Tryst with Bicycles

Covid-19 has unequivocally wreaked havoc across the world. Devoid of any discrimination, it has touched us all. While its horrors still haunt us and will come to haunt the generations ahead, it also augurs a more careful, sustainable and morally conscious trajectory with a more symbiotic relationship with nature in tandem. The change in human behaviour during this crisis has not been inconspicuous. We have observed significant shifts in mindsets and the understanding of responsibilities. While these changes are plentiful, here we'll discuss one; the transition towards a more conscious approach to well-being through cycling.

With cities under lockdown and social distancing regulations in place, these unsolicited barriers engendered a health-conscious population with awareness surrounding the importance of mental and physical well-being and its connection to the immune system. With limited to no public or private infrastructure access, people identified the nearest and most accessible devices to their benefit; bicycles.

India is the second-largest bicycle manufacturer in the world, after China. The Indian bicycle industry is classified into four categories; standard, premium, kids and exports. It is important to demarcate the differences among the categories as a depiction of the industry as a whole tells a skewed story; since 2018, the total amount of units produced annually (fiscal year) has dropped from 16.2 million units to 14.5 million, which is certainly antithetical to the premise established in the introduction. The production of 2 particular categories, the kids' bicycle and the premium bicycle, justify the premise. The production of these categories has increased from 36% of the mix in FY2018 to 52% in FY2021 (CRISIL, May 2021).

Among the four categories, the government procured most of the units to back their welfare schemes. These procured units are under the Standard Segment of bicycles. As the government diverted its fiscal space towards cushioning the impact of the pandemic, the government significantly reduced its bicycle expenditure in FY2019. However, it rose in the subsequent years. The volume of units produced under the standard segment has diminished compared to the pre-pandemic level. This has happened in response to a decline in the demand from the government. Notwithstanding this reduction in demand in the Standard segment, the demand in the Premium and Kids segment has increased since FY2019 and is projected to increase to 52% of the product mix in FY2022 (CRISIL, May 2021). Moreover, the product mix of premium and kids' bicycles has seen higher profitability than the other segments, which has helped the manufacturers balance their accounts in the event of the loss of orders from the government.

The total volume of units produced has indeed decreased. Still, due to the rising demand for higher-priced bicycles in the premium and kids segment, a significant revenue increase is observed along with higher profitability.

Shift in Curves

The demand curve has indisputably seen a rightward shift. A big retailer of bicycles in Delhi has claimed a 400% increase in demand in 2020 compared to 2019 (The Hindu, Sep 2020). The rise in demand is attributed to people using it as a substitute for fitness equipment and a mode of commute, with public and private transportation on halt on government orders. On the supply side, the supply chain's bottlenecks limited the manufacturing firms' capacities. The manufacturers have moved to reduce the dependence on imports to become self-reliant and increase supply to cater to the increased demand (The Hindu, Sep 2020).

Impact of Higher Input Costs

The demand for bicycles in the premium and kids segments is price-inelastic, as observed in the Crisil report. The manufacturers have been able to transfer higher input costs to the selling prices of the bicycles without discouraging sales. It is also observed in the fiscal year 2020, when the steel prices increased without adversely affecting the revenue and the profitability (CRISIL, May 2021)

External Intervention and Equilibrium

As per the bicycle seller anecdotes, extremely high bicycle demand had overwhelmed the supply. The lack of stock meant many buyers had to return without bikes. (DW, July 2020) Here the equilibrium was disturbed, where the high price-inelastic demand was still not met with the supplies. The external factor influencing this was the crumbling global supply chain, as bicycle manufacturers imported many parts of bicycles from China and Taiwan.

References

1. Crisil Report, May 2021 https://www.crisil.com/en/home/newsroom/press-releases/2021/05/bicycle-demand-growth-pedalling-to-a-decadal-high-of-20-percent.html

2. DW, July 2021

https://www.dw.com/en/india-coronavirus-cycling/a-54185591

1. The Hindu, Sep 2020

https://www.thehindu.com/sci-tech/health/india-sees-a-bicycle-boom-post-pandemic/article32661457.ece