Training Report

On

“Study On Hero Cycles and Comparative Analysis of exports from India and China
with special reference to bicycle exports”

Submitted to
PUNJAB TECHNICAL UNIVERSITY
JALANDHAR

In partial fulfillment of the requirement for the

Award of degree of
Master of Business Administration (MBA)

Submitted by Supervised By:

Pallavi Chhabra Mr. Rajesh Verma
6022200118 Lecturer in Management

Session (2006-2008)
APEEJAY INSTITUTE OF MANAGEMENT
JALANDHAR
 CERTIFICATE

This is to certify that the research project entitled, “Study On Hero Cycles and
Comparative Analysis of exports from India and China with special reference to
bicycle exports”, submitted for the degree of Master of Business Administration of
Apeejay Institute of Management, Jalandhar is a bonafide research work carried out by
Pallavi Chhabra Under my supervision and no part of this thesis has been submitted for
any other degree.
The assistance and help received during the course of this investigation
have been fully acknowledged.

Mr. Rajesh Verma

Major Advisor
Lecturer in Management
Apeejay Institute of Management
Jalandhar
 PREFACE
Exports play crucial role in a developing economy like India, which attaches considerable
importance to export promotion. In the age of liberalization and globalization of the
economy, the importance of exports for economic development of the State cannot be
ignored. Exports has been growing much faster than GDP in most countries. As a
consequence, their share on GDP is much larger now than 30 years ago.
It is no secret that Chinese products are much cheaper. Our exporters are beaten up in the
export market due to this. On bicycle industry the threat of clandestine imports from
China is looming large. Bicycle industry is the hub of Punjab’s industrial economy.
Bicycle and parts production is worth about Rs 3,000 crore. Out of this approximately Rs
800 crore go as export. The Indian bicycle industry is likely to lose out up to 50 per cent
domestic market share and Rs 100 crore worth exports to Chinese bicycles this year, in
view of sharp difference between input prices in these countries. According to Indian
Bicycle Manufacturer Association low realization of export proceeds due to rising rupee
against dollar has also aggravated the situation for Indian exporters. It will rattle the
business of bicycle manufacturers in Ludhiana and India at large. So, it’s very important
to study what is in the offing for the bicycle manufacturers and the bicycle export
scenario in the near future. This project is a small endeavor to study the competition
Indian bicycle manufacturers and exporters are going to face from China and
suggestions have also been given at the end to explain how such competition can be
countered.
 ACKNOWLEDGEMENT

I wish to express my gratitude and sincere thanks to my Major advisor Mr.RajeshVerma,

Lecturer in Management, Apeejay Institute of Management, Jalandhar, under whose
guidance this project has been completed.

My Cordial and sincere thanks are due to all the faculty members of Apeejay Institute of
Management, Jalandhar.

I am highly grateful to Dr. Balram Dogra, Director, Apeejay institute of Management for
his timely help and able guidance.

I shall fail in my duties if I do not acknowledge the generous help, cooperation and
valuable suggestions received from my friends during the course of the study.

Jalandhar,July 2007 (Pallavi Chhabra)

 TABLE OF CONTENTS

1.Introduction to the project

3.Research Methodology and Research design
4.Objectives of Research
5.Data Presentation and analysis
6.Findings and Recommendations
7.Annexure-I
8.Annexure-II
9.Bibliography
 LIST OF TABLES

Table1: Major destinations of India’s export

Table2: % Share of countries in total Indian exports

Table 3: China's Top Exports 2006

Table 4: China's Top Export Destinations 2006

Table 5: Comparative table of India and China’s Exports to the world since 2004

Table 6: Share of India’s exports and Chinese exports in the basket of world
exports:

Table 7: Growth of India and china’s exports share in world exports 2001-2004

Table 8: Exports by China to India

Table 9: India’s export to China

Table 10: Rank of India and China in world exports and the countries in between

Table 11: Exchange rate of India and china and its impact on exports

Table 12: World bicycle production since 1950

Table 13: India’s exports of bicycles and bicycle parts components during the
period 2001-02 to 2004-05

Table 14: Collective figures of India’s exports of bicycles and bicycle parts to major
countries from 2003 to 2004 and percentage change

Table 15:Item wise India's exports of bicycle & bicycle parts & components during
the Period 2001-02 and 2004-05

Table 16: India’s exports of bicycles and bicycle parts to major countries during the
period 2003-04 and 2004-05

Table 17: India’s exports of bicycles and bicycle parts in the select markets in the
years 2003-04 and 2004-05

Table 18: India and china contribution in world’s bicycle production

Table 19: Exports of bicycles by various countries in 2005

Table 20: Chinese Exports of Complete Bicycles, 2005

Table 21: Decline in Production of bicycles parts in India

Table 22: Difference in Price of Raw Material

Table 23:Comparison of price of bicycle parts, which are now being sourced from
China by Indian Manufacturers

Table 24:Comparison of Labour Rates

Table 25: Impact of appreciation of rupee on profits of bicycle industry

Table 26:Indian Labour laws: Responses of people

Table 27: Duty drawback rates of complete bicycles and some parts for the year
2006-2007

LIST OF GRAPHS

Fig1: Comparison of India and China’s exports to the world 2004-2006

Fig2: Growth of share of India and China’s exports in world exports

Fig3: Exports by China to India 2003-2005
Fig4:India’s exports to China
Fig5: World Bicycle Production 1950-2003

Fig6: Share of Hero, Atlas, TI, Avon, Unorganized sector

Fig7:Individual Share of Bicycle and Bicycle parts in Collective Exports of Both

Fig8: India’s exports of bicycles and bicycle parts components during the period
2001-02 to 2004-05

Fig 9:Collective figures of India’s exports of bicycles and bicycle parts to major
countries from 2003 to 2004 and percentage change (in Crores)

Fig 10:India and china contribution in world’s bicycle production

 INTRODUCTION

International trade is an vital activity of strategic importance in the development process

of a developing country. Rapid industrialization as a means to achieve higher rate of
economic growth has become a major objective of economic policy in most of the
developing countries in recent times. Shortage of foreign exchange is considered a major
constraint on rapid economic development of the less developed countries. How far an
under developed country can grow, depends on its resource position. So exports play an
important role in the development process of a country as they provide foreign exchange.
Today China has world’s largest foreign reserves built up at its disposal, which have
inseparable role in its rapid development.
Export marketing is the performance of the business activities that directs the flow of
goods and services to the consumers or users of more than one nation. Exports involve
the exchange of goods and services between the countries or regions. In export marketing
the exporter has to deal with a different country having political and legal uncertainties
and has to adapt the product to a different set of needs and expectations. The government
provides various incentives to exporters..

1.1 Importance of exports

Exports help the country earn valuable foreign exchange, which is essential for
importing modern technology. Expansion of exports is very important for meeting the
foreign debt obligations of the country and for reducing the gaps in the balance of
payment account. Increasing exports also leads to greater utilization of existing capacities
and thus reduce cost, which reinforces further exports. Since export marketing helps in
the promotion of exports, the significance of export marketing is obvious.

Export has been assigned a crucial role in the country’s economic development. Export
sector is considered to be a key sector as it can diffuse economic development into other
supporting industries. There is also empirical ground for believing that export is a key
factor in the growth process.

If the relevance of exports is looked at only from the financial angle, it would tantamount
to belittling their importance. Financial earnings are only part of the whole story. In some
countries it is an engine of growth or a leading sector.

1.3 General provisions regarding exports and imports

Profile of Importer/Exporter: Each importer/exporter shall be required to file

importer/exporter profile once with the Regional Authority in Part 1 of ‘Aayaat Niryaat
Form’. Regional Authority shall enter the information furnished in part 1 of ‘Aayaat
Niryaat Form’ in their database so as to dispense with the need for asking the repetitive
information. In case of any change in the information given in part 1 of ‘Aayaat Niryaat
Form’, importer/exporter shall intimate the same to the Regional Authority.
Identity Cards: To facilitate collection of licence/certificate/Authorisation/permissions
and other documents from DGFT Head Quarters and Regional Authorities, identity cards
may be issued to the proprietor/partners/directors and the authorized employees (not
more than three), or the importer and exporters.
However in case of limited companies, the Head of the Regional Office may approve the
allotment of more than three identity cards per company. An application for issuance of
an Identity Card may be made in the form given in Appendix 20A.

Certificate of Origin: Certificate of Origin is the instrument to establish evidence on the

origin of the imported into any country. There are two categories of Certificate of Origin
viz. (1) Preferential and (2) Non preferential.
Preferential: The preferential arrangement/schemes under which India is receiving tariff
preferences for its exports are Generalized System of Preferences (GSP) Global System
Of Trade Preferences (GSTP), SAARC Preferential Trading Agreement (SAPTA),
Bangkok Agreement, India-Srilanka Free Trade Agreement (ISLFTA) and Indo-Thailand
Free Trade Agreement. These arrangements/agreements prescribe Rules of origin which
have to be fulfilled for the exports to be eligible for the tariff preference.

Generalized System of Preferences (GSP): GSP is a non contractual instrument by

which industrialized (developed) countries unilaterally and on the basis of non reciprocity
extend tariff concessions to developing countries. The following countries extend tariff
preferences under their GSP Scheme.
(i) United States
(ii) New Zealand
(iii) Belarus
(iv) European Union
(v) Japan
(vi) Russia
(vii) Canada
(viii) Norway
(ix) Australia (only to LDCs)
(x) Switzerland
(xi) Bulgaria

Global System of Trade Preferences (GSTP): Under the agreement establishing Global
System of Trade Preference (GSTP), tariff concessions are exchanged among developing
countries, who have signed the agreement. Presently, there are 46 member countries of
GSTP and India has exchanged tariff concessions with 12 countries on a limited number
of products. Exports Inspection Council (EIC) is the sole agency authorized to issue
Certificate of Origin under GSTP.

SAARC Preferential Trading Agreement (SAPTA): The Agreement establishing

SAPTA was signed by seven SAARC members namely India, Pakistan, Nepal, Bhutan,
Bangladesh, Sri Lanka and Maldives in 1993 and came into operation in 1995. Four
rounds of trade negotiations have been completed and more than 3000 tariff lines are
under tariff concessions among the SAARC countries. The list of agencies, which are
authorized to issue Certificate of Origin under SAPTA are notified under Appendix – 4B.

