BUSINESS DRIVEN BY NEED SERIES
Bicycles - An Opportunity Created by Subsidy Removal
Take advantage of bad governance, while liberating our people.
Tues.March.26.2024 - Ubochi Nkwo
As the Nigerian people and our West African brothers adjust to the economic pains of Petroleum Motor Spirits (Fuel) Subsidy removal and its 380% rise in the cost of mobility, transportation and residential power generation, I am shocked that no one has seen the need to raise economic and enterprise solutions..
This is no insult for the likes of Innoson Motors that has implemented massive LPG and CNG conversions for cars and trucks, or the importers investing heavily in parts for such conversion, gas fuel tanks and Solar alternatives to home power systems.
I am however shocked at 2 missing pieces, which have to do with the massive economic opportunities presented. 1 is in the conversion to Diesel Fuel for Innercity mass transit and Interstate travel, this owning to the fact that Diesel fuel has long been "de-regulated" and as such the change in regular fuel prices makes Mass Transit Diesel vehicles economically competitive. The 2nd is Bicycle manufacturing, because the sheer economic Desperation of the West Africa experience, makes the human propulsion and self help of bicycles, a no brainer.
This article is focused on the idea, opportunity, justifications and implementation of Bicycle manufacturing in Nigeria.
I am shocked that this solution is not making news as such and just in case the wealthy in West Africa are too rich to understand the desperation or too confused as to where to start, let me answer the twin questions of Need and How, now.
THE NEED
Photo: Civil servants in Abuja waiting hopelessly for "common" public transportation.
Using Nigeria as a case study we have
established that at least 50% of the working
class earn less than A34.74 (₦50,000) a
month. These groups in core cities
including Abuja and Lagos spend on
average A13.90 (₦20,000) to get to work - a
shame to all of us that are private sector
employers and to the government as a
whole, Traditional, Local, State and Federal.
The need is simple. Most of these
employees, when their income levels are
taken into consideration can afford a A150
(N215,888) loan to have the ability to
own a high quality bicycle and be
responsible for their own movement. That
cost is about 6 months of transport cost
and once bought creates massive
independence and net savings that can be
converted to feeding, accommodations and other needs.
This A150 can buy an imported Chinese
bicycle and much less can buy a Used
bicycle but used bikes have maintenance
risks and imported Bicycles are an additional pressure on our much needed foreign trade balance.
Even still, the question becomes, why are the people not buying up bikes? The people are not buying up Bicycles because need and actions do not correlate without inducement or social engineering, and no Nigerian firm or African firm, has enough economic stake to induce actions on this very obvious need.
If a Nigerian firm, makes even an A10million
investment on Bicycle manufacturing, it can
set the cost of a brand new adult bicycle at
a meager A75 (N107,944). Such a company can also
integrate with employers to allow direct
deductions from Salaries, banks to ensure
micro credits and find other means to
establish an ease of Acquisition that is
Commiserate with the monthly
expenditures of the people, as they are.
Social acceptance of any initiative is not merely a matter of need but also a matter of social engineering. As such via advertisements, promotions and celebrity endorsements it can stimulate the market, but when it does, I am 100% sure that it cannot contain the demand.
The inherent need is not a factor of choice or interest but rather desperate necessity.
When a man spends his potential for a reasonable diet to get to work, there should be no difficulty in understanding that he would much rather work an extra 30 minutes by riding to work, in exchange for "Rice and Stew with a good size of Meat".
For those of us who still have the liberty of pride, this may seem like a tall order to sell to Nigerians and Africans, however this is madness when you consider their actual work. Gatemen, Receptions, Cleaners, Secretaries in 2 man offices etc., menial as their work is and lowly as their residential abodes are, I believe that pride is the least of their worries.
This may be hard for my Maitama, Ikoyi, Independence Layout business magnets to understand but the Nigerian working class is not too proud to ride a bike and even when they are, they are too hungry to pass up any hope of food, even if it means becoming a personal transport company.
HOW
Bike manufacturing in Nigeria can be
started for as little as A100,000
(₦143.93million), but I recommend at least A1million (₦1.44bn) and the ideal is at least A10million (₦14.4bn). If the solution is not
presented in the next 1 year, I will enter with
at least a A50million investment (₦72billion).
