s Generalized System of Preferences (GSP+). This offers the country’s industry a significant competitive edge as normally a 6% import duty is levied by the EU on e-bike imports from countries that do not have the GSP+ status. That advantage is expected to become even bigger when taking into account that a dumping duty is to be installed by the European Union on its e-bike import from China. “We are looking forward to seize the opportunities this brings,” commented GM Naqeeb Isthiark who, for his e-bike production, has turned to Japan and Korea for batteries.
Alloy frame production
Asia Bike will be able to equip the e-bikes it produces for OEMs and importers in Europe with alloy frames. As said they are also made at Asia Bike’s new Horana plant which was opened in 2017. “Acquiring the land and building the factory required a multi-million US dollar investment,” said the company’s GM. For the welded alloy frames the plant has two heat treatment units T4 & T6 which are sourced from Taiwan. The production of alloy frames started last January and it is expected that it will take two years to have the facility run at full capacity. In particular as, GM Naqeeb Isthiark says, “Our bike shipments are focused on the EU markets for which strict quality control perimeters are applied.”
Meeting local content requirements
Next to strict quality perimeters also strict rules on origin are applied by the European Union on its e-bike imports. As they stipulate that 60% of the ex-work price of an e-bike exported to the EU has to account for locally made components, it proved reason for Asia Bike to start making alloy frames. And as the company currently attains an over 50% localization level by manufacturing critical parts like frames, forks, alloy rims and others, a further hike in the production of parts is needed. “We are working on hiking the localization level to over 60% by starting the production of handle bars, stems as well as seat parts in very near future at the Horana plant,” explained GM Naqeeb Isthiark.
Asia Bike’s new Horana plant has the capacity to produce 400,000 bikes annually. Production for 2018 will amount to some 125,000 units. However, the company’s mother plant at Panadura (about 23 km from Colombo) has 100% capacity utilization, manufacturing 300,000 units yearly. With that Asia Bike is considering to shift production between the two units and on a longer term to even completely focus on the Horana facilty. Isthiark Farook, Asia Bike’s Managing Director, says on this “Rising urbanization around Panadura left no scope for further expansion, therefore, a plant shift is also under consideration but it’s part of our mid-term strategy. Currently, we are more focusing on streamlining production at Horana besides operating it at optimum capacity utilization in the next couple of years.”
Export to India rising
Asia Bike’s both factories ship bicycles to the EU as well as the neighboring Indian market. Currently, exports to EU constitutes the vast majority accounting for 80% of the export with 20% to India. “But with the surging size of the Indian market, exports to India are likely to grow to 30%. However, the EU remains our core export market now and also in the future,” emphasized Farook.
Asia Bike dominates Sri Lanka’s bicycle export. Both plants shipped about 400,000 bikes last year. Overall Sri Lanka exported 500,000 bikes in 2017. Next to Asia Bike DSI & Hero Cycles BSH venture is the other main exporter.