Bangkok Agreement (SAPTA): The Bangkok agreement is a preferential trading

arrangement designed to liberalize and expand trade in goods progressively in the
Economic and Social Commission for Asia and Pacific (ESCAP) region through
liberalization of tariff and non-tariff barriers. At present, Bangladesh, Sri Lanka, South
Korea, India and China are exchanging tariff concessions. The agencies authorized to
issue Certificate of Origin under Bangkok agreement are listed in Appendix – 4B.

Exports Of Samples/Exhibits: An application for the export of samples of exhibits,

which are restricted for export, may be made to the Director General of Foreign Trade.

Free of Cost Exports: The status holders shall entitled to export freely exportable items
on free of cost basis for export promotion subject to an annual limit of Rs. 10 lakh of 2%
of the average annual export realization during the preceding three licensing years
whichever is higher.

1.2 Indian Export scenario

India has come a long way in changing its trade policy from the earlier export permission
to the present export optimism. In early past-independence period, India neglected the
export sector and its commercial policy, industrial policy and exchange rate policy, have
all been used as the instruments of an inward-oriented strategy. This resulted in sluggish
economic growth as compared to other developing countries. Indian export potential has
not been fully realized as its share in world exports is only meagre 0.9 %. India's share in
world trade has gone up by 0.4 percent since 2004
India's share in total world trade, which includes trade in both merchandise and services
sector, has gone up from 1.1 percent in 2004- the initial year of the Foreign Trade Policy
(2004-09)-to 1.5 % in 2006. India's share may cross the two percent mark in 2009.
India's merchandise exports touched $120 billion in 2006 taking it to 29th slot among
the top 30 exporters of the world
Its position in commercial services exports at $73 billion was at No. 10 in this category
India's position in commercial services exports amounting to $73 billion in 2006 and
accounting for a share of 2.7 per cent in global commercial services exports has improved
vastly, The cumulative value of India’s exports for the period April-March, 2007 was US
$ 124629.48 million ($ 124.6 billion) or Rs.563800.06 Crore as against US $ 100606.92
million  ($ 100.6 billion) or Rs.445657.97 Crore during the same period last year,
indicating a growth of Government is striving hard to increase its share in world exports
by taking a number of measures for export promotion, such as simplification of EXIM
policy, improving efficiency and competitiveness, focusing on quality improvement and
technology up gradation, improvement in infrastructure and activity involving state
government in export promotion continuous efforts are being made to develop new
markets as a part of the overall export promotion strategy through product promotion and
participation in trade fairs and exhibitions.
1.3 Bicycle industry-An overview

The bicycle industry of India is one of the most established industries with an annual
turnover of more than 12 million bicycles. India is the second largest bicycle producer of
the world next only to China.

Table: Total Number of Units Producing Bicycles in India

Total No. Of Units in No. Of Units in No. Of Units in Small Scale sector
bicycle and parts Organized sector
4125 674 3451

India has seen a tremendous increase in the number of bicycle manufacturers and bicycle
exporters in the recent past. Today, the Indian bicycle manufacturing and bicycle spares
industry is well accepted and is also widely recognized for its quality standards in
international markets.
The Indian bicycle industry is currently in the midst of making endeavors for enhanced
and increased bicycle exports since the scope for export of Indian manufactured bicycles
in the international market is significant. Ludhiana is a bicycle manufacturing and
exporting of bicycles and components oriented city, located in Punjab State of India.
Bicycle industry has played an important role in the economy of Punjab. From the
following figure we can see that Bicycle and bicycle parts exports account for 11% of the
total exports from Punjab.
Source: Punjab Statistical Abstract 2003

Ludhiana is known as Peculiar City for manufacturing quality bicycles at competitive

prices in domestic market as well as in export market. For encouraging bicycle
manufacturing and exporters so many facilities and legalized amenities have been given
by the Govt. of India-and State Govt. also. For obtaining import and export license
custom clearance, as well as RBI requirements are now very easy task and smooth
procedures for companies. Companies are also benefiting from various incentives
schemes provided by the Govt. Viz.- D.E.P.B etc. Govt. Of India is also providing
recognition on certain parameters to those export houses, which are exporting up to the
mark quality product at competitive price in world market. On the basis of their overall
performance and export turnover grading is awarded in terms of - Trading house, Star
Trading House, Super Star Trading House
 RESEARCH METHODOLOGY AND RESEARCH DESIGN
Secondary data has been used for the project’s exploratory research. Data has been
collected from authenticated and or well-recognized sources.

Research Design: -

Limitations of my study
1.Due to volatile market scenario data mentioned in the study/project may not be relied
fully.
2.

OBJECTIVES OF RESEARCH
1.To determine what are the challenges currently being faced by the Indian Exporters.
2.To study and compare the export position of India with that of china with reasons why
china is leading..
3.To study the position of Indian bicycle industry vis a vis Chinese bicycle industry.
4. To identify the measures that the company may take to reduce the manufacturing cost
of bicycles and bicycle parts.
 DATA PRESENTATION,ANALYSIS AND INTERPRETATION
India at a glance

1.India is nearly one quarter of the World's population

2.India has been growing at 6% or better rates for a decade and at an 8% or better
level for the last 3 years.  Indian growth in its service economy has been historic
and manufacturing economy is now ramping up sharply.
3.The advantages of low cost and skilled made India a globally competitive
manufacturing destination
4.India also has offered talent pool of skilled professionals and English speaking
population
5.India has increasing disposable incomes and significant domestic demand. 
Rising per capita income and changing demographic distribution are conducive to
growth. India has the highest proportion of population below 35 years-70 percent
(potential buyers), which means that 130 million people will get added to the
working population between 2003 and 2009.
6.The government is also pursuing reforms and liberalization
7.At present, over 200 of the Fortune 500 companies from the U.S., the UK,
Germany, France, Japan, Netherlands, South Korea, Switzerland, Canada, and
Sweden are present in India.
8.A favorable foreign investment environment: freedom of entry and exit,
investment, location, choice of technology, import and export, and rule of law.
9.India has increasingly moved from an agro based economy and has emerged as
a service oriented economy.
10.Today India produces more than 50,000 computer professionals and 360,000
engineering and management graduates each year
11.Developed and well regulated banking system of over 63,000 branches
supported by a number of international banks, insurance joint ventures, national
and state level financial institutions.
12.WTO commitments

Role Of Exports
The precise mechanism through which countries commencing on a path of rapid growth
can benefit from ‘openness’ to trade and rising exports has been the subject of much
discussion. Several possible benefits of the exports have been identified;
1.First, if economies can break into export markets they will be able to overcome the
constraints on sales imposed by the absolute size and dynamism of the domestic market.
In terms of manufactures it is often pointed out that there is an ‘easy’ stage of import
substitution when domestic production can capture the market served initially by imports.
Beyond this the expansion of sales will be determined by the growth of that domestic
market, which may be relatively low. Insofar as increasing returns to scale in production
are important this will reinforce the advantage of operating at higher output levels due to
exporting and subsequent cost reductions due to specialization can lead to further
cumulative gains in export market share.
2.Second, exporting, by exposing firms to foreign competition, technology and
marketing, can lead to productivity gains that would not be obtainable from sales in the
domestic market. Contacts with foreign buyers, for example in the clothing sector and
more recently in branches of electronics, have meant that East Asian firms received
access to foreign designs or technologies that allowed them to upgrade their production to
international standards, thus enhancing productivity. Further, strong competitive pressure
was exerted on domestic suppliers producing under contract to buyers abroad since to
maintain their contracts they had to constantly monitor costs as foreign buyers were
‘constantly seeking newer, lower cost sources’
3.Third, exports allow access to imports that can be purchased with the foreign exchange
they generate. For individual producers gains from imports can be both static, if they cost
less than competing domestic production, and dynamic where capital and intermediate
imports embody superior technology that allows productivity gains. Consumer will also
gain from access to new or cheaper products.
4.Fourth, insofar as there is validity in the case that growth of manufacturing output is
more valuable at the margin than the same growth of agriculture or services, due to
externalities and dynamic increasing returns to scale, the shift in the composition of
exports in the NIEs i.e. Newly industrializing countries(particularly Malaysia, Thailand
and Indonesia where primary exports were important initially) would in itself have had
positive growth effects.
.
Exports have played an important role in India’s sustainable rapid economic growth.
Indian products have been able to gain access to many of the world’s major markets.
Following table shows major destinations of India’s export.

Table1.Major destinations of India’s export

Unit: US %million

 Country 2001-02 2002-03 2003-04 2004-05 2005-06

U.S.A. 8538.75 10917.26 11497.94 13760 17201.01
U.A.E. 2499.22 3334.04 5129.11 7344.85 8591.52
China 954.79 1979.38 2957.11 5613.56 6720.16
Singapore 975.21 1424.38 2126.29 3998.97 5569.02
UK 2167.32 2501.33 3025.33 3679.58 5145.24
Hong Kong 2373.42 2618.48 3264.05 3690.30 4456.54
Germany 1793.69 2110.84 2546.30 2825.08 3516.47
Belgium 1394.77 1665.11 1806.96 2508.67 2852.72
Italy 1210.13 1359.76 1730.59 2285.05 2489.59
Japan 1514.94 1867.70 1710.46 2127.03 2458.33
Netherlands 866.46 1049.98 1289.99 1604.20 2455.73
France 947.82 1076.21 1281.76 1680.25 2047.27
Sri Lanka 632.78 922.80 1320.10 1412.60 2018.19
Korea Republic (South) 472.78 646.12 765.38 1041.25 1818.69
Saudi Arabia 828.90 942.60 1124.08 1411.48 1806.67
Bangladesh 1005.17 1178.32 1741.94 1630.45 1632.20
Spain 679.23 812.09 1003.27 1388.79 1562.56
South Africa 354.00 484.93 539.72 983.63 1551.76
Indonesia 535.30 827.69 1127.98 1332.05 1370.32
Israel 429.30 635.79 724.48 1005.34 1213.59
Total (Incl. others) 30173.98 38354.81 46712.84 61323.13 76477.58
Total to the world 43,826.73 52,719.43 63,842.97 83,535.94 103,090.54

