The Economist Intelligence Units Ltd.

Prospectus for Bicycle Manufacture

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Report
Eastern Caribbean and British Honduras Industrial Survey
August 1972

The Economist Intelligence Unit Ltd.
Spencer House 27 St. James's Place London SW1A 1NT
Telephone 01-493 6711

Excerpt from: Bicycle Reference Manual for Developing Countries. Edited by Barbara Gruehl Kipke, April 1991.

This Survey has been prepared for the Caribbean Development Bank under contract with the International Bank for Reconstruction and Development acting as Executing Agency for the United Nations Development Programme.

The views and recommendations contained in the report are those of the EIU rather than those of the IBRD or CDB. The CDB is responsible for the release and distribution of the

The Market for Bicycles in The CARIFTA Region

A survey of bicycle imports into the CARIFTA region shows that the sales of bicycles In 1967 (the latest year for which regional figures are available) stood at approximately 23,500 units. Import statistics are somewhat incomplete, but by 1969 imports had probably risen to 25,000 unite. By 1972, the E.I.U. estimates that the market is probably 27,000 unite. Of this total, Guyana probably accounts for about 30 per cent, Trinidad about 25 per cent, Jamaica for about 15 per cent, Barbados and British Honduras for approximately 10 per cent each. The remainder of the islands together probably account for less than 10 per cent of the total.

The vast majority of the imported bicycles are manufactured by Raliegh Induitries Limited under one of their proprietary brand names, Raleigh, Rudge, Philips, etc. Of these imports, the majority (80 per cent) are made up of the standard women's or men's roadster models. Smaller quantities of children's cycles, small wheel cycles, racing cycles or "chopper" bicycles are imported. It is felt that the growth in the market is likely to come through increased sales of children's bicycles.

Bicycles are presently imported Into the region in "knocked downs" form. That is to say the bicycle is imported in parts including the frame complete, handlebars, chain sets and pedals, wheel rims and spokes, hubs, saddle, brake sets and accessories. The importer, who is also the retailer, assembles the bicycle from this state, including the assembly of the wheels.

The breakdown of cost of the standard roadster machine is shown below.

The importer will usually mark up this figure by about 25 per cent - 30 per cent to obtain the retail selling price of about E.C. $144 - $150.

It can be seen that the market is highly fragmented. Even in some of the more developed areas where there will be more than one importer, sales per month are generally low. Sales increase in December when the Christmas trade is boosted by the demand particularly for children's bicycles.

All told, there are 5 basic types of machine, each of which will have a number of size or styles as illustrated below.

Any local manufacturiog plant in the Survey Area should, it is thought, concentrate initially upon the production of the standard men'a roadster machine. In the project profile which follows a production capacity of 12, 000 bicycles has been assumed. This will account for approximately 50 per cent of the market for this type of machine. It the required sales penetration is obtained, it would always be possible at a later date to diversify into the other types and styles once the approximate production expertise in bicycle manufacture had been acquired.

This problem of sales penetration should not be under-estimated. It is beyond the scope of this profile to determine the sales resistance which this project would meet. Over the years Raleigh have established a very good product image. In order to advertise the products and set up marketing links the E.l.U. has included in the cost profile an item to cover advertising and promotion at 10 per cent of sales turnover. The product is likely still to need a price advantage over the imported article to overcome consumer (and dealer) resistance.

Presently because of the rather large number of types, styles and sizes of bicycle being sold, it is found that importers usually carry substantial imventories of machines. The minimum order quantity from the manufacturer Is usually 5 machines of each type, style, size and colour. However, in this profile the E.I.U. has evaluated the manufacture of the most common type of bicycle which is required. Thus the local enterprise, as conceived, would not be able initially to offer the retailer the advantage of being able to buy the fail range of bicycles from one local supplier until the manufacture of a wider range of bicycles was adopted.

Additional Bicycle Manufacturing Stages Which Could be Undertaken

The existing local assembly of bicycles does not include various aspects of the manufacturing process, namely the production of the frames, mudguards,handlebars saddles, pedals, chain sete and hubs. In the case of the latter three items, even Raleigh Industries Ltd. do not attempt their own manufacture, but purchase their supplies from a German manufacturer. The volumes of production considered in this project do not justify the production of saddles and handlebars. In the case of the latter, an extremely expensive electroplating operation is involved which precludes the possibility of local production. Thus the only additional manufacturing stage which may be contemplated is the local production of frames. For this the tubing required would be bought already cut to size and ready to assemble.

In the longer run the plant might extend to include the production of bicycle baskets, shopping trailers and other accessories.