Atlas Cycles shuts shop, blames cheaper imports, higher cost and lack of working capital
On World Bicycle Day on June 3, Atlas Cycles, India’s second largest manufacturer, shut its last manufacturing unit, ostensibly because it did not have Rs 50 Cr as working capital. Believable?
On the UN designated World Bicycle Day, India’s second largest manufacturer of bicycles shut shop. Atlas Cycles had shut its other units earlier and the Sahibabad plant was the last to close down on June 3.
It had started operations from a tin shed in 1951 but the brand, named after the Greek Titan Atlas, condemned to hold up the celestial heaven for eternity, quickly became the largest bicycle brand in the country. It was the official supplier to the Asian games hosted by India in 1982.
But the company insists that it is not the end of the road. It in fact admitted that it had sought permission to sell part of its land bank to raise operational funds. In fact, a company spokesman claimed that its application for permission to sell the parcel of land will be heard by the NCLT on June 18 and that it had sought to sell a small parcel of land to raise just Rs 50 crore.
It is not clear why such permission was not sought earlier and why the company failed to sell the land of its units closed earlier to keep Sahibabad going. But the company spokesman claimed that since 2014 the company has been in dire straits and is unable to even buy the raw material needed. The Sahibabad plant, which has a capacity to manufacture four million bicycles a year, was working at less than 50 percent of its capacity, he said.
The employees are sceptical. “700 lives will be affected by this shutdown as 400 workers were directly employed by the company and 300 more were indirectly benefiting from the operations,” said Shyam Kumar (name changed). A security guard said that the closure was declared so suddenly and secretively that the notice caught everyone by surprise and the workers’ union had little time to react.
The company had shut down two units in 2014 and 2018. In December 2014, its Malanpur unit in Madhya Pradesh was closed down while it suspended manufacturing at its Sonipat unit in 2018.
Founded by Janki Das Kapoor in a modest production unit in Sonepat, Haryana, Atlas Cycle Industries Ltd then surprised many by producing 12000 bicycles within a year of its founding. The company started import by 1958 and by 1965 the Atlas had emerged as India’s largest cycle manufacturer.
Insiders claimed that while export of Indian bicycles to even neighbouring countries had come down to a trickle, import of cheaper parts from Bangladesh and Sri Lanka had flooded the Indian market, giving an advantage to late entrants with no supplier base but putting the older players like Atlas to a disadvantage.
A report released by the International Trade Centre (ITC) in 2019, imports of bicycle parts and components from Bangladesh were $24 million in 2011 and increased to $65 million in 2018. Similarly, imports of bicycle parts and components from Sri Lanka increased from $19.5 million in 2011 and reached to $32.3 million in 2018.
“The import duty on bicycles in India is zero under the Agreement on South Asia Free Trade Area (SAFTA), which provides duty-free access to Bangladesh and Sri Lanka bicycle manufacturers in the Indian market,” claimed the report.
“On the other hand, import duty in Bangladesh and Sri Lanka is 25 percent and 30 per cent respectively. High import duty helps Bangladesh and Sri Lanka to protect their bicycle industry,” added the report.
“What happened with the Atlas yesterday may happen with Hero or Avon or other manufacturers morrow,” said a bicycle dealer. Manufacturers in India believe that low-cost Chinese bicycle companies are routing their products, taking undue advantage of the preferential market under SAFTA.
They blame the lack of interest and protection extended by the Indian Government precipitating the crisis.