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Breaking the near monopoly of Chinese bicycle manufacturers, the Pankaj Munjal-promoted Hero Cycles has clinched an agreement with Walmart, the world's largest retailer, to supply bicycles across the world. It will supply bicycles priced at $200 (roughly Rs 10,000) apiece.
Pankaj Munjal, managing director, Hero Cycles, said, In bicycles, we intend to double our sales to 10 million units annually by 2015. For that, we are exploring new geographies. We are approved with Walmart and can leverage their network to expand overseas.
The US retail major sources virtually all its bicycles from manufacturing units in China and Hero Cycles would be the first Indian supplier. Walmart, the largest seller of bicycles in the US, used to source a large part of its bicycles from Huffys plant in Ohio in the 1990s. But, increased pressure from Walmart to cut costs forced Huffy to close its plants in the US and rely increasingly on factories in China to keep production competitive. That led to Walmart's reliance on China's low-cost producers.
India's attractiveness, Hero Cycles executives say, is that manufacturing costs are cheaper than in China currently, with Chinese labour costs having risen in recent years.
Pravin Patil, president, Urban Trail, Hero Cycles, said, China is cost-competitive. But, manufacturing expenses in India are lower. Where China scores over us is in government subsidies. If you factor that, our costs are on a par and so is our quality. The Chinese government offers 14 per cent subsidy and pays for inland freight on exported bicycles. In India, a duty draw-back of nine per cent or Rs 298 apiece is given to bicycle exporters, whichever is lower.
Hero Cycles has commenced supplies to Walmart cash-and-carry stores in India, and is in advanced talks to firm up the product line for retail operations globally. We plan to sell premium bicycles from the Urban Trail range globally, said Patil.
While the bicycles are being sold under the Hero brand in the country, a call is yet to be taken on branding the products for international sale. Walmart has 10,130 retail outlets in 27 countries.
It operates in India through a joint venture Bharti Walmart Pvt Ltd, which has 17 cash-and-carry outlets.
Hero Cycles supplies 10 models of Hero Trax priced below Rs 5,000 to Walmart's India stores. It rules the domestic bicycle market, with standard Black cycles and the mid-range Trax cycles. It introduced premium products under the Urban Trail tag earlier this month. There are 17 products priced Rs 10,000-43,000 in the Urban Trail range and the company plans to add 10 models over two months.
To realise its foreign ambitions, Hero Cycles has set up an office in Denver, Colorado, and roped in former president of Schwinn Bicycles, Kevin Lamar, to drive growth in the US. That office will oversee the Walmart deal.
Walmart to sell Hero bicycles worldwide
Pankaj Munjal, managing director, Hero Cycles, said, In bicycles, we intend to double our sales to 10 million units annually by 2015. For that, we are exploring new geographies. We are approved with Walmart and can leverage their network to expand overseas.
The US retail major sources virtually all its bicycles from manufacturing units in China and Hero Cycles would be the first Indian supplier. Walmart, the largest seller of bicycles in the US, used to source a large part of its bicycles from Huffys plant in Ohio in the 1990s. But, increased pressure from Walmart to cut costs forced Huffy to close its plants in the US and rely increasingly on factories in China to keep production competitive. That led to Walmart's reliance on China's low-cost producers.
India's attractiveness, Hero Cycles executives say, is that manufacturing costs are cheaper than in China currently, with Chinese labour costs having risen in recent years.
Pravin Patil, president, Urban Trail, Hero Cycles, said, China is cost-competitive. But, manufacturing expenses in India are lower. Where China scores over us is in government subsidies. If you factor that, our costs are on a par and so is our quality. The Chinese government offers 14 per cent subsidy and pays for inland freight on exported bicycles. In India, a duty draw-back of nine per cent or Rs 298 apiece is given to bicycle exporters, whichever is lower.
Hero Cycles has commenced supplies to Walmart cash-and-carry stores in India, and is in advanced talks to firm up the product line for retail operations globally. We plan to sell premium bicycles from the Urban Trail range globally, said Patil.
While the bicycles are being sold under the Hero brand in the country, a call is yet to be taken on branding the products for international sale. Walmart has 10,130 retail outlets in 27 countries.
It operates in India through a joint venture Bharti Walmart Pvt Ltd, which has 17 cash-and-carry outlets.
Hero Cycles supplies 10 models of Hero Trax priced below Rs 5,000 to Walmart's India stores. It rules the domestic bicycle market, with standard Black cycles and the mid-range Trax cycles. It introduced premium products under the Urban Trail tag earlier this month. There are 17 products priced Rs 10,000-43,000 in the Urban Trail range and the company plans to add 10 models over two months.
To realise its foreign ambitions, Hero Cycles has set up an office in Denver, Colorado, and roped in former president of Schwinn Bicycles, Kevin Lamar, to drive growth in the US. That office will oversee the Walmart deal.
Walmart to sell Hero bicycles worldwide
