Ludhiana cycle manufacturers cut production by 40 per cent

It seems the Ludhiana bicycle industry is never short of issues it has to contend with. Sometime back, it were the fluctuating raw material prices that troubled the bicycle manufacturers and now with the global meltdown, bicycle industry in Ludhiana is again losing profitability.

Ludhiana has about 4,000 bicycle manufacturers with most of them falling under the ambit of small and medium scale categories. These units account for 90 per cent of the production of the country’s bicycles.

The falling Re this time seems to be the troubling issue for the industry. Also, the financial crisis has forced the bicycle manufacturers in Ludhiana to drop production by 40 per cent.

DS Chawla, former President, United Cycle and Cycle Parts Manufacturers Association (UCCPMA), said the appreciating Re should have brought cheers to the bicycle exporters in Ludhiana, but that unfortunately did not happened. The currency drop has has led to a drop in the export orders for bicycle manufacturers in Ludhiana, thus pushing them into deep trouble and nullifying the impact of the falling Re.

Chawla said with currency fluctuations most of the foreign buyers have put the orders on hold as they are waiting for the market to stabilise.

Chawla adds the drying up of export orders is likely to lead to a loss to cycle manufacturers to the tune of Rs 200 crore. The export market for bicycle from India was Rs 800 crore in 2006; it came down to that came down to Rs 750 crore in 2007. This year, the manufacturers are expecting the export market to fall to around Rs 500 crore.

Chawla adds with export orders drying up, the domestic market too is witnessing cancelling of earlier orders by buyers on account of higher costs.

Earlier this year, when the prices of steel were on the higher side, most of the cycle manufacturers in order to meet the domestic demand had to manufacture the cycles on higher prices. But now with the prices of steel softening the domestic buyers are also interested in purchasing cycles at lower costs. Chawla says already the production of cycles in Ludhiana has come down by around 40 per cent and there is every possibility of production going down further with the slackening in demand of bicycles.

Chawla maintains that it is a tough time for bicycle manufacturers, especially in the SME sector and if the conditions continue to prevail, it could possible result in many bicycle units either shutting down or diversifying to other businesses.