Hero Cycles acquires 48% stake in Germany’s HNF Nicolai

Already the world’s largest bike maker by volume, Hero Cycles has continued its pursuit of external investments by taking a 48% investment in HNF Nicolai.

HNF Nicolai’s business is the merged title covering HNF Heisenberg and Nicolai, a coming together that took place in February of 2018 and that resulted in the relocation of Nicolai’s production. The two operate as separate businesses, however.

The lesser known side (in the UK, at least) is the electric bike specialist formerly known as HNF Hesienberg. This label services the market with a handful of all terrain and urban electric bikes, each of which carries a Bosch drive system. It is this business that Hero Cycles appears to value most as part of the investment.

The plan appears to for Hero to manufacture its electric bike components in India and then utilise HNF’s plant in Germany for final assembly. A seven day shipping lead time is apparently expected between the countries.

HNF has been manufacturing electric bikes for around seven years already, with the founders Michael Hecken, Karl Nicolai and Benjamin Borries handling business. The deal inked this week will “give the benefits of Indian cost structure,” said Hero.

Though details of Hero Cycles’ investment are light, it is hoped that the transaction could be worth around €100 million per annum to the Indian bike giant.

CEO of Hero Cycles Pankaj Munjal told press in the region: “The European market is big and growing. The market there is very predictable. HNF is the entry point as we have gone from India to Germany. In the future we may also cater to other countries from there (Germany).

“We are now looking to invest in Europe. We are looking and searching for more and more partnerships in the components space, as well as on the supplier side,” he added.

As was alluded to some time ago in an interview with CI.N, Munjal says this is unlikely to be the last investment in Europe. In the UK the bike giant acquired Avocet Sports, adding a Manchester design centre from which many of Hero’s key bikes are drawn up.

Hero Cycles manufacturers around 19,000 bikes and e-Bikes every day, meaning that by volume it has overtaken Giant as the world’s largest bike maker. Annual output sits at around 5.3 million units.

The Hero Motor Group’s turnover stands at around Rs 3,500 crore, a figure Munjal speaks of doubling in just two and a half years from now.

Speaking to CI.N in 2017, Munjal suggested that the firm’s goal is to produce 8% of the world’s bikes with the help of a new Cycle Valley that the firm has spearheaded in India.

Domestically Hero has sought to develop the cycling market to bring many above the poverty line an into work, yet the market for higher priced electric bikes is minuscule. According to Munjal, there is potential, particularly in terms of electric cargo bikes as part of the logistics picture.