Above table depicts that India’s exports have increased over a period of time and
developed countries account for maximum exports with USA recorded Indian exports
worth $million 17201.01 and UK accounts for Indian Exports worth $ 5145.24
million.China posted Indian exports worth $6720.16 million
Table2: % Share of countries in total Indian exports

 Country 2001-02 2002-03 2003-04 2004-05 2005-06

U.S.A. 19.43 20.67 18.00 16.48 16.75
U.A.E. 5.69 6.31 8.03 8.80 8.36
China 2.17 3.75 4.63 6.72 6.54
Singapore 2.22 2.70 3.33 4.79 5.42
UK 4.93 4.74 4.74 4.41 5.01
Hong Kong 5.40 4.96 5.11 4.42 4.34
Germany 4.08 4.00 3.99 3.38 3.42
Belgium 3.17 3.15 2.83 3.00 2.78
Italy 2.75 2.57 2.71 2.74 2.42
Japan 3.45 3.54 2.68 2.55 2.39
Netherlands 1.97 1.99 2.02 1.92 2.39
France 2.16 2.04 2.01 2.01 1.99
Sri Lanka 1.44 1.75 2.07 1.69 1.96
Korea Republic (South) 1.08 1.22 1.20 1.95 1.77
Saudi Arabia 1.89 1.78 1.76 1.69 1.76
Bangladesh 2.29 2.23 2.73 1.95 1.59
Spain 1.55 1.54 1.57 1.66 1.52
South Africa 0.81 0.92 0.84 1.18 1.51
Indonesia 1.22 1.57 1.77 1.60 1.33
Israel 0.98 1.20 1.13 1.20 1.18
Total (Incl. others)  68.68  72.63  73.15  74.14  74.43
SOURCE: CMIE
USA dominated with share at 16.75% and China’s share is 6.54%. Change in
Percentage share of countries has not changed much. For many countries it has
decreased only.For USA it has dipped to 16.75% in 2005-06 from 18% in 2003-04.It
has remained quite impressive in case of UAE with minor decline in 2005-06.Other
countries which clocked good growth of Indian exports were Singapore,
Netherlands, South Africa etc.
Table 3: China's Top Exports 2006 ($ billion)

*Percent change over 2005

Source: PRC General Administration of Customs, China's Customs Statistics
HS# Commodity Description Volume % Change*
85 Electrical machinery & equipment 227.4 32.0
84 Power generation equipment 186.6 24.7
61, 62 Apparel 88.6 34.5
72, 73 Iron & steel 51.9 52.2
90 Optics & medical equipment 32.6 28.0
94 Furniture 28.0 25.0
28, 29 Inorganic & organic chemicals 23.2 21.5
95 Toys & games 22.6 18.4
87 Vehicles other than railway 22.4 34.8
39 Plastics & articles thereof 22.2 25.0
Electrical machinery and equipment, and power generation equipment dominated China’s
exports with Electrical machinery and equipment exported worth $227.4 billion and
Power generation equipment exported worth $186.6 billion.
Table 4: China's Top Export Destinations 2006 ($ billion)
*Percent change over 2005
Source: PRC General Administration of Customs, China's Customs Statistics
Rank Country/Region Volume % Change*
1 United States 203.5 24.9
2 Hong Kong 155.4 24.8
3 Japan 91.6 9.1
4 South Korea 44.5 26.8
5 Germany 40.3 23.9
6 the Netherlands 30.9 19.3
7 United Kingdom 24.2 27.3
8 Singapore 23.2 39.4
9 Taiwan 20.7 25.3
10 Italy 16.0 36.7
China has flooded developed countries like United States, Germany, and United
Kingdom with its products. China exports to USA stood at $203.5 billion with good
increase in growth by 24.9 %. Exports to Italy witnessed maximum increase in growth at
36.7%.

Table 5: Comparative table of India and China’s Exports to the world since 2004(in
billion dollars)

Year 2004 2005 2006 2007

India 63.843 83.536 103.09 61.151(Jan-Apr)
China 593.3 762.0 969.1 349.5(Jan-Apr)

Fig1: Comparison of India and China’s exports to the world 2004-2006

Above is the graphical representation of the exports recorded by both India and china.
China recorded a phenomenal growth in its exports. China’s exports to the world are ever
increasing where as India’s exports show very negligible growth. There is ever widening
gap between exports registered by both the countries. Exports for the year 2007 is only
from January to April for obvious reasons.

Table 6: Share of India’s exports and Chinese exports in the basket of world
exports:

India China
0.9% 7.83%
China has a whopping share of 7.83% in World Exports and India has meager 0.9%
share.

Table 7: Growth of India and china’s exports share in world exports 2001-2004

Year 2001 2002 2003 2004

India 0.7% 0.8% 0.8% 0.8%
China 4.3% 5.1% 5.9% 6.2%

China has witnessed steady increase in its share of exports to the world over a period of
time and India registered very slow and negligible change in its share of exports.

Fig2: Growth of share of India and China’s exports in world exports

Trade between both the countries

China has managed to creep into almost every market of the world. It has flooded
countries with its products. India too has not remained untouched by it. Following figures
and tables depict the trade between the two countries and ever-increasing trade deficit
due to inability of India to increase its share in China’s import from India.
Table 8: Exports by China to India

Year 2003-04 2004-05 2005-06

Total Export 4,053.23 7,097.98 10,868.05

 Fig3: Exports by China to India 2003-2005

The above table shows that the china’s exports to India have increased sharply. These
were worth 10868.05 $million in 2005-06 and the preceding year i.e. 2004-05 they stood
at 7097.98 $million i.e. there is an increase by 3770.07 $million and there has been
continuous increase since 2003.
Table 9: India’s export to China

Year 2003-04 2004-05 2005-06

Total Export 2,955.10 5615.88 6759.10

Fig4:India’s exports to China

India Registered exports to China worth $6759.10 million in 2005-06 and in 2004-05
they stood at $5615.88million so there is a marginal increase .In 2003-04 Exports posted
were $2,955.10 million.So year 2003-04 saw a good amount of Indian exports to china And we
can see that there is huge trade deficit between India and China.
Table 10: Rank of India and China in world exports and the countries in between

Unit: $
Rank   Countries  Amount of Exports
#1  Germany: $1,133,000,000,000.00
#2  United States: $1,024,000,000,000.00
#3  China: $974,000,000,000.00
#4  Hong Kong: $611,600,000,000.00
#5  Japan: $590,300,000,000.00
#6  France: $490,000,000,000.00
#7  United Kingdom: $468,800,000,000.00
#8  Italy: $450,100,000,000.00
#9  Netherlands: $413,800,000,000.00
#10  Canada: $405,000,000,000.00
#11  Belgium: $335,300,000,000.00
#12  Korea, South: $326,000,000,000.00
#13  Russia: $317,600,000,000.00
#14  Singapore: $283,600,000,000.00
#15  Mexico: $248,800,000,000.00
#16  Spain: $222,100,000,000.00
#17  Taiwan: $215,000,000,000.00
#18  Saudi Arabia: $204,500,000,000.00
#19  Sweden: $173,900,000,000.00
#20  Switzerland: $166,300,000,000.00
#21  Malaysia: $158,700,000,000.00
#22  Brazil: $137,500,000,000.00
United Arab
#23  $137,100,000,000.00
Emirates:
#24  Austria: $133,300,000,000.00
#25  Thailand: $123,500,000,000.00
#26  Norway: $122,600,000,000.00
#27  Ireland: $119,800,000,000.00
#28  Australia: $117,000,000,000.00
#29  India: $112,000,000,000.00
#30  Poland: $110,700,000,000.00

China is witnessing unflinching growth in it’s exports .It occupies no. 3 in terms of
exports and is likely to replace US which is at no.2 for the Information and
Communication Technology export in the near future. Whereas the minor change India
has seen is it has acquired 29th position. Earlier in 2004 it was at 30th position.

Table 11: Exchange rate of India and china and its impact on exports
Year 2004 2005 2006 2007(Jan-Apr)
Exchange Rate, Exp Exchange Rate, Exp Exchange rate,Exp ExchangeRate,Exp
India 45.317, 63.843($bn) 44.101, 83.536($bn) 45.3,103.09($bn) 40.76, 61.151($bn)
China 8.2768, 593.3($bn) 8.1943,762.0($bn) 7.97,969.1($bn) 7.63, 349.5($bn)

Exchange rate plays a significant role in a country’s Exports. Rupee has seen sharp
appreciation against dollar since January 2007. Though no further appreciation is being
anticipated yet past changes in the exchange rate had exporters their foot in the mouth.
China is accused to have artificially devaluing its currency to boost its exports and has
invited the wrath of Governments of so many countries. At the end of the present year the
exports are not expected to cross $145 billion due to sharp appreciation of rupee against
dollar where as the target stands at $160 billion.

Although India has tremendous potential, the reality of India today is that it is still a
developing economy with a great deal of poverty.There are certain roadblocks in the path
of india’s road to success. Infrastructure inadequacies in rural and urban areas: roads,
ports, airports, communication, and power have constrained India's growth. Bureaucratic
red tape, rigid labor laws, and its inability to build infrastructure fast enough also holds
India back. Some research indicated that some of the factors that prevent the fast growth
of foreign direct investment (FDI) across the states of India include labor conflicts and
market regulations, institutional entry barriers, poorly functioning financial markets,
limited domestic demand, credit and market conditions, and other state-level economic
indicators. Tariff rates continue to remain high by international standards. There is a lack
of decentralized decision-making at the level of state governments. Banking and
insurance systems are not competitive. Labor laws are overly stringent .One key place to
start is the stage of development and government development plans. China opened its
doors to FDI in 1978; India in 1991. Today the coastal areas of China are mostly fairly
modern although a few miles away conditions can be quite primitive. India has some very
modern areas but infrastructure tends to be less developed and poverty right next to
considerable wealth is often on view.

