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How Neelam Cycles rode the market conditions to become country’s leading cycle brand

posted on 31st December 2018
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The brothers behind Neelam Cycles were quick on their feet to identify an opportunity to set up a cycle brand in the seventies.

Ludhiana-based Rajesh Seth recalls how his uncle and father took advantage of a sudden market development in 1970s to build a leading cycle brand called Neelam Cycles.

“God gives an opportunity to every person for growth. Sometime in late 70s, a behemoth cycle maker of the time, which held approximately 90 percent of the market share, decided to abandon its rickshaw manufacturing operations, because it considered that business to be too substandard,” says Rajesh, Joint Director of Neelam Cycles.

By the time the development occurred, Rajesh says that his uncle and father, who started as small traders of bicycle parts in Ludhiana in 1964, had already built a strong foundation in business. By 1979, the duo had a manufacturing unit in Ludhiana and were making bicycle parts for most of the established brands of the time.

Winds of change

But when they heard of the sudden development regarding cycles, and the subsequent gap created in the market by a behemoth’s exit, the duo decided to stop manufacturing for other cycle brands, and considered the moment to be opportune to enter the bicycle market with their own brand name.

“My dad and uncle had always dreamt to have a bicycle in their own brand name. But, in the start it was not possible. Once they gained the knowhow and accumulated sufficient capital, coupled with the gap created in the market by the giant’s exit, there was no stopping them in converting their dream into reality”, says Rajesh.

Today, the company has a production capacity of 4,000 bicycles per day, and claims to account for 90 percent of sales of manual rickshaws across the country. It exports to Africa, Bangladesh, Sri Lanka and is currently seeing a turnover of Rs 300 crore. The company also recently bagged a government order from Rajasthan for the supply of 15 lakh bicycles. Rajesh says,

“Our USP is our quality. We are the only company in India that makes all the eight major components of a bicycle. Unlike other renowned brands like Hero and Avon, we do not outsource our cycle’s parts. We manufacture them completely in our units.”

Entering the EV market

Recently, Neelam has also ventured into the electric vehicle (EV) market. It launched its e-rickshaws a year-and-a-half ago, and is currently producing 100 e-rickshaws per month. Taking stock of the sector’s potential, the company has bought a two-acre land dedicated to manufacturing of e-rickshaws, and shortly plans to launch other EVs like golf carts, e-scooters, and e-bikes under the same brand.

Although Neelam is seeing success in India, Rajesh feels that its growth abroad has remained stagnated owing to a number of factors. He says, “Apart from developing nations like ours, we cannot supply to many developed nations.” This is because there is a demand for advanced bicycles there, made of a different kind of material, and which is not available in India, he adds.

Steeling themselves against challenges

The other major challenge hindering Neelam’s growth is the prevalence of a near monopoly situation in the steel sector. Rajesh says, “Earlier, there were five major steel suppliers in the country. Now, there are only three.” In the last one year, the prices of steel have shot up by 40-50 percent, and the buyers have no choice but to buy at whatever prices the remaining few sell at, he adds.

With the consumption of 3,000-4,000 tonnes of steel per month, Neelam feels that there is an immediate need for a remedy to curtail the rising steel prices, which it feels are more fabricated and less reflective of the industrial scenario. Given that the customer segment of its rickshaws and bicycles belong to the lower rung of the society, Neelam’s sales have taken a hit due to rising steel prices.

On the lessons his father passed on about running a business, Rajesh says, “My dad told me to never compromise on quality even if they come at the expense of profits. He believed that the brunt of losses or declining profits in the business are short term. What pays in the long term is the commitment to quality.” We made sure to stick to it and it has paid off, Rajesh adds.

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