An investment of up to A100million is the best point of attack, that makes Chinese and Korean imports uncompetitive.
The first thing is to understand that 90% of the bicycle is "tube pipes" , as such the smart manufacturer will start with imported pipes and circumvent import duty on finished bikes, shipping costs and expensive foreign labour.
At scale this will produce bicycles at 90% of
the cost of Chinese and Korean bikes and
can allow a Subsidized sale through
employers. With this the sales costs can match
imported brands but the product can still be sold on loan without interest as the additional 10%
margin covers any default risks and interests and allows the delayed
mode of payment to still maintain
profitability. (Note that this is modeled on a 6-12months pay cycle).
At this stage the manufacturer will purchase pipes, paints and fittings and input value in the guise of metal works and labour.
This can be done with only A100,000
(₦143.93million).
The next step up is in the smelting of pipes
from recycled steel, or the local
manufacturing of paints, or plastic
components and/or fittings like the chain
drives. This for an investor building with up
to A1million will drive costs down by at
least 20%.
The ideal where an investor is Inputting up
to A10million is genuine manufacturing
where you can scale to producing up to
1million bicycle units per year. At such
scale, you can source your pipes and
fittings from any producer world wide and
achieve the best economies of scale, your
focus should be on 1. warehousing capacity
for seasonal purchasing of materials in line
with international fluctuations in cost, 2. maximum production in line with extreme
production line efficiencies and 3. distribution, to include social branding of your products
and "the Bicycle" as a whole, as an alternative mode of transport and a native lifestyle component overall. Think Dole and the Cavendish Banana.
In this case a total savings from foreign imports of up to 50% is possible, because most of the local recycle suppliers who now focus on building rods, will gladly adjust to supply you.
Where money is no object, or where I to directly venture into it due to your absence, we will
invest A100 million dollars to develop the
world's premier "value" bike brand, right here
in Nigeria.
How is that possible?
Because the nascent position of the market means that Africa houses less bicycles now that it did in 1980.
When I was growing up a bicycle was the best gift on a child's list and the elders used "Long Johns" for movement, haulage and trade. Today the Okada motorcycle has replaced the trade remit, covered small haulage but it fails to be a suitable means for rural transport due to the fragmented and separated nature of rural communities. It also cannot replace the joy of childhood, if we reconnect our children to the pleasures of cruising "round the town" and when aided by the economic incentive of its subsidy on the pains of subsidy removal with its attendant pressures on transport cost, it becomes a strong alternative to every other means for personal haulage, short haul trading and all forms of independent mobility within a 5km range.
This creates a market in Nigeria of
20-40million units and in Africa of up to
200million units. It far outstrips volumes for
Cars, Commercial Vehicles and Motorcycles.
The missing piece is the "cool" factor and
with a A100million investment we will have
the capacity to produce for global
competitiveness and make the price of
Acquisition low. We will also have the ability
to independently finance the social
engineering required to make the concept
of biking, a lifestyle in Africa, again
Why I would suggest this mass of investment for those who can afford it is simple. The market is open yet no one cares to carry initials risks on Africans, however, the second you move in and succeed they will move in to take the cake. As such a suitable investment is one that creates and also Seizes the market. In that case others can enter but your own place and investments will be secure.
A key to this is that however you enter and regardless of your volume of investment you must have a story behind you, a passion for the people or cycling in order to build a brand that is "loved", if you cannot scale to build an optimized, scaled and efficient concern, that is "needed" on the basis of mass production and its resulting price and value correlations.
WHAT IS NEEDED
One of the reasons why I was forced to start Vision 1960, is the lack of eco-systems for advanced business development in Africa. Also since we cannot depend on our governments to aid the development of eco-systems, we must factor eco-systems into every business we do.
In building out a bicycle culture that will support the speed of adoption necessary to support local manufacturing, I propose the following. It is important to note that you do not have to do them all but as you build out your manufacturing capacity, you must find ways to encourage the society, partners and associates to participate in these areas, and in relation to their own advantages and mutual benefits. Even charities and organizations to which you belong have a role to play but often need your passion to imagine and drive the programs through.