The two regions, though, are taking very different paths to developing their economies.
The approaches reflect the most basic difference between the two: China remains state
run but is gaining an increasing commercial class and is very pro-business; India is a
democracy but also with a strong bureaucracy and continues state control on many key
industries.

In China, the government is taking a "planned" approach to development, while India is

growing more organically. In 2003, China received $53.5 billion in FDI more than 10
times that of India at $4.3 billion. In 2004, the disparity was even greater, with China
attracting more than $153 billion in new agreements, up by one-third over 2003. Utilized
FDI (the amount actually invested during the year) also surged to a record high of almost
$61 billion, rising 13.3 percent over 2003. India, in the same period, was only able to
increase its investment number to just under $6 billion.
In further comparing locations, China is by far the bigger player than India for
manufacturing as much more of India's recent growth has come in services (computer
programming, call centers, etc.)
India has decided to rely less on outside investment, which is largely a function of
government attitudes, and created a more nurturing environment for its own
entrepreneurs. However, India still has a high level of government regulation of business,
bureaucracy and poor actual infrastructure development. For example, one foreign
investor was required to have 100 separate forms signed by 60 different authorities prior
to being authorized to open operations in India. This level of red tape is much more than
that found in China.

Bureaucracy: China is not a bureaucratic country when it comes to business. Licenses,

permits and approvals are generally quickly issued and acted upon. India is another story.
British may have invented bureaucracy but India has perfected it. That situation has been
improving but it still can be very difficult to get a project through on a timely basis.
Shipping: The cost of shipping a 20- or a 40-tt container varies from port to port and
from shipper to shipper varying on the time of year, volume of shipment made by the
producer and other factors. India tend to be higher for shipping ($300 or more per 40 foot
container) and this often affects the profitability of locating large shipping-dependent
manufacturing in these countries.
 WORLD BICYCLE PRODUCTION AND MARKET

Bicycle Production
The bicycle continues to be the principal mode of transport for the low and middle
income families. This is because the bicycle is both environment and people-friendly.
Bicycle production measures our ability to provide affordable transportation, reduce
traffic congestion, lower air pollution, increase mobility, and provide exercise to the
world’s growing population.

Fig5: World Bicycle Production 1950-2003

In 2003, global production of bicycles hit 105 million—two-and-a-half times the record
42 million cars produced. During the 1950s and 1960s, bicycle and automobile
production were nearly equal. In the decades following, however, bike output soared,
reaching 91 million in 1990, when car production totaled 36 million. Since then, with the
exception of 1997 and 1998 (when output dropped to 90 million and then 87 million),
about 100 million bikes have been produced each year.
World bicycle production increased by nearly 9 percent to some 105 million units in 2003
China’s share of global bicycle production hovered at roughly 50 percent The country’s
total output of 52 million bikes was nearly five times greater than the next largest
producer, India, which built 12 million in 2003.
Table 12: World bicycle production since 1950
Year Bicycles (million)
1950 11
1951 11
1952 12
1953 13
1954 14
1955 15
1956 16
1957 17
1958 18
1959 19
1960 20
1961 20
1962 20
1963 20
1964 21
1965 21
1966 22
1967 23
1968 24
1969 25
1970 36
1971 39
1972 46
1973 52
1974 52
1975 43
1976 47
1977 49
1978 51
1979 54
1980 62
1981 65
1982 69
1983 74
1984 76
1985 79
 1986 84
1987 98
1988 105
1989 95
1990 91
1991 96
1992 99
1993 99
1994 102
1995 103
1996 96
1997 90
1998 87
1999 96
2000 104
2001 95
2002 104
2003 105

The global bicycle industry, including bicycles, parts and accessories, is estimated to
have total retail sales in excess of $20 billion. The bicycle manufacturing segment of the
industry produces approximately 100 million units per annum. (Source: Derby Cycle
Corporation annual accounts, April 2001).
In 2000, world production of bicycles exceeded 101 million units. The British bicycle
industry is estimated to be worth £500m per annum. (Source: CTC/Bicycle
Association/Association of Cycle Traders press release, April 2001). However, household
expenditure figures from the Office of National Statistics say that sales were £974m in
2002. And in 2005, the ACT revealed that just 322 IBDs (independent bicycle dealers)
are turning over £82m a year on credit/debit cards alone. The total annual turnover - Oct
04 to Oct 05 - generated by ACT members using the Association's card processing deal
with HSBC was £82.2m, a £15m increase on the previous year. 322 of the ACT's 800
members take advantage of the ACT/HSBC card processing scheme. The 322 members
represent 402 outlets. These 402 had credit card turnover of £43.7m and debit card
turnover of £38.5m.
The global market for bikes is dominated by just a few big players. Few global bike
companies are worth over $200m.
In Europe there are 144 bicycle brands. In the US there are 66. (Source: The B.O.S.S.
Report, June 2004)

Bicycle Market
The US bicycle market in 2000, bikes and accessories, was worth $5.7 billion, with the
speciality retail channel (ie IBDs - independent bike dealers) accounting for $1.47 billion
of bike sales, selling 3.93 million units. The US is the world's largest open market for
bicycles with sales of 20.9 million units in 2002. (Source: Bicycle Retailer and Industry
News, 2002).
In Q1 of 2005, Taiwan's bicycle and parts production grew by 23.6 percent, with bicycle
output up 24.2 percent to $286m and parts production gaining 22.6 percent to $184m.
(Source: Taiwan's Ministry of Trade)

China’s bicycle industry

China is the world's biggest producer of bicycles, 79 million units in 2004, of which 51
million were exported. Imports of Chinese bicycles into the EU attract dumping duties.
The average unit price was only US$34.5. By contrast, the average unit price of Taiwan-
made and Japanese-made bicycles last year was US$164.41 and US$150, respectively.
(Source: China Bicycle Association, May 2005).
The People's Republic of China produces 55-60 percent of the world's bicycles. India
produces 11 percent. 86 percent of the bicycles sold in the US are imports from China.
The Chinese domestic market for bicycles is about 22-25 million per year, down from a
peak of 40 million just a few years ago. Thanks to government policies of promoting
cars, and discouraging cycling, cycle use in China is plummeting, down to 20 percernt of
all trips, compared to 33 percent in 1995. The Chinese bicycle industry employs 150 000
people and geneates $1bn a year in foreign exchange earnings. Most of the domestic
Chinese bikes are produced by state-owned companies, who wouldn't dare criticise the
official policy to discourage urban cycle use. The Chinese Bicycle Association (CBA) is
a branch of China Light Industrial, a government minstry, and its leaders toe the party
line, viewing the removal of bikes lanes as a necessary measure for accommodating
increasing car use. However, there's one glimmer of hope: the Olympic village being
built for the 2008 Beijing Games is to be criss-crossed by cyclepaths (Source:
BikeEurope, February 2003)
Customs statistics indicate that China exported a total of 45.57 million bicycles in
2002, which represented growth of 31% from the 34.94 million export figure of 2001.
While China's reported bicycle production for 2001 was 51.95 million units, actual
production for the year probably exceeded 60 million units. This suggests that actual
production exceeded 70 million units in 2002, and means that China has captured more
than 60% of the 110 million-unit global bicycle market. (Source: WheelGiant, May
2003). However, domestic use of bicycles is on the wane. According to the Cycling
Association of China, bicycle ownership was an average of 142.7 bikes per 100
households in 2002 compared to 182.1 in 1998. In Beijing, only 20 percent of
commuters rode bikes in 2002, compared to 60 percent in 1998.
According to statistical data on 206 bicycle firms collected by the Tianjin Bicycle
Association, a total of 20.28 million bicycles were produced in the Tianjin area of China
in 2002, accounting for over one-third of China's total output. Of the total of 821
companies composing the Tianjin bicycle industry, 403 are whole bicycle companies
(including 61 makers of electric bicycles) and 418 are parts manufacturers. The sole
whole bicycle manufacturer to exceed the million unit mark last year was Tianjin Fushida
(1.23 million bikes). Seven manufacturers produced 500,000~ 800,000 bikes last year:
Tianjin Flying Pigeon (800,000), Jie Ma (650,000), Kai Te (600,000), Tai Mei (600,000),
Ko Lin (560,000), Golden Wheel (530,000), and Boma Bike (500,000). In addition, three
manufacturers produced 300,000~500,000 bikes: Ganda (400,000), Ta Ming (300,000),
and Zheng Yi (300,000). Most exported bikes were sold to Japan and Korea. The number
of exporting firms in Tianjin has been growing steadily, rising from 18 in 2001 to 32 in
2002. The top three exporters are currently Tianjin Fushida (exported 611,000 units; up
160.34% from 2001), Kelin (282,000 units; up 106.04%), and the Tianjin Machinery
Import/Export Group (247,000; down 4.6%). (Source: Wheel Giant, May 2003)
There are estimated to be 260 bicycle manufacturing companies in China making electric
bikes and electric bike components. (Source: Promotion Association of Electric Bicycles
(PAEB), Taiwan, 2005).
INDIA’S BICYCLE INDUSTRY

Manufacture of complete bicycle falls within the purview of the Organized sector. More
than 90 per cent of the production of bicycle in India comes from four bicycle companies
viz. Hero is the market leader with a share of around 35 per cent followed by Atlas cycles
(24%), TI Cycles (18%), and Avon (15 %) as shown in the following figure. The total
size of the bicycle market in the country is approximately 12 million a year.

Source:

Fig6: Share of Hero, Atlas, TI, Avon, Unorganized sector

Besides the Standard/Conventional model, the Indian bicycle industry over the years
has introduced a variety of new models of bicycles viz. sports and high tech models
both for domestic and export markets.

The industry is mainly concentrated at Ludhiana (Punjab) where about 80 per cent of
the bicycles and parts are manufactured. Kanpur (Uttar Pradesh), Mumbai (Maharashtra),
Sonepat (Haryana), Chennai (Tamil Nadu) and Kolkata (West Bengal) are the other
important production centers for manufacturing bicycles and Bicycle parts. The
Engineering Export Promotion Council under the Ministry of Commerce & Industry,
Government of India over the years has been looking after export promotion Activities of
bicycles and parts.

