TI Cycles bets on market shift, moves from commuter cycles to recreational

Firm has shifted mfg from Nashik unit to Chennai as market for commuter cycles declines, that of recreational grows steadily

TI Cycles, the bicycle manufacturing and marketing arm of the Murugappa Group, is shifting its capabilities towards value-based, recreational and trendy urban cycles from those that simply meet commuting requirements. The company, which has launched its third bicycle manufacturing facility in Rajpura, Punjab, has shifted its manufacturing capabilities from Nashik facility to its facility in Chennai.

The industry has been going through a shift, with the market for commuter segment of cycles declining and that of recreational cycles growing steadily. The latter category is mostly used by children and adolescents, before they shift to a motorised vehicle as they grow older. Recreational cycles find favour with the urban youth who use cycles more for fitness and environment friendly commuting.

"It made sense to focus on Rajpura for the bulk of non-south requirements and use Ambattur for the southern market. We have shifted the Nashik plant to Ambattur and consolidated manufacturing operations there. We effectively have two manufacturing locations now," said K R Chandrasekaran, president, TI Cycles of India.

The decision to set up the Rajpura facility was taken in 2015, when the market situation was different and the lease for its plant in Noida was expiring. The company needed a new plant, since the outlook was a growth of 8-10 per cent every year.

"So we had a capacity of 130,000 to 140,000 cycles a month. When we expanded, we thought we might ourselves create more headroom, as we cannot set up plants ever so often. So we went from 140,000 to 250,000 cycles, and to that extent we can say we put up a much bigger plant in terms of investment. Anyway, part of it serves as a replacement for existing plants," said L Ramkumar, managing director of Tube Investments India Ltd earlier to analysts.

"We need to look at fine tuning our manufacturing capacity and costs to keep pace with the current volume levels and simultaneously look for opportunities to enhance our market share in certain emerging segment in which our presence is miniscule at present," Ramkumar added.

Recreational and fitness cycles need different manufacturing capabilities, including assembly and advanced painting and finishing set-up. They also require a welding set-up as compared to a brazing set-up used for the commuter segment. The company's facilities are flexible to an extent and can be reoriented towards producing the newer cycles. However, while the value of the products may go up in the new trend, it would take time to catch up with the previous figures in terms of volume, which is common for the entire industry.

The company has a capacity utilisation of about 55 per cent at present on an aggregate basis, which is expected to rise to 60 per cent in future.

Chandrasekaran said the challenges the company is faced with include taking the category into the fast growth lane by attracting customers and reorienting the existing capacity for manufacturing recreational and fitness bicycles.

"Value growth may be there, but volumes may still fall short of historical highs and will take time to catch up. This is because simple commuting cycles are cheaper compared to recreational ones. The targeting of consumer, the point of sales and model of service have to reorient has to address the shift in trend," he said.

"The shift has started and some of the major companies are tuned towards this," Chandrasekaran averred, adding that some of the unorganised players who had been betting on the commuter segment may vanish from the market in future.

The bicycle industry size is around 13 million cycles a year and is declining annually by around 5-6 per cent excluding government purchase, which is growing by 2-3 per cent. The commuter segment, which is around 4.5-5 million of the total market, is declining in excess of 20 per cent, while the recreation segment is growing at 3-5 per cent per annum. The fitness bicycle segment, focused on urban market, is growing at around 10-15 per cent, but at a very small base. Once that crosses the inflection point, the industry will see a growth and there is enough potential in the market for this, said the company.