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Bicycle demand growth pedalling to decadal high of 20%: Crisil

03:45 PM May 29, 2021 | IANS

India's bicycle industry is pedalling to a decadal-high demand growth of 20 per cent this fiscal with sales likely to touch 1.45 crore units compared with 1.2 crore units last fiscal, according to Crisil Ratings.

The ongoing Covid-19 pandemic has spurred demand for bicycles owing to improving fitness consciousness and leisure requirements, it said. India is the second largest manufacturer of bicycles in the world. The industry is classified into four segments -- standard, premium, kids and exports. Demand for standard bicycles, which is the largest segment (accounting for half of all bicycles sold in 2020) is driven by government purchases.

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The government departments procure these bicycles through a tender process and distribute under various welfare schemes. Demand for premium and kids bicycles (nearly 40 per cent) is driven by fitness and leisure needs.

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Exports and sales of other kinds of bicycles constitute the remaining 10 percent demand.

In the five fiscals through 2019, bicycle sales volume logged a modest compound annual growth rate of 5 percent. In fiscal 2020, it contracted a massive 22 per cent as government purchases plunged and a large bicycle manufacturer downed shutters. However, last fiscal saw a turn for the better.

Nitesh Jain, Director at Crisil Ratings, said the pandemic-induced constraints on fitness and leisure options increased the demand for bicycles, especially in the premium and kids segments.

Strong growth in these limited the overall decline in sales volume to just 5 percent in fiscal 2021 despite a further reduction in government purchases, he said.

"The momentum is likely to continue this fiscal too, given the ongoing second wave of pandemic, and should lead to a 22 percent growth for the premium and kids segments," said Jain.

In the past couple of months, however, orders from government departments have started improving. Consequently, demand for standard bicycles is likely to grow after two dull years.

Overall sales growth this fiscal will support the profitability of bicycle makers. The resultant improvement in cash flows amid higher capital expenditure will support the credit profiles of bicycle manufacturers.

While lockdowns have slammed the brakes on sales, pent-up demand can be expected once sales outlets open.

Crisil said the analysis assumes demand will decline by a third in the first quarter of current fiscal. Recovery is expected from the second quarter with COVID-19 caseloads and lockdowns likely to peak in June, and as vaccinations pick up pace

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