Indian Bicycle industry majorly exports bicycle parts. Exports of bicycle parts enjoy 70%
share of collective exports of bicycle and bicycle parts.

Fig7:Individual Share of Bicycle and Bicycle parts in Collective Exports of Both

Bicycle exports from India

Table 13: India’s exports of bicycles and bicycle parts components during the
period 2001-02 to 2004-05

(In crores, Rs.)

Item 2001-02 2002-03 2003-04 2004-05 %
Change
in 2004-
05 over
2003-04
Bicycles 162.08 137.46 201.36 168.33 (-) 16.40
(18.27) (16.96) (24.67) (22.73)
Bicycles 725.02 672.95 615.01 572.12 (-) 6.97
parts and (81.73) (83.04) (75.33) (77.27)
components
TOTAL 887.10 810.41 816.37 740.45 (-) 9.30
(100.00) (100.00) (100.00) (100.00)

(Note: Figures within brackets indicate percentage shares of the total.)

India’s exports of bicycles & bicycles parts and components in 2004-05, as may be seen
from Table declined by 9.30 per cent over the previous year when the same reached a
level of Rs. 740.45 crore as against Rs. 816.37 crore. Exports of bicycles, as may be seen
from the table, registered a steep decline of 16.40 per cent when the same dropped to Rs.
168.33 crore as against Rs. 201.36 crore. Further, a glance at the table shows that exports
are dominated by bicycle parts & components. In 2004-05, they accounted for a share of
77.27 per cent.

Following figure is the graphical representation of negative growth seen by bicycle

industry since 2001.Bicycles are the worst affected as even in 2004-05 the exports stood
close to that in 2001-02.

Fig8: India’s exports of bicycles and bicycle parts components during the period
2001-02 to 2004-05

Table 14: Collective figures of India’s exports of bicycles and bicycle parts to major
countries from 2003 to 2004 and percentage change
(Rs. Crore)
Countries 2003-04 2004-05 % Change in 2004-
05 over 2003-04
Nigeria 125.66 59.14 (-) 52.94
Mozambique 31.44 49.91 58.75
Uganda 28.73 41.35 43.93
Tanzania 44.32 40.57 (-) 8.46
Kenya 30.89 35.26 14.15
Malawi 22.55 34.15 51.44
Italy 16.38 27.13 65.62
UAE 9.78 24.31 148.57
Congo P.Rep 16.36 23.60 44.25
Nepal 15.54 23.11 48.71
Burkina Faso 34.12 21.11 (-) 38.13
UK 15.07 17.46 15.86
Myanmar 6.89 16.93 145.72
Zambia 9.73 15.14 55.60
Germany 13.15 11.48 (-) 12.70
Total 816.37 740.45 (-) 9.30

As may be seen from Table, Nigeria continues to be the largest market for Indian bicycles
and bicycle parts. However, exports to this market in 2004-05 drastically declined by
52.94 percent over the previous year when the same dropped to Rs. 59.14 crore as against
Rs. 125.66 crore. The other markets showing a declining trend during the period
included: Burkina Faso (38.13%), Germany (12.70%), and Tanzania (8.6%). On the
other, the markets showing a steep growth during the period comprised: UAE (148.57%),
Myanmar (145.72%), Italy (65.62%), Mozambique (58.75%), Zambia (55.60%), Malawi
(51.44%), Nepal (48.71%), and Congo P. Rep. (44.25%). Following is the graphical
representation of the same-
Fig 9:Collective figures of India’s exports of bicycles and bicycle parts to major
countries from 2003 to 2004 and percentage change (in Crores)

Table 15:Item wise India's exports of bicycle & bicycle parts & components during
the
Period 2001-02 and 2004-05
(In crores)
A look at the above table shows that bicycles showed negative growth amounting to
16.40 and bicycle parts and components also showing a negative growth of 6.97.

Table 16: India’s exports of bicycles and bicycle parts to major countries during the
period 2003-04 and 2004-05
(In crores)
We can see that all the countries indicate positive growth of bicycles exports from India
except for Nigeria, Kenya, UK , Burkina Faso, ivory coast, Saudi Arabia, Tanzania rep,
Ghana, guinea and total growth also remained negative equal to 18.71.

In case of rickshaws, tricycles, cycles, delivery cycles, tricycles growth remained positive
totalling to 294.59.Bicycle parts and components showed declining trend in case of
countries like Nigeria, Burkina Faso, Egypt, Indonesia, Mozambique, and Turkey,
Argentina, Colombia
In case of other types of rims and spokes Nigeria, Tanzania, Burkina Faso, Brazil,
Mexico showed negative growth and total growth equaled to 14.69.Pedals and crank gear
and parts thereof: negative growth in case of Mexico, France, Nigeria, Brazil, and
Colombia. Bicycle free wheels: Brazil, Thailand showed negative growth. Bicycle Rims:
Only Egypt showed dented growth.Bicycle hubs: Negative growth in case of Brazil,
Indonesia, Mexico, Nigeria, and France. Total growth also stayed negative at
11.65.Brakes including coasting braking hubs and hub brakes and parts thereof: total
growth registered was negative equaling to 20.69.

Table 17: India’s exports of bicycles and bicycle parts in the select markets in the
years 2003-04 and 2004-05
(Rs. crore)
Tanzania remained a lacklustre market showing a negative growth of 8.46. Uganda and
Malawi showed quite impressive growth of 43.93% and 51.44%. Kenya growth remained
at 14.15

China’s Bicycle industry vis a vis India’s bicycle industry

Table 18: India and china contribution in world’s bicycle production:

China India Others Total

52 million 12 million 41 million 105 million
 Fig10:India and china contribution in world’s bicycle production

Above table and figure shows that China has about 50% share in the world’s bicycle
production.

Let us see the bicycle exports by various countries. Following table indicates that China
remains a stalwart in exporting bicycle to the world. Its bicycle exports saw a major
increase. In case of other countries their exports have either decreased or saw minor
increase.

Table 19: Exports of bicycles by various countries in 2005:

(Figures in million units)

Country 2000 2001 2002 2003 2004 2005

China 32.80 34.94 46.09 50.84 51.75 53.58
Taiwan 7.53 4.80 4.20 3.88 4.35 4.59
European 3.90 3.63 4.32 5.19 5.70 6.10
Union
US 0.18 0.19 0.16 0.13 0.16 0.19
Japan 0.56 0.56 0.65 0.87 1.00 1.22
Italy 1.75 1.41 1.42 1.59 1.55 1.35
Germany 0.25 0.23 0.26 0.51 0.56 0.38
France 0.33 0.30 0.37 0.53 0.72 0.88

India's share in total global export of bicycles is estimated at a mere 2 per cent; China has
a whopping share of 80 per cent. China has always been a leader in producing and
exporting bicycles. India stands second to it. But now the Indian bicycle industry is
passing through a rough patch. Same is the situation of other countries which are losing
their share to China and Taiwan

Table 20: Chinese Exports of Complete Bicycles, 2005

Country Units/millions
United States 19.17
Japan 7.81
Indonesia 1.96
Russia 1.92
Korea 1.84
All Others 20.88
Total 2005 53.58
Total 2004 51.75
Source: China Bicycle Association

USA remained a lucrative market for Chinese bicycles with China exporting 19.17
millions. Among other Countries that were key markets Japan accounted for 7.81 million,
Indonesia (1.96), Russia (1.92), Korea (1.84), and Others 20.88 and to exports stood at
53.58 up from 51.75 million in 2004.

Problems at Hero cycles-A reflection of woes of Indian bicycle industry

Due to competition posed by Chinese bicycle industry, Indian bicycle industry is passing
through a bad phase and Hero cycles too have not remained untouched by it. It is not only
in competition with the domestic manufacturers but also with Chinese bicycles
specifically Chinese toy bicycle. As the price of raw material, bicycle parts, labour rates
etc are costs to the company; following is the description of problems being faced by the
company and comparisons of these costs being borne by the same and its any Chinese
counterpart.

(1) Rising Steel Prices: Because of the sluggish demand and ever-increasing steel prices,
Hero Cycles is reported to curtail its production to only 6,000 cycles per day as against
18,000 cycles per day earlier. It has been reportedly owing to the fact that prices of the
steel, which has been the main raw material for making bicycles and bicycle parts, have
almost doubled in the last three years which used to be Rs. 13,000 per metric tonnes in
2000, now stand at Rs. 27,000 per metric tonnes. Also,India’s exports of bicycles and
bicycle parts in 2004-05 have declined to Rs. 740.45 crore as against Rs. 816.37 crore in
the previous year, registering thereby a negative growth of 9.30 per cent.

(2)Competition from China, Expensive raw material, low labor productivity as

compared to China:
In India, prices of raw material such as MS round, CRCA sheet and tube hover around Rs
29,000, Rs 36,000 and Rs 43,000 per tonne respectively, while in China the prices of
these inputs stand at Rs 14,400, Rs 21,000 and Rs 25,000 per tonne respectively.
Table 21: Decline in Production of bicycles parts in India
(Figures are approximate)

Type of Bicycle Daily Production in Daily Production Now

Part the past
Multi speed Chain 15000 units 3000 units
wheel
Multi free wheel 15000 units 3000 units
Hub 45000 units 22000 units
Single steel free 1 lakh units 45000 units
wheel

Table 22: Difference in Price of Raw Material

Type of product (per tonne) Cost of Production in Cost of

India Production
in China
MS ROUND Rs.29000 Rs.14400
CRC SHEET Rs.36000 Rs.21000
ER TUBE Rs.43000 Rs.25000

Table 23:Comparison of price of bicycle parts which are now being sourced from
China by Indian Manufacturers:

Type of product (per unit) Price in China Domestic

price
Bicycle Chain Value Per Piece           Rs. 25
= $ 0.39
Dynamo with Lights Value Per Piece          Rs.118 (but
=  $ 2.24 quality is
cheap)
Coaster Hub Brake Value Per Piece Rs.100
= $1.55 

Due to competition from china’s bicycle industry, there is likelihood that the bicycle and
bicycle parts exports will decrease to approx. 500 crores According to customs
department, 18 crores worth of bicycle and bicycle imports from china have entered
Indian market to take on ludhiana’s bicycle industry.
The Indian bicycle industry is likely to lose out up to 50 per cent domestic market share
and Rs 100 crore worth exports to Chinese bicycles this year, in view of sharp difference
between input prices in these countries. Indian cycles are about 30 per cent costlier than
the Chinese ones.
There is expected a dip of almost Rs 100 crore in total exports of bicycle from India due
to sharp difference between prices of Chinese and Indian bicycles. The Chinese bicycle
industry has already been successful in cornering almost 25 per cent share in fancy
bicycle market in India.
Labour rates in China are less as compared to that in India and though India’s labour
productivity is improving but it is lagging behind that of China. Bicycle industry is
highly labour intensive so high labour productivity is very critical for the growth of
bicycle industry.

