The small Bulgarian town of Loukovit could soon look a bit more like Amsterdam if the town’s 11 000 residents follow the advice of mayor Petar Ninchev and turn to bicycles because of the global financial crisis. Ninchev’s arguments are two-fold – first, it would help households save money on fuel and then there is the health benefit.
Ninchev is not alone.

The Bicycle Association of Great Britain recently forecast that the number of Britons commuting by bike will rise by 3.3 million this year and the distance travelled by bikes will increase by 40 per cent.

Two faces of crisis
The global slump is a mixed blessing for bike producers and retailers in Bulgaria. "On one hand, the global demand for bicycles is indeed on the rise, but the crisis has had its impact.

Orders from new customers have managed to compensate for the loss of bankrupt clients and those facing uncertain times," the manager of Plovdiv-based bicycle maker Lider 96, Dimitar Zlatanov, said. "The biggest drawbacks are the high exchange rate of the US dollar, harder access to loans and late payments from our customers."

Dragomir Kouzov of Velomania said the inability to borrow from banks has cut into producers’ ability to buy components from abroad, with rising costs being another drawback. The rise of oil prices in 2008 boosted Bulgarian exports to Western Europe, but at the same time the high prices of metals in 2008 and the high interest payments on loans this year has pushed the cost of assembling a bike higher.

"On top of that, some of our customers in the European Union are having a hard time getting a loan and financing imports," Kouzov said. Bulgarian bike exports fell by 10-15 per cent in the last quarter of 2008, he said, but have been offset this year by an increase of 25-30 per cent in the sales of bicycles domestically.

According to Darina Todorova, commercial director at Balkanvelo, the industry has not been affected much by the global economic crisis. The Lovech-based firm has seen its sales in Bulgaria drop 20 per cent, but that was compensated by rising orders from European customers.

"Many people in European countries with a well-developed bicycle infrastructure are realistically turning to bikes as their main means of transport in this crisis, which is why we are keeping our production capacity unchanged in 2009 and making the same number of bikes as last year," Todorova said.

Change of concept
Lider 96 made about 55 000 bicycles so far this year, the same as in 2008, worth about nine million leva, an increase of 30 per cent in value. Montana-based Kros made last year 150 000 bikes, 40 000 less than in 2007, but its sales revenue remained unchanged at about 30 million leva. The change is not incidental, but intentional.

"Bulgaria is no longer a country making cheap bikes," Kros commercial director Stefan Ivanov said. "We are no longer focusing on the low end of the market because customers are looking at mid-range bicycles," he said. That means bikes that sell for between 200 and 1000 euro.

Bulgarian companies are also looking for new opportunities for growth. In 2008, Balkanvelo joined a project for rental bikes launched by several Spanish municipalities. The city halls build bicycle "parking lots" in key transport nodes, where customers can rent a bike for a small charge and then return it at the same "parking lot" or another of its kind.

"These types of ‘communal’ bicycles are very different from conventional bicycles for individual use," Todorova said. All parts come with additional protection against theft or being taken apart and are also a lot more damage-resistant. Balkanvelo plans to expand its production line to meet demand for new kinds of spare parts.

"Despite the crisis, we are still investing in new production because we believe that by expanding our production functions we become more competitive. Pure assembly lines will not be enough to keep our market share," Todorova said.

In Montana, Kros is experimenting with fitting lithium-ion batteries onto bicycles. Kros expects to sell about 1500 bikes of this type in The Netherlands, where they would retail for more than 1400 euro.

Velomania is also banking on demand for more expensive and better-designed bikes, with Dragomir