Written by Akhlaqur Rahman Sachee & Susmita Bhatta

The bicycle industry in Bangladesh was historically local market oriented because people used to prefer bicycles to avoid traffic situations. However, after meeting the local market demand by producing quality bicycles while maintaining global standards, the industry has started exporting bicycles to other countries as well, and it has successfully positioned its name on the list of top-notch global suppliers. During the global pandemic, Bangladesh has experienced a surge in export orders for bicycles because of the facility they provide to travel around while keeping social distance and reaping the health benefits of physical exercise. As a result, Bangladesh now produces approximately 1.5 mln bicycles each year, and nearly 1 mln of them are exported to global markets. Bicycles, especially electric ones, are expected to be in high demand in the future as the world embraces more environmentally friendly modes of transportation. All these facts and figures indicate that this industry is an emerging export oriented industry which is experiencing a growth of 5% in export earnings every year.

Global Market Scenario

The bicycle industry has started to experience significant growth since 2011. By 2016, the market had grown to USD 45.6 bln from USD 40.2 bln. This occurred as a result of heavy traffic congestion, growing awareness regarding environmental issues, and the lower repair and maintenance cost of bicycles. In addition to that, the COVID-19 pandemic has triggered a demand for bicycles worldwide because people have started opting for bicycles as a convenient tool for physical exercise for health benefits. As a result, there was significant market expansion in the year 2020. The introduction of home delivery services by different businesses and increased e-commerce initiatives during the COVID-19 period are also the reasons why this sector started to gain remarkable growth.

According to Brandessence Market Research, the global market size was valued at USD 49.74 bln at the peak time of the COVID-19 pandemic. Research says the trend will continue, and the worldwide bicycle market is expected to reach USD 65.4 bln by the end of 2022. Also, it has been predicted that the industry will be valued at USD 70.10 bln by 2027, with a Compound Annual Growth Rate (CAGR) of 6.13 %.

The underlying factors of this optimistic projection are policy support, evolving bicycle fashion trends, and the expanding worldwide urbanization rate.

Electric bicycles are also becoming more popular as environmental and health concerns develop. The e-bike market is predicted to earn USD 53.53 bln in revenues by 2027, according to Statista, with a CAGR of around 12.27%. This is also one of the reasons why the global bicycle market is expected to grow by 6.13% over the forecast period.

Rise of Bicycle Manufacturing Industry in Bangladesh

European Union (EU) countries are the most bicycle friendly, explaining why 18 mln bicycles are sold there each year. 60% of the bicycles are manufactured domestically to meet this massive demand, while the rest are imported from other countries. Bicycles are in high demand in the United Kingdom, Germany, Spain, France, Italy, and the Netherlands, particularly. According to the Confederation of the European Bicycle Industry, during the course of 2020, bicycles worth EUR 18.3 bln or 22 mln units were sold across Europe. This spurred an unprecedented expansion of Europe’s bicycle production. Bicycles sold in Europe include road bicycles, hybrid bicycles, all-terrain bicycles, and electric bicycles. Electric bicycles are fast becoming the consumer’s preferred choice for greener e-mobility options. This resulted in a staggering 52% growth in revenues to EUR 10.6 bln in 2020.

Moreover, because of increased government support for bike-sharing infrastructure, Asia-Pacific countries’ bicycle markets reached USD 22.83 bln in 2019. The bicycle market in North America was valued at USD 11.9 bln and is predicted to increase at a 6.9% annual rate between 2022 and 2030.

Aside from the countries of Europe, Asia-Pacific, and North America, Bangladesh has quickly established itself in the global bicycle market by exporting bicycles, particularly to Europe, to meet global demand. As indicated in the graphs below, Bangladesh is currently the third-largest non- EU bicycle exporter.

Export receipts were USD 82.46 mln in the 2016-17 fiscal year, as demonstrated in the graph above. In the fiscal year 2017-18, the bicycle export industry earned USD 85 mln, representing a 3.97% increase over the previous fiscal year. As a result, bicycle export revenues accounted for 12% of the overall light engineering sector exports in FY 2017-18. There is a downward trend in the bicycle industry’s export performance from the fiscal year 2018-2019 to the fiscal year 2019-2020. However, due to COVID-19, a transition happened in the bicycle industry’s export performance in the fiscal year 2020–21 because manufacturers exported bicycles valued at approximately USD 130 mln, up to 50% growth from the previous year.