Table 24:Comparison of Labour Rates:

India China
Rs. 2300 (8 hrs/day) For 25 Rs. 4500(12 hrs/day) for 29
days days

In China labour rates are less, working hours are more and labour productivity is high.
High labour rates and low productivity add to the cost of manufacturing bicycle and
parts.
(3) Appreciating Rupee impacting Exports: Last year, India exported bicycles worth
Rs 760 crore and this year it will come down to Rs 650 crore because of increasing
presence of Chinese bicycles in export market .Low realization of export proceeds due to
rising rupee against dollar has also aggravated the situation for Indian exporters. Indian
Manufacturers are losing almost Rs 165 per bicycle on export due to appreciation of
rupee.

Table 25: Impact of appreciation of rupee on profits of bicycle industry:

Exchange Rate Price obtained by a bicycle

manufacturer
45.50 1663
40.50 1498
LOSS: 165

So if the manufacturers don’t book orders then there is risk of loss of customers
And if they book orders then they have to incur loss.
There is anticipated reduction of almost 30 per cent in total production of Indian bicycles
this year.   
(4) High Shipping costs:
Port facilities in India are not good and moreover shipping cost is higher as compared to
that in China. The total transactions costs for shipping goods from India to the US reflect
costs at ports plus costs of traversing the high seas. Even though the port in Shanghai is
roughly as bad as the port in Bombay, the distance from Shanghai to the US west coast is
smaller than ours.. Hence, geography gives China an edge in exporting to the US.
(5) Small-scale sector reservations, labour law, and indirect taxes: It may, hence, be
time for policy makers to shift their prime focus to these issues. The indirect tax front is
basically about the GST: achieving near-zero customs, zero-rating of exports, and free
movements of goods within the country. The recurring theme is economies of scale --
China has perfected gigantic labour-intensive factories. Barriers to the movement of
goods, SSI reservation, and Indian-style labour laws all hold back Indian firms from
achieving scale. According to a survey, sampled respondents said labour laws constrained
their business. Most respondents responded that they found labour laws stringent.

Table 26:Indian Labour laws: Responses of people

Highly Average Not Stringent

How stringent are 62 27 11
labour laws
How different it is 11 43 46
to fire labour?
Do you think that 10 30 59
hire and fire policy
will help your
business
How effective has 66 17 17
been the delegation
of L-commisioners
powers to the DC

Over 62 % of the respondents indicate that labour laws are highly stringent. Around 90
percent of the respondents find it difficult to retrench labour and indicate that their
performance would improve with the introduction of the flexible labour laws. They
however welcomed the recent move by the government to delegate labour
commissioner’s power to DCs. Over 60% of the respondents considered this move very
effective. Only 17% of the respondents feel that it was not effective.

In China, labour contracts are signed between the employer and employees, which
regulate the labour relationships. The nature of the contract is subject to approval by the
local authorities. In the case of recession, units may lay off work force after explaining
the situation to the workers and consultations with the labour Department 30 days in
advance. If they recruits people within 6 months then the laid off workers get priority
in re-employment. This system has provided a considerable flexibility to exporting units
in labour retrenchment during a business downturn.

(5) Chinese Government’s immense support to the industry:

Government of China regulates the price of every product that is of use to the industry.
Price of raw material, electricity charges and labour rates are approximately 30% cheaper
as compared to those in India.

What the Hero and other Bicycle manufacturers and exporters are doing to
salvage themselves

(1) Setting up office in China

Since Chinese bicycles are 40 per cent cheaper than those manufactured in India, the
traders view it as a source for inexpensive material, which could be used for export
purposes. So.hero exports which looks after the overseas market of the hero cycles has
recently set up office in China. Other bicycle and bicycle parts exporters who have set up
their offices in China are Sadem Industries, Deepak International, Eastman Industries,
Unistar Exports and Deol cycles. Many others are considering of opening offices in
China.
While the shift would hit Indian bicycle component manufacturers, exporters say that the
new duty drawback rates back home was one of the reasons why they were forced to look
towards China for sourcing components.
Table 27: Duty drawbacks rates of complete bicycles and some parts for the year
2006-2007 are given below:

Description of Unit A B
goods Drawback when Drawback when Cenvat
Cenvat facility has not facility has been availed
been availed
Drawback Drawback Drawback Drawback cap
Rate cap per Rate per unit in Rs.
unit in Rs.
Complete 1 No. 11% 183 1.3% 21.6
Bicycles
Hub (front or 100 Pcs 12% 501 1.1% 45.9
rear) made of
steel
Mudguard (pair) 1 pair 13% 10.1 1.3% 1
Pedal (pair) 1 pair 13% 4.8 1.7% 0.6

Rim (pair) made 1 pair 13% 23.3 1.3% 2.3

of steel
Spokes set of 144 1 set 11% 8 1.7% 1.2
pieces

(2) Raising prices by 2-3 percent

Company will raise prices by 2-3 per cent on all models following the hike announced for
hot rolled coils, a key input in manufacturing a bicycle, by steel producers.
Domestic primary steel producers had recently jacked up the prices of HR coils ranging
from Rs 700-1000 mt.
According to bicycle manufacturers, the price of standard bicycle would go up by Rs 50
to Rs 70 per bicycle, while the prices of MTB and fancy models would be increased
between Rs 70 and Rs 100 per unit.
HR coils accounts for almost 80 per cent in the manufacturing of a bicycle and bicycle
parts and any increase in its price directly impacts the cost of production of a bicycle.
Considering the hike in HR coil prices as a major blow to the industry, bicycle
manufacturers have also asserted that the increase in input cost would hit the exports of
bicycle which is already facing stiff competition at international level. This hike would
further encourage the import of Chinese bicycles into the country.
 CONCLUSIONS AND RECOMMENDATIONS

Conclusions

Cheap Labor

+
Lower Factory Overheads

+
Government Export Rebates

Currency (Probably Undervalued)

Which More Then Offset Higher:

Ocean Freight

11% Import Duties

Plus, Quality and Response Time are Competitive

Summary, China has won the Bicycle Manufacturing War With India

Recommendations

Shri Nani Palkhiwala often addresses, “Indians have the most fertile brains”. We have
often excelled as individuals in respective fields - as individual islands of excellence, but
always fail as a team, as we have more leaders than followers.
But if Hero has to survive:

• It will have to learn and work as a team; with increased productivity to share the
common goal and vision.
• Explore ways and means to reduce the cost to save jobs.

These measures alone will help it to regain its health and competitive edge. Following are
The specific recommendations to the company

Prompt Response to changing Demand

Hero should take a leaf out of what Chinese bicycle industries are doing which are quick
in responding to the changing demands. Company should make endeavors to incorporate
ready changes in the designs of bicycles in order to salvage its dying share of fancy
bicycle. This is not possible through R&D which of course is an additional cost but pays
in the long run

Need of R&D in bicycle industry

The company needs latest research and development facilities to match the world leaders.
For tapping export potential, the company needs to pay special attention to R&D,
designing and marketing. On the whole, the future of company will be challenging. It
should acknowledge this fact that the domestic market will be open to goods and services
from global companies with low tariffs; Protection will be a thing of the past; The
companies that will survive will be those, which successfully restructure and modernize
to achieve global competitiveness in terms of quality, cost and distribution system.

Looking for new markets

In order to diversify risk the company must look for new markets like US, which is so far
the most lucrative market for China.

Cost Reduction- A Key to Survival and Success:

Cost reduction is the key word for success in today’s global competitive market scenario.
Gone are the days; where the vendor can pass on the cost of his inefficiency, low
productivity and bureaucratic way of functioning to the customer, as he used to often do
in the old sellers market’s hay days.Today’s customer has a wide choice in a Net
connected global market, where one or the other market savvy vendor is ready to offer
the required quality of products and services at competitive rates, often for strategic
reasons of capturing the unconquered market.

Exporting involves additional transport, distribution and marketing costs and additional
financial and legal risks. While some of these additional costs vary with the volume
exported (e.g. production and transport costs), others are ‘fixed’ costs. Some fixed costs
can be recovered if the firm does not succeed internationally (e.g. by selling fixed assets).
However, others are ‘sunk costs’ in the sense that, once incurred, they cannot be
recovered if exporting turns out to be unsuccessful (e.g. the time and money spent on
international market research and advertising). The theoretical literature argues that many
of these costs are likely to be significant (e.g. Baldwin 1989, Baldwin and Krugman
1989, Dixit 1989, Krugman 1989). To export successfully, therefore, firms need to
possess a competitive advantage to overcome the advantages typically enjoyed by rival
firms located in the country into which they export (e.g. greater familiarity with local
laws and customs and lower transport costs, greater familiarity with local tastes). The
source of competitive advantage is primarily the result of firm’s own efforts and vision.
But the source of this advantage can arise outside the firm also. These could be a result of
the overall institutional and policy environment that constitutes ‘investment climate’. The
term ‘investment climate’ includes factors such as better infrastructure facilities, better
geo-strategic location, hassle free production operations and government policy
incentives. These factors help in reducing the costs of producing and exporting and
enhance competitive advantages of firms.

Survival Strategy:

•Clear shared vision.

•Well set goals and objectives.
• Committed organisation aligned with the company’s goals and vision.
•Global cost consciousness.
• Well structured policies and procedures to back up the same and to deliver the said
objectives at minimum costs.
• Produce and market quality products and services at the right price, time and place as
per the customer’s requirements.
• Ensure that systems are in place to deliver the said objectives at minimum costs and that
the key performance indices are identified and tracked with mapping of end results (e.g.
data on repeat orders indicating brand/ customer loyalty, market share, cost of service
etc.)

