Financial Daily from THE HINDU group of publications
Thursday, Aug 08, 2002
Alliances & Joint Ventures
Japan co to outsource from Hero Cycles
Mr Brijmohan Lall Munjal
NEW DELHI, Aug. 7
HERO Cycles, the world's largest bicycle maker, today announced a strategic tie-up with Japan's National Bicycle Industries (NBI) to produce high-end cycles for exports.
NBI, part of Matsushita Electric, which owns the brands National and Panasonic, will initially outsource three lakh cycles from Hero.
The cycles would be manufactured at the Rs 30-crore facility being set up in Ludhiana, top company officials said here.
"In five years, we will manufacture five lakh cycles for NBI from this facility," said Mr Brij Mohan Lall Munjal, Chairman of Hero Group.
The bicycles would be exported to Japan and European countries under the NBI brand, he said, adding that in India, they would be sold under the `Hero' name.
"This tie-up will not only give us international recognition in the high-end bicycle market, but also significantly strengthen our technical expertise. This combination will thereby give Hero Cycles a competitive edge and open doors for other lucrative exports markets such as the US," said Mr O.P. Munjal, Co-Chairman of Hero Cycles.
To begin with, Hero Cycles will produce basic commuter and children's bicycles before moving onto the high-end products in a phased manner.
Mr Munjal said NBI decided to align with Hero Cycles to take advantage of the low-cost production in India.
"They could not have made cycles at our prices," he said.
Hero Cycles plans to invest another Rs 20 crore in the new facility in the next two years to expand capacities for catering to other export markets and also to the domestic market.
Asked whether the current agreement would lead to NBI making equity investments in the venture, Mr Munjal said: "We are going to watch how it will shape up."
Established in 1956, Hero Cycles today has nearly a 50 per cent market share in India's over 12-million bicycle market, the second in the world.
The company exports cycles worth Rs 120 crore annually to a number of markets.
As much as 30 per cent of Hero's exports go to the US and Europe.
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