Major Market Players and Top Export Destinations

PRAN-RFL Duranta: Duranta Bike is the sister concern of the RFL group. It is one of the leading bicycle manufacturers and exporters in the country, having launched in 2015 with two plants in the Hobigonj district in the Sylhet division. These two factories are compliant with the world’s highest-tech mechanical component testing lab worldwide. One plant manufactures local products, while the other produces for export. More than 6,000 people work in factories that make 65% of the raw materials that are used to make bicycles that are exported.

Meghna Group: M & U Cycles Ltd., which manufactures bikes, is a sister business of the Meghna Group. It was started in 1982 in Gazipur, Dhaka. This company was the first to start exporting bicycles from Bangladesh. In their past 38 years of legacy in the bicycle industry, other major exporters entered this industry. However, Meghna Group, being the largest, exported more than 130,000 units of bicycles from January to June of the financial year 2021 while having a production capacity of 900,000 units. Currently, 600 or more people in the M & U Cycles industry operate 9 plants, with 2 dedicated to exports, 2 to meet local demand, and 5 to manufacture bicycle components.

Alita Bangladesh: This company was the first in Bangladesh to manufacture bicycles. It launched the country’s first export-oriented bicycle manufacturing factory in 1995, exporting only 1000 bicycles. Exporting became easier after 1997, and the value of exports reached USD 130 mln in FY 2020–21 and USD 140.71 mln in the first ten months of the current fiscal year. Its factory has the potential to create 2.40 lakh bicycles per year. Alita Bangladesh Limited invested USD 4.74 mln in the Chattogram EPZ area to build its plant. Two more factories were built with an additional investment of USD 5.92 mln.

Contribution to the Export Basket

Bangladesh’s industrial base is highly focused on RMG because more than 80% of exports come from this industry. However, this high concentration on one sector poses significant risks to the economy and the livelihoods of Bangladeshi workers. So, this emerging bicycle sector can mitigate the risks by accelerating the export growth and earnings because this will diversify the industrial production and, thus, the export basket of Bangladesh.

Challenges

Higher import duties are the main challenge in the bicycle industry because of the inability to build a backward linkage industry. As a result, import tariffs on various raw materials range from 10% to 25 per cent, with an average rate of 55% on brakes, gears, and chains. Since about 30–40% of the parts and raw materials like derailleur gears, known as cycle gears, are imported from China, India, Malaysia, Indonesia, and Vietnam, according to the Bangladesh Bicycle Merchant Assembling and Importers Association (BBMAIA) that import duty leads to a higher export price for the consumers.

As a result, several approaches should be taken, taking into account that they still have a long way to go in the domestic market, despite their strong export performance. To accomplish so, it will be necessary to bridge the gap between the domestic and export markets by cutting import tariffs while maintaining minimum quality standards for the domestic market. Moreover, bicycles have become more expensive and less competitive due to port congestion and delays in the supply of imported parts. So, investments in backward linkage industries in the light-engineering sectors are required.

The industry is classified as heavy industry, and so the manufacturing plants for this industry necessitate substantial investment. Furthermore, infrastructure problems and a lack of foreign investment must be addressed to accelerate growth in the industry. As a result, government policy support for this business is required. So, in addition to helping the industry with production and marketing, the right financial incentives must be set up with the help of the industry’s stakeholders in order to get a share of the overseas market.

If Bangladeshi manufacturers solve these challenges, their export market will expand beyond a few countries.

Prospects of the Bicycle Industry in Bangladesh

Bangladesh began exporting bicycles to the European market in 1999, and by the following year, the exports had reached a value of around USD 10 mln. Bicycle exports have increased to USD 130 mln after 22 years. After the import duty on raw materials is cut, the country is expected to generate around BDT 1,200– 1,500 crore from bicycle exports within a couple of years. Bangladesh has a competitive advantage over other countries in the bicycle manufacturing industry, such as Taiwan, China, and Europe, due to low labour costs. Increased wages in China, the world’s largest bicycle sourcing country, have shifted the focus of bicycle manufacturing to Bangladesh. As a result, this is an opportunity for us to explore the worldwide market and respond to its demand by adopting mandatory measures. Also, the government has just decided to grant a 4% financial incentive for the increase of bicycle exports. This assistance can help local manufacturers with the construction of manufacturing plants, reducing the need to import bicycles and other parts, which would promote the sector’s growth in the future as demand rises.