Need for Strategic Sourcing at Optimum Cost:

One of the major costs in any organisation is the procurement cost of materials,
fabrication & services ranging from 40% to 70% of the total turnover. The next area as a
fall out of the manufacturing activity in any organisation is scrap accounting, monitoring
disposal & realisation.
Optimisation of cost benefits in the above- mentioned areas through strategic sourcing by
establishing vendor chain management under each major category, is a key to achieve
global competitiveness.
The traditional Indian idea of sourcing from the cheapest source by way of quotations
often required and insisted upon from the internal control point of view, has lost
relevance due to the following reasons:

•Quotations can be fabricated.

• Vested persons can share rates quoted by the lowest bidder to interested vendors
•Lowest rates can be at the cost of quality.

Therefore it is essential that the organisation should:

• Develop a business partnership module and vendor chain relationship based on mutual
trust and benefit.
• Define corporate sourcing strategy in consultation with all stakeholders to achieve
optimum cost benefit for required quantity and quality of materials at the right time and
place.
• Reduce inventory-carrying cost on one hand and avoid stock out situation on the other.
•Explore global sourcing initiatives.
 ANNEXURE-I

COMPANY PROILE
THE HERO GROUP
The Beginning

“We look over our shoulders, we see the past. We use it to make a better present and a
beautiful tomorrow, as tomorrow isn’t just another day, it’s another chance for us to
better ourselves to excel”.

Hero Cycles is a product of this philosophy, the philosophy that instills commitment,
teamwork and foresight. Hero’s colossal journey started before independence. The four
Munjal brothers, hailing from a small town called Kamalia, now in Pakistan, are the men
who are behind the mission. Brotherhood apart, what knit the men together was the
wealth of will, integrity, ambition & determination. In the year 1944, they decided to start
a business of bicycle spare parts in Amritsar. It was modest beginning and the next 3
years saw the business grow rapidly. But the dark clouds of partition eclipsed their plans
of the future. With renewed vigor and optimism, the operational base was shifted to
Ludhiana. By 1956, the brothers had began manufacturing key components of bicycles
and as a logical way forward, began to assemble the entire cycle at their manufacturing
plant in Ludhiana. In the early days, the plant had a capacity for 25 cycles per day. Over
the next few years, the Bicycle Unit started growing in stature and size, attracting skilled
engineers, technocrats, administrators and entrepreneurs. From a modest beginning of
mere 639 bicycles in the year 1956, Hero Cycles products over 18500 cycles a day today,
the highest in global reckoning. With the 48% share of the Indian market, this volume has
catapulted Hero in the ‘Guinness Books of World Records’ in 1986 and edge over global
players is being maintained since then.

A tiny acorn has now become a mighty Oak. From cycle to two - wheelers was a natural
step, and the Hero Group came into being. The Hero Group, today, is a vast conglomerate
of companies, either in the form of collaborations, joint ventures or fully owned
subsidiaries, with more than Rs. 10000 Crore turnover annually. Hero Group, besides
being the world’s largest manufacturers of bicycles, motorcycles and chains to this date,
has diversified into newer segments like Information Technology, IT Enabled Services
and Financial Services.
The Vision
" We, at the Hero Group are continuously striving for synergy between technology,
systems and human resources to provide products and services that meet the quality,
performance, and price aspirations of the customers. While doing so, we maintain the
highest standards of ethics and societal responsibilities, constantly innovate products and
processes, and develop teams that keep the momentum going to take the group to
excellence in everything we do."

The Mission Statement

" Its our mission to strive for synergy between technology, systems and human resources,
to produce products and services that meet the quality, performance and price aspirations
of our customers. While doing so, we maintain the highest standards of ethics and
societal responsibilities. "

According to Mr.Brijmohanlall Munjal, MD Hero Group, this mission is what drives

them to new heights in excellence and helps them forge a unique and mutually beneficial
relationship with all their stakeholders. They are committed to move ahead resolutely on
this path, shown to them by visionaries like Mr. Satyanand Munjal, Mr. Om Prakash
Munjal, the late Mr. Dayanand Munjal and late Mr. Raman Kant Munjal.

Milestones

Hero’s success saga contains the element of courage, great, determination, enterprises
and perseverance coupled with vision and meticulous planning :
1956
Hero Cycles Ltd. is established.
1961
Rockman Cycle Industries Ltd. established, which is today the largest manufacturer of
bicycle chains & hubs in the world.
1963
Bicycles exports take off from India – a faray into the international market.
1971
Highway Cycles was set up. It is today the largest manufacturer of single speed & multi-
speed freewheels in the country.
1975
Hero Cycles Limited became the largest manufacturer of bicycles in India.
1978
Majestic Auto Limited was formed and Hero Majestic Moped was introduced.
1981
Munjal Casting established.
1984
Hero Honda Motors Limited established in joint venture with Honda Motors, Japan to
manufacture Motorcycles. It is now the world’s largest producer of two-wheelers.
1985
Munjal Showa Ltd. established to manufacture shock absorbers and sturts and is today
one of the topmost shock absorber manufacturer companies in this country.
1985
100 cc Hero Honda Motorcycle was launched, which, later on in 1988, became No.1
among all motorcycles in India.
1986
Hero Cycles Limited entered the Guinness Books of World Records as the largest bicycle
manufacturer in the world.
1987
Hero Motors, a division of Majestic Auto Limited set up in collaboration with Steyr
Diamler Puch of Austria.
1987
Gujarat Cycles Limited, now known as Munjal Auto Centre Ltd. was established to
manufacture and export state-of-the-art bicycles and light products in its full automated
plant at Wagodia.
1987
Sunbeam Auto Limited, earlier a unit of Highway Cycle Ind.Ltd., established as an
ancillary to Hero Honda. It has the largest die casting plant in India.
1988
Hero Puch was introduced by Hero Motors Ltd. which was a revolutionary machine to set
new records of petrol efficiency in 50 to 65 cc engines.
1989
Ranger bicycles (a generic name for Mountain Bikes today) was introduced by Hero
Cycles Limited.
1990
Hero Cold Rolling Division established, which is one of the most modern steel cold
rolling plants in India.
1991
Hero Honda received National Productivity Council Award and also the Economic Times
– Harvard Business School Association Award against 200 contenders.
1991
Hero Cycles introduced Kidd – the first branded bike in children’s segment.
1992
Hero Cycles introduces Impact, the first citibike in India.
1992
Munjal Showa Ltd. received national safety award.
1993
Hero Exports was established as International Trading Division for group & non-group
products.
1995
Hero Corporate Services Ltd. was established.
1995
The first exerbike from Hero Group was introduced with the name – Allegro.
1996
Hero Winner, a large wheeled scooter with a choice of 50 cc & 75 cc engines was
launched by Hero Motors Ltd.
1996
Munjal Showa Ltd. received British Council’s National Safety Award.
1998
Hero Briggs & Stratton Auto (P) Ltd. was set up to produce 4-stroke two wheeler engines
in various cubic capacities.
1998
Munjal Auto Components established to manufacture gear shaft & gear blanks for
motorcycles.
2000
The first fully automated bicycles by the name ‘POWERBIKE’ was introduced by Hero
Cycles Limited.
Hero Corporate diversified into I.T. and I.T. Enabled Services through its services
segment Hero Corporate Services Limited.
2001
Hero Honda emerges as the market leader in motorcycles with the sales of over a million
motorcycles and a market share of 47%.
2001
Hero Global Design established to offer engineering services in CAD/CAM/CAE related
to new product development design, engineering, manufacturing.
2002
Hero Cycles Limited ties up with National Bicycle Industries, a part of Matsushita
Group, Japan, to manufacture high end bicycles.
2002
Fastener World established.
2002
Easy Bills Limited established to offer utility bill collection and retail services.
2003
Super Starter Series launched by Hero Cycles Limited.
2003
Tie-up with Live Bridge Inc., U.S.A., Aprilia Scooters, Haly & Bombardier Rotax GmbH
of Germany.
2003
Hero Honda continues to be the world’s largest manufacturer of two-wheelers with the
market of more than 48%.
2004
Hero Retail Insurance Business established.
2004
Super Smart Series introduced by Hero Cycles Limited.
The Hero Group has done business differently right from the inception and that is what
has helped us to achieve break-through in whatever product category we have ventured
in. The Group's low key, but focused, style of management has earned the plaudits amidst
investors, employees, vendors and dealers, as also worldwide recognition.
The growth of the Group through the years has been influenced by the number of factors:
The Hero Group through the Hero Cycles Division was the first to introduce the concept
of just-in-time inventory. The Group boasts of superb operational efficiencies. Every
assembly line worker operates two machines simultaneously to save time and improve
productivity. The fact that most of the machines are either developed or fabricated in-
house, has resulted in low inventory levels.
In Hero Cycles Limited, the just-in-time inventory principle has been working since the
beginning of production in the unit and is functional even till date. The vendors bring in
the raw material and by the end of the day the finished product is rolled out of the
factory. This is the Japanese style of production and in India Hero is the first company to
have mastered the art of the just-in-time inventory principle.

