Hero Cycles to Open Design Centre in Europe
COLOMBO, Sri Lanka – Mathias Seidler former CEO of Derby Cycle AG for 15 years has become a member of the Board of Hero Cycles. He is to formulate the European strategy of the biggest in bikes in India that recently made acquisitions in the UK and Sri Lanka.
Hero Cycles has made the moves in order to be in the right place at the right time. It has parts manufacturing capacities in India, assembling in BSH plant in Sri Lanka to take advantage of its import duty free GSP status and shipping to its own company Avocet in the UK to cater the UK & European market.
Designing and manufacturing capabilities based in Europe
Hero Cycles is also working on acquiring designing and manufacturing capabilities based in Europe for meeting customer specs. “We are planning to set-up a design studio and innovation centre in Europe, which would exclusively work to meet the requirements of the European market,” said Pankaj Munjal, Chairman & MD, Hero Cycles Ltd.
When asked for the specific location in Europe of the innovation centre, Munjal said, “We have been supplying car components to BMW and entered into a joint venture with ZF. Therefore a design centre would be ideally located in Germany or in Central Europe, which also happens to be the largest bicycle market in Europe.”
To enter the e-bike market in 2016
Hero also plans to introduce electronics to its bicycle range this year. “As the world is getting inter-connected, lot of electronics is added to the bicycle and that is one area identified by Hero to work on,” Munjal said. He declined to elaborate on a technical or joint venture plan to acquire such technology but industry insiders stated that Hero is keen on acquisitions that could bring the company into the centre stage of e-bike market globally.
Strategic acquisitions to move-up the value-chain
Hero values the global bicycle market at about USD 50 billion annually. India’s biggest in bicycles claims to have about a 5% share in that market volume wise. “It is our challenge to move up the value chain and obtain a 5% value share as well. And if we have to move up to the value chain, we have to make more strategic acquisitions to take a bigger share of the global bicycle business,” Munjal said.
BSH to cater India and EU market
Hero’s plan with its latest acquisitions is to take the Sri Lankan made bicycles to the Indian market and also supply the UK. The same product designed and made for the UK market is now available for India with the launch of the brand Sprint Pro. These are already made at BSH and shipped for India as well UK market. Bicycle exports from Sri Lanka to India takes a limited 6% duty, while Sri Lanka is likely to retain its GSP+ status for exports to EU by the end of 2016, which brings access to EU market for Hero Cycles.
Bicycle exports touched USD 39 million
Pankaj Munjal, Chairman & MD, Hero Cycles also said, “Thanks to acquisitions in Sri Lanka and the UK, we have emerged as the largest bicycle exporter in India by exporting bicycles at a value of USD 39 million in 2015. The acquisition of Avocet brought us access to some of the largest IBDs like Tesco and Argus in Europe. We are targeting to emerge as one of the biggest bicycle exporter by 2019 exporting 60% of our production while distributing the remaining 40% on our domestic market.”
BSH acquisition – Advantage Hero
According to Munjal, “Different from the Indian bicycle company, BSH understands the requirements of the European customer for example in material handling, colour and component base. The small company is teaching us and it has the unique capability of manufacturing small batches because in Europe numbers are small but values are high. The BSH plant would manufacture 250,000 units annually, half of it shipped to Avocet and rest to India. Production capacity is to be raised to 1 million by 2019, with half of it shipped to Europe and rest to India.”
Mathias Seidler of Hamburg based A/M/S GmbH and former CEO of Derby Cycle AG for 15 years is on the Hero board to give advice to formulate the European strategy, “Optimizing the current business model, Hero has a strong interest to expand in Europe in the near future and it is absolutely on the right path. It is building a long term supply chain model set-up in India and Sri Lanka and plans to expand a distribution structure at Avocet in the UK to increase in Europe. To grow its business in outside the UK, in Germany, Austria and Switzerland the company is planning a separate strategy to increase its footprints in Central Europe.”
Ghaziabad plant to supply alloy frames to BSH
Initially, Hero will supply single speed kids bikes to Avocet from the Ludhiana plant, the alloy frames come from its Ghaziabad plant near Delhi. The alloy frames will attain European standards starting November this year and it would start supply to the Sri Lankan plant for its shipments to Europe. “Currently, BSH only manufactures steel frames and adding alloy frame would upgrade product in value chain considering Sri Lanka would likely to be awarded GSP+ status end of 2016 for bicycle exports to EU,” said Steven Walsh, Chairman of Avocet. The UK based company has increased shipments from BSH from 60,000 to 100,000 units this year.
Cycle Valley Project
Interestingly is the Punjab’s government announcement to build a ‘Cycle valley’ in Ludhiana. The state government earmarked 300-acre land for establishing a hi-tech cycle valley in the city. The complex will include bicycle manufacturers, vendor base, testing tracks, R&D and certification bodies. This was conceived in meeting with the State’s deputy chief minister recently,” stated Munjal.
“With the increasing importance of cycling industry, the deputy chief minister has travelled to the China Cycle 2016 to attract investment and companies from China. With the required infrastructure for expanding the high-end bicycle market base in place, the state government is persuading several overseas companies to invest in the valley.” During the bicycle show in Ludhiana, Munjal informed, “Five companies from Taiwan and one from Germany have shown interest in the Cycle Valley project.”