Step 1: Bicycle Manufacturing
Step 2: Cost Reduction and Financing
Step 3: Bike Rental Services
Step 4: Bike Parking Systems
Step 5: Regulatory and Traffic Corporation
Step 6: Bike Culture
Step 7: Competitions and Social Programming (Occurs simultaneously with all other steps)BICYCLE MANUFACTURING
While all of the above can be achieved with imported Bicycles, it is a sign of African aided self submission to slavery for us to continue to "nurture" or own markets onbehalf of others.
As such the starting line is for Nigerian and African Brands to start Bicycle manufacturing in Nigeria and Africa.
I am intentional in the word "brand". We must build brands.
We must start with true manufacturing where the designs, development and production is an African concern that modifies the process to suit our peculiar advantages like cheap manual labour, access to recycle materials and ready advantages in components like Rubber and Plastics.
A good manufacturing outfit should be able to retrofit its bicycles from the most readily available pipes and tubes already available from imports and to dynamically adopt changes that enable it to aid supporting enterprises and suppliers, providing them a stable customer in exchange for reliable suppliers and ever growing discounts on the core inputs of Bicycle manufacturing.
COST REDUCTION AND FINANCING
The easiest consumer base for Bicycles in Nigeria and Africa are rural dwellers and entry level, unskilled labour.
These groups are also financially hamstrung and not often able to make bulk investments. As such it is important that any producers of Bicycles find ways to directly or indirectly reduce the cost of acquizition, be it through scale economics, component production or other market and manufacturing based ways of bringing down the cost.
Another way of achieving this is financial partnerships with financial institutions, corporate organizations, governments and formal enterprises to enable the subsidy and financing of Bicycles, such that the working class can acquire the Bicycles with minimal deposits and with the natural cost of Taxi and Bus travel, pay off the balances month to month as a natural cost of transport that is equal and at best, below their traditional costs of transport to work.
If this is achieved the uptake will increase by at least 20-30% because need will justify the sacrifice and the savings will propel the intelligent working class to take up cycling as a pragmatic solution to their transport imposed economic woes.
BIKE RENTAL SERVICES
For the city dweller, one of the key needs of transport are errands while at work or in the office. The growth of rental services would mean that even where someone is not biking to work, he or she can take a bike from the office complex, commercial area etc., and bike to a need, returning the bike as a natural part of coming back to the office.
A perfect example would be a bicycle service at the Federal and State Government Secretariats and Head Offices of Major Corporations where the staff can pick a bike for a fee to make lunch runs, nearby meetings etc.
For those who will say this will not work, you are the reason we are stuck, have you tried it? How exactly is this your theory that Africa cannot lead the world in "best ideas" helping the African?
Others will not understand how important such a system is because they are absolved of the drastic economic pains in the country, but if your concern is security, let me solve that.
1st of all if the services are being provided in collaboration with major offices and employers, they will have records of employees and the employees would not dare risk unemployment for the gift of a bicycle. In addition modern technology allows that Bike rentals and drop-offs can be tracked by mobile and web applications. The bicycles themselves can be equipped with cheap trackers and in general the branding of the product can create safe guards for movements beyond their target neighborhoods.
In addition the rental services can collaborate with traditional high traffic points like Supermarkets, Markets and Malls to ensure accommodations in their parking lots and even a full proliferation of the service that allows drop of, pickup and rental such that a trip can start from any point in the chain and end at any point - for a commensurate fee.
This is ofcourse a little more complicated than I have put it but the point is that as a manufacturer, you must take responsibility for aiding all developments that will further the uptake of your goods and services. This can mean a direct investment in Bicycle rental services, even if you only do it to inspire and then exit the business, it can also mean partnering with others or investing in startups that move in this direction. In the end benefits will accrue to your main investments in Bicycle manufacturing.
BIKE PARKING SYSTEM
The bicycle security question is a big one, not just for rental services but even for users. Locking a bicycle tire is not sufficient security in a city due to its light weight and high value, as such measures must be taken to encourage biking from the angle of bicycle security and it must not be left for government.
A simple solution is the introduction of bicycle holding spaces in Supermarkets, Malls and other mass population centers. Offices can house even simple poles with the ability to accept a bike lock. These are not difficult or expensive measures and when weighed with the morale boost to employees and visitors, it is a great addition to any business or commercial establishment.
Again, it should fall on the manufacturers to initiate the acceptance of such ideas and encourage their proliferation, by hook or crook.
A key point where this is ideal is secondary schools. Many parents are forced to withdraw their children from school on the basis of distance, schools they love but which now due to the Subsidy removal is too expensive in terms of transport.
These children will prefer to ride a bicycle to school and keep their friends, than to shift to a new school and start to build a new life. In this guise, the smart manufacturer will use Secondary schools as a gateway, Aiding the development of parking structures and systems in schools and finding innovative financing schemes that incorporate the schools and students.
REGULATORY AND TRAFFIC CORPORATION
Ofcourse much of Africa is not designed for bicycles, are they however even designed for cars or walking - as such this is not an excuse for failing to manufacture bicycles in Africa.
For cities like Abuja, Enugu, Accra, Nairobi, sidewalks exist that will allow the bicycle rider complete seperation from road traffic but there must still be further education of motorists, bicyclists and the walking public on agreed codes of conduct.
Furthermore, cities like Lagos where the road standards are inconsistent may form a challenge, but again bicycles are not ideal for mega commutes as such the rider should know the neighbourhood. In either case the bicycle manufacture must consider the political possibilities in a country that bans and unbans everything, he must help to set health and safety standards, road rules, production standards and the acceptance of the driving and walking public of their new found middle - the bike riders.
BIKE CULTURE
Probably more important than all of the above is Bike Culture.
It must become a normal thing to Bike, in order for bicycle uptake to hit its maximum threshold. This is not about a "cool factor" but the conscious tooling of mass adoption such that across the Rich, the Poor and the Middle, Transport, Sport and Leisure, there are reasons and conditions for cycling at all points.
Bike culture in the villages, is as simple as access, because here need outstrips the luxury of class. Even where people have the economic means for public transportation their distance from the village center makes it a necessity to have a minimal means of moving around for light errands and timebound Emergencies. The motorcycle has been the solution, with even Junior Secondary School students owning them but with the removal of fuel Subsidy Motorcycles are now less attractive.
The main task in the city is getting enough people to ride, If you succeed in making it a trend in any city, sit back and watch the sheer power of duplicity do the rest.
For the city, Bike Culture is about ensuring volume and acceptance across Social tiers such that riding a bike in itself is not a means of identifying class and yet styles, brands and features can allow the "cool kids" to show off and enough social accent that "the rich also bike".
COMPETITIONS AND SOCIAL PROGRAMMING
90% of what our people do, is driven by economic and leisure Imperatives. Sport intersect these 2 spaces perfectly. Competitions must be developed around cycling, giving it economic yield incentives, social memorial and the star power for mass adoption founded on sound social programming.
The introduction of competitions is also a massive brand building opportunity, that allows the bicycle manufacturers to sample their wares in extreme conditions and prove the quality of their brand, it is also a marketing opportunity not just for the brand but further for cycling as a whole, which has a general benefit on sales regardless of any direct brand connectivity.
At the heart of viability of bicycle manufacturing in Nigeria and Africa is the supporting volumes in demand that justify the scale economics necessary to compete with Asian suppliers. Competition and Sports is the greatest platform for achieving such monumental uptake.
IN SUMMARY
Yes, all of what I mentioned means a lot of
work, but is there anything in life that is not
work. Even the looters of our treasury work
hard to fool us. If you must work hard, why
not for our people and the good name of a
brand, that helps them survive.
Take it or leave it, our people need an alternative to the fuel burn that costs them good meals. The bicycle allows them to work a little hard and keep cash for food. If you cannot see the value, your been rich for too long. The base reality of the lives or our people is that percieved comforts of sharing a seat with 5 people in a 3 person bus row is much more painful, that the energy expended, driving oneself to work, in an open air vehicle, articulated by human propulsion.
The question isn't need or opportunity, the question is, "who is going to build it", you or me?
Glossary
CONCEPT
THE RAW NAKED TRUTH
this is a syndicated Article Released Every Friday and taking an Unbiased Approach to unraveling the implications of the weeks leading events to the Lifes of My People.
Read with an open mind...
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