The Achievements
 The Group and its management have acquired a number of accolades and achievements
over the years:
Hero Group Management style has been acclaimed internationally by World Bank and
BBC, UK. Hero Group is discussed as a case study at London Business School, UK and
INSEAD, France. World Bank has acclaimed Hero Cycles as a role model in vendor
development based on a worldwide study. The London Business School, UK, has done a
case study on the Group as model of entrepreneurship.
Boston Consulting Group has ranked Hero Group as one of the top ten Business Houses
on Economic value, in India.
HSBC-Merrill Lynch has estimated Hero Group to be amongst the top value creators in
the five years 2001-05.
The Hero Group is recognized as a long-term partner and an ideal employer:
-- Hero Group's partnership with Honda Motors, Japan is over 20 years old
-- Hero Group's Partnership with Showa Manufacturing Corporation, Japan is over 18
years old.
Group Chairman, Mr. Brijmohan Lall Munjal received the coveted "Ernst & Young
Entrepreneur of the Year" award for 2001.
Hero Cycles was ranked 3rd amongst top Indian companies Review 2000 - Asia's leading
companies award (2003) by Far Eastern Economic Review.
Hero Cycles is the World's largest manufacturer of Bicycles with annual sales volume of
over 4.8 million cycles.
Hero Cycles Limited is a Guinness Book Record holder since 1986 as the world's largest
manufacturer of bicycles, with annual sales volume of 5.2 million bicycles in FY 2004.
Engineering Exports Promotion Council has awarded Hero Cycles with the Best Exporter
Award for the last 28 years in succession.
Corporate Services
Established in 1995
Providing Corporate services to group companies

 HRD and Personnel

 Project Management

 Strategy Planning

 Information technology Planning and implementation

Group Strengths:
  Leadership in all spheres

 Technological Capabilities

 Dealer Network

 Vendor Network

Largest Market Share in majority of products

Products Market Share Rank in India

Bicycles >48% 1

Motorcycles 45% 1

Shock Absorbers 29% 1

Castings 22% 1

The group has been actively involved with various hospitals in providing medical
facilities
Hero has set up a heart institute Hero MDC Heart Institute.
It has various college and schools for the general public and the workers.
They maintain various parks and public facilities on behalf of the municipal
corporation to serve the community.
They provide clean drinking water in a number of villages and have provided free
medical van fully equipped with doctors and medical equipment.
Hero Exports
The Vision
To achieve the perfect balance between technology, systems and human resources, in
order to produce products and services that meets the quality, performance and price
aspirations of clients
Mission
To get global recognition as a socially responsible corporate entity by ensuring good
service and high business ethics
Hero Exports began its journey in 1993, as an International Trading arm of the US $ 2
billion Hero Group. Commencing with just the export of bicycles, Hero Exports has
grown, within a short span of over a decade, into a reputed international trading house
dealing in varied business across the globe in the following sectors: Agro
Commodities, Engineering Products, Bicycles & Bicycle Parts, Auto Components,
Mobility Products, Steel, Iron Ore and Coal etc.

With a network spanning over 80 countries spread across the globe, we have our
corporate headquarters for managing operations in Ludhiana (India), and branch office in
New Delhi (India).

Hero Exports stands for reliability and quality in services as well as products. With
us, customer's interest always comes the first. With our advanced technical standards,
extensive global presence and efficient goods-delivery system, all our projects are
executed according to customer's specifications and time requirement. Our single-
minded commitment to quality is reflected in the large clientele that has been with us
over many decades.
Certification
With an ISO 9001 certification from TUV hero exports has taken on the challenge of
becoming a benchmark in international business.
Quality Steps to success
Hero Exports ensures its clients the best in quality as well as services through an
integrated system of quality assurance that is incorporated in our work ethics.
Employees are informed, trained and mentored on our quality principles and processes
from the first day of employment. Commitment to quality and processes is practiced and
demonstrated at all levels within the organization.
We believe in continuous and persistent efforts in diversifying our markets, offering
value added products and services to our existing clients, enlarging our product range and
client base, expanding extensively our infrastructure facilities, using our expertise in
trading by attaching utmost care and importance to our trade commitments as also the
quality service and product

Products/Sectors
Hero Exports has a product portfolio that incorporates a wide range of products spanning
markets across Europe, USA, Middle East, Africa, Latin America, Indian Subcontinent
and South East Asia and China.
The product range includes

1.Bicycles
2. Agro Commodities
3. Engineering
4. Metals
5. Minerals
Bicycles:
Hero Cycles, the world's largest manufacturer of bicycles, has maintained it's Global
leadership position since 1986 when it was featured in the Guinness Book of Records as
the largest producer of Bicycles in the World.
With a Technical Collaboration with National-Panasonic of Japan, Hero Cycles enjoys a
leadership position not just in India but also on a global scale.
Agro Commodities:
As a leader in commodities trading, Hero Exports provides you access to some of the
highest quality, most competitively priced agro commodities in the world. A wide
network of strategic relationships with producers and suppliers throughout the globe,
allows Hero Exports to source, procure and deliver products reliably, on a long-term
basis. Today, Hero Exports supplies markets over Europe, Middle East, Africa, Central
Asia, and the Indian subcontinent. All the products that are delivered undergo stringent
testing to ensure that they adhere to international quality standards. We also have tie-ups
with state of the art warehouses to ensure that each product retains its original freshness
and flavor. We deal in:
1. Sugar
2. Sesame Seeds
3. Rice
4. Wheat
5. Soya Bean Meal and other extractions
6. Pulses
7. Spices
8. Maize
9. Milk Powder
Engineering:
a) Auto & Auto Components
Engine Components, Transmission Components, Pistons, Fine Blankings, Sheet
Metals, Alloy Castings, Forgings, Plastic Components, Seating Systems, Fasteners
etc.
 b) Bicycle & Bicycle Components
Complete bicycles. Parts such as Frames, Forks, Hubs, Chains, Freewheels, Chain
wheels etc.
c) General Engineering
Aluminum Extrusions, Fitness Equipment, Hand Tools, Scaffoldings, Machine Tools,
Screws, Bolts & Nuts, etc.
d) Medical Equipment
Wheel Chairs, Rollators, Walkers, Tubular Beds, Seating, Sheet metal components,
Alloy Castings, Precision components, Aluminum Extrusions etc.
Metals:
Steel
Hero’s Steel Division caters to the demands of buyers across the globe for their specific
needs in catering to different customer requirements world-wide.
Rolled Steel, Corrugated Steel, Corrugation Mills etc.
Hero’s Cold Rolling Division: Hero is an ISO certified company where quality and client
satisfaction are bywords that permeate their work ethics at every level—from the initial
plant design/ layout to the finished product. For us quality assurance is a continuous
process. From selecting the right inputs to establishing a system, the adherence to certain
rules and set procedures ensure the highest quality products.
Minerals
India is a rich source of various raw metals and minerals such as Iron Ore, Manganese,
and Coal. It is one of the largest exporters in the world for metals, and ships out
substantial quantities to countries like China, Japan, and Korea etc.
Hero Exports is a major player in Metal & Minerals, having built strong business
relationships with Mines and Suppliers. With long term relationships with our suppliers
we are able to procure the materials at competitive prices.
The major commodities that we specialize in are:
Iron
Ferro Manganese
Coal

Pricing for Exports:

For achieving the desired rate of growth in exports effective pricing policy for export
constitute an essential element. In Pricing is three things are important Cost, Demand
and competition

There are three methods of price quotation which are considered before price fixation:-

Export price based on Marginal cost.

Export prices based on feel cost
Market oriented price.

Export Price Based on Feel costs-

Description Amount

1. Direct Cost+ -
2. Fixed Cost+ -
3. Freight+ -
4. Insurance+ -
5. F.O.B.+ -
6. CIF+ -
Total
Export Price.

Market Oriented Price

- Market Price:-
Less- Retail margin on billing price

- Cost to Retailer:-
- Less- Whole sellers mark up on his cost.

-Cost of the whole seller

Fewer Importers mark up his cost.

Cost of the Importer:

Less: Import duty.

C.I.F. Price: -
Less- Freight and insurance charges,

Hero Export has competitive pricing considerably framed by its experts,completely based
on export oriented price quotation factors determined under the business relationship with
party in US Dollar currency mechanism. All negotiations regarding pricing quotations
for complete bicycle & parts are taken by the C.E.O. under consultative approach with
export manager and quality control Inspector.

Export Finance and exchange mechanism of the company

Currency mechanism
Hero Exports does all its export operation mainly under U.S. dollar currency, Yen, Euro,
and simply that present rate of U.S. dollar taken into account, which is prevailing in
exchange market or whatever mentioned in export import contract. A contract is deemed
to be successfully completed when the company gets paid for the goods shipped by it.
How the company will receive payments is decided during earlier negotiations between
the Hero exports and importers. There are following five methods of payment-

1. Payment in advance
2. Open Account
3. Documentary bills
4. Documentary Credit under letter of credit
5. Shipment on consignment basis

But Hero exports does all deals of exports under documents against payments which
mean Hero exports Ltd’s bank “State Bank of India Overseas Branch, Ludhiana” will
send the documents to its corresponding bank in the buyers country which will present
the documents to buyers and on payment of bill of exchange will deliver the documents
to him so that he can take possession of the goods.

But under documents against payments there are so many risks, which an exporter must
take into account before he agrees to accept payment on such basis. So, Hero exports
does more than 95% its export deal on D/P and U.S. dollar exchange rate system
followed by the company. For covering the payment risks Hero Exports take help in the
form of Insurance from Export Credit Guarantee Corporation of India Ltd. (ECGC).

Export Turnover

Hero Cycles does bulk of export to African Countries. Bicycle and bicycle parts exports
to African countries were worth 70 crore approximately. All receipts and payments
transactions done with these countries are under US Dollar currency. Company takes
payments on the basis of documentary credit.

Export Documentation, Custom Clearance, Transportation and shipment of goods

Export Documentation

Export documentation plays a vital role in international market as it facilitates the smooth
flow of goods and payments there of across national frontiers. A number of documents
accompany every shipment. These documents must be properly and duly filled. Export
documentation is; however, complex as number of documents to be filled in is large, so is
the number of concerned authorities to whom the relevant documents are to be submitted.
Moreover documents required differ from country to country. The company knows this
fact very well that incorrect documents may lead to non-delivery of goods to the
importer. He may get the correct documents after fine tune but in meantime storage
charges may have to be paid. More important, the importer will think twice before
importing from the company. So, due care is taken to fill in the documents correctly.
Generally Export Documents are of following types:

1. Commercial Documents
2. Regulatory Documents
3. Operation Documents
4. Export Assistance Documents
5. Documentation required by Importing countries.

But Documents used by Hero Exports are:

1. Commercial Invoice.
2. G.R.Form
3. Letter of Credit
4. Bill of Exchange
5. Shipping Bill.
6. Marine Insurance Policy
7. Bill of Lading
8. Packaging Lists.