Institute Of Business Management

Contents
Introduction of Bicycle Industry in Pakistan: ................................................................................................ 2 Specification of Bicycles in Pakistan: ............................................................................................................ 2 Local Players and their Locations: ................................................................................................................. 3 Production Capacity: ..................................................................................................................................... 5 Sources of Raw Material ............................................................................................................................... 5 Pricing: .......................................................................................................................................................... 6 Government Policies and Incentives: ........................................................................................................... 6 Some Findings: .............................................................................................................................................. 6 Conclusion: .................................................................................................................................................... 7

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Introduction of Bicycle Industry in Pakistan:

There was no single factory which manufactured bicycles and their spare parts at the time of independence in Pakistan. In 1952 the Shortage of foreign exchange reserves encouraged a serious look into domestic production and a remarkable idea was conceived by the twenty two shop owners of the Nila Gumbad (Lahore) area who drafted a plan to establish foundation of a co-operative society for the purpose of bicycle manufacturing factory within the country on cooperative basis. The main reason behind the establishment of the society is to provide mutual help and benefits to its founding members.

Overview:
If we compare Pakistani bicycle industry with international bicycle industry then we can see that we have only one major manufacturer in the industry and covering the entire local market. The international bicycle industry is much stronger than Pakistani bicycle industry. India is the second largest manufacturer of bicycles after china. China has great contribution in the manufacturing of bicycles. Chines Bicycle industry is a big threat for both Indian and Pakistani bicycle industry. We can say that the decline of local Pakistani industry is just because of imported Chines Bicycles are covering the market share.

Specification of Bicycles in Pakistan:

Pakistan bicycles are the only cheaper means of transportation for the local public. Bicycles are categorized into 3 categories. 1. Fancy Bicycles (Majority Chinese Imported) 2. Standard Bicycles (Pakistani Manufactured) 3. Smuggled Bicycles 1. Fancy Bicycles: A fancy bicycle has different types which attracts the youngsters. When we talk about speed then indeed one thing always come in to our mind that less weight bicycles are more reliable for customer point of view. Fancy bicycles has the specialty of different frame designs, colors, braking system, comfortable seats, stylish reflectors, electric light system for mountains, classy mudguards, sporty looks, shining nickel brings more beauty in the product which attracts the customers. Gear system increases the speed of the bicycle but decrease the pressure of pedal. The sub segments of the fancy bicycles in which mountain bike, BMX, Electric bicycles and recumbent bicycles.

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Chinese Phoenix Bicycle: Chinese Phoenix bicycle was everywhere in the shops. According to the shop keeper the demand for Chinese Phoenix cycle is very high just because of low prices and stylish designs which attract customers. All spare parts of Chinese bicycles are available in the market. Low quality and low price Chinese Phoenix bicycles are also available in the market. Some people go to the price factor and rest goes with the quality factors. There are some more types in which you will find High price and high quality Chinese Bicycles. The finishing of the Chinese bicycle is excellent as compare to the local manufactured bicycles. Chinese bicycles are not solid in nature but the fancy categories are the main focus of Chinese bicycles. 2. Standard Size Bicycles The second segment is standard size bicycle which is for personal use instead of entertainment. The benefit of standard bicycle in Pakistan is more as compare to fancy. The target market of standard bicycle is poor people or those who work on wages. There are 50,000,000 people who work on daily wages in all the areas of Pakistan and to be considered as the poor people. The standard bicycle is the major benefit for the Pakistani region. Standard Bicycle usage: These are the countries China, India, Pakistan, Afghanistan, Bangladesh, and Syria in which the largest population is dependent on bicycles. The main features of standard bicycle is heavy weight, we can carry children giving a ride to our spouse. Carrying capacity is more than fancy bicycles. We can carry lunch boxes, laundry cloths, milk containers and a variety of things. People play bicycle polo in northern areas of Pakistan. The bicycle of night watchman in our colonies proudly rides it all night, blowing a shrill whistle to remind us that he is keeping a careful eye on streets

Local Players and their Locations:

Local produces in Pakistan are Sohrab, Sartaj, Humber, Eagle and Pego. There are many local vendors in the industry which import raw material and produce unbranded bicycles. 1. SOHRAB: Rustam & Sohrab Factory, Sheikhupura Road, Shahdara, Lahore-Pakistan. 2. SARTAJ: Locally Manufactured in Nila Gumbad Workshops, Lahore, Pakistan 3.PEGO: Locally Manufactured, In Nila Gumbad Workshops, Lahore, Pakistan 4.EAGLE: Shahdara, Lahore 5.HUMBER:Locally Manufactured, In Nila Gumbad Workshops Lahore, Pakistan

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3. Smuggled Bicycles: According to our survey it was confirmed that the reports regarding the smuggling of bicycles in Pakistan were true. However most of the traders refused to accept that these smuggled bicycles were sold at their shops. But few traders agreed to tell us the whole process of smuggling on the condition of anonymity and this is how we came to know about the whole racket of this illegal trade and the high levels of profits in this process. The bicycles are smuggled under the cover of NATO containers which are usually not checked and these containers carry imported bicycles. These bicycles move through Pakistan without any custom check due to the involvement of high ups. The next destination of these bicycles is Afghanistan where they are unloaded and then these bicycles are smuggled into Pakistan through the Chamman route. The fact to be kept in mind is that these bicycles are being graded as USED cycles but are bought by the local traders as a scrap and are being bought at the rate of iron/kg and avoiding tax by bribe. After buying it as scrap these cycles are reconditioned locally and are sold. Since these are very high quality bicycles they are very costly. The profit levels can be imagined by the fact that one trader told us that if A CHINESE IMPORTED CYCLED COST US PKR 10,000 ,WE CAN GET BETTER QUALITY SMUGGLED BICYCLE AT MERE PKR 2,000 ONLY. Since the cost difference is very high this smuggling is flourishing and government is itself involved in it. However, we were not able to confidently find out that if those bicycles are being sold in Karachi Light house market.

Bicycle Smuggling Process: It involves the following process.

BICYCLES ARE BROUGHT INTO PAKISTAN AS NATO SUPPLIES

TRANSPORTED TO AFGHANISTAN USING NATO SUPPLIES ROUTE

SMUGGLED CYCLES REACH PAKISTANI MARKETS

RECONDITIONING

SMUGGLED INTO PAKISTAN THROUGH THE CHAMMAN ROUTE

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Production Capacity:
From 2002 to 2003 the local production of bicycle recurring with 629,695 numbers of bicycles produced according to the industry statistics. From 2003 to 2004 681448 bicycles were produced with the increase of 8.22% from previous year. From 2005 to 2006 the production of bicycles was 449400 which was a decline from the previous trends, in year 2007-2008, the production increases to approximately 650,000 and in year 2008 the capacity increase to approximately 1 million. The Present capacity of the Pakistani bicycle industry is to produce 1.45 million bicycles per year (2010). Market Share of local Production: Local Industry produce Standard Bicycles and very few fancy Bicyles.According to the SMEDA report Pakistan bicycle industry is dominated by one key player, Sohrab which comprised more than (80 %) eighty percent share of the whole industry whereas the rest of (20 %) the production is shared by other six authorized and unauthorized manufacturing companies. Market Share of Chinese and Smuggled Bicycle: Chinese imported cycles account for around 90% of the fancy bicycles and 10% accounts for smuggled. Smuggled bicycles are refurnished bicycles and are majorly sold in urban markets.

Sources of Raw Material

1. Steel: The steel which is used for manufacturing bicycle frames are imported from China. The steel which is used for manufacturing small metal parts of the bicycle are local made from ILL Company which are the main dealer of Pakistan Steel mills. Front head of bicycle is imported from Italy, Japan and China. 2. Plastic material: Plastic material is from Universal Rubber Manufacturer in Lahore and some other vendors it depends upon the prices and relationship of the firms with their vendors. 3. Nickel: Nickel is imported from United Kingdom the company which is the largest provider of nickel all over the world is INCO. 4. Paint: Paint is locally used from ICI companies and Burger paints. Both companies are the best companies in Pakistan and are considered to be the best provider of paints. Some local paints is also used. 5.Acids :All acids which are used in the manufacturing process are imported from United Kingdom and locally made in Lahore as well. But the companies which are trying to improve the quality of the bicycle they usually prefer imported acids.

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Pricing:
As there are three major categories of the cycle: Standard Bicycle Fancy Bicycle Smuggled

So, Prices are: Average Price of Standard Bicycle: Rs. 4700 Average Price of Fancy Bicycle: Rs. 8000

Average Price of Smuggled Bicycle: Rs: 10,000

Government Policies and Incentives:

There are some of the government policies which are related to bicycle industry in Pakistan. These include: 1. Material Constraint Government has pointed some of the specific vendors for purchasing the raw material only from them. 2. Labor Law Constraint Government has a rule: Not to fire the worker in any case without the proper documentation and with in a long period of time. And also the company should have to pay the wages even if the factory is not in the operations. Also if the worker is on leave so the company have to pay him/her half of its pay.

Some Findings:
Key Product: Mountain bike accounts for key product of retailers which sells the most and has many varieties. Most of the sales majorly 2/3 of the sales are mountain bikes now days. New Trends: Folding Bicycle is the new trend in the market. Customer demand is increasing day by day.
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Major Buyer: Most of the bicycle in Pakistan is purchased by Children age group 5 15. Brand Awareness: Customer is not aware of the brand name they only know Sohrab and Chinese rest sales are due to price factors or design. Discounts: Discount is given only on large cash purchase. It can account to 5% to 10% of selling price. Credit Sales: No credit sales for customers retailers its only between retailers and importers. Import/Exports: We import around 20,000 bicycles monthly and export is only done by Sohrab to Srilanka, Bangladesh and few countries in Africa. Assembling: Importing parts and assembling it locally is more expensive than importing assembled bicycle from China. Overall Market: Market for bicycles in Pakistan is stagnant it is not increasing nor decreasing but the retailers hope it will increase as this government will go.

Conclusion:
Bicycle Industry in Pakistan is fighting a war among itself to sustain. Nowadays it is facing threats from bicycles imported from China and Smuggled from USA.Standard Bicycles still is dominated by local players like Sohrab and Eagle. Bicycles with design like (Gear, Suspension, Mountain, Races) are dominated by Chinese companies. Due to changing trend and availability of Motorcycles demand for bicycles are not increasing it is showing only stagnant growth.