Hero Cycles to enter US by year-end

The world's largest bicycle maker, Hero Cycles,  on Monday said it plans to enter the US market by the end of this year, for which it is close to signing up with a local partner.

The company, which plans to not only sell to consumers directly but also supply to retail giant Walmart and departmental store chain Sears in the US, said it will invest up to Rs 35 crore (Rs 350 million) on a new plant in India to produce bicycles for the US market.

"At present we are focusing on products and distribution of bicycles for the US market. We are in the process of signing up with a local partner there," Hero Cycles Managing Director Pankaj Munjal said.

Hero Cycles products are currently sold in the US through third party distributors. The company is now looking at a more direct presence there.

"In the next two months, we expect to sign a contract with the US partner and start selling products by the end of the year," he said, without disclosing the name of the potential partner.

On the branding front, Munjal said the bicycle will not have the Hero badge. Instead, it will be marketed under the brand of the US firm, which will distribute the products.

"There will be a two-way approach for the US market. While we will also focus on the youth segment, we will go for institutional supplies to players like Walmart, Sears, etc," Munjal said.

The bicycles are likely to be priced between $200 and $800, he added.

In order to supply to the US market, Hero Cycles will set up a new plant in Punjab at an estimated investment of up to Rs 35 crore.

"The plant will have an annual capacity of 1,50,000 units in the first year of operations. Investment from Hero Cycles would be around Rs 30-35 crore (Rs 300-Rs 350 million), but other component suppliers will also put in money there, which is difficult to quantify at the moment," he added.

He said the company's investments would be through internal accruals. When the new plant goes onstream by April, 2011, Hero Cycles will have a total capacity of around six million units annually, Munjal said.

The company currently has two manufacturing plants at Ludhiana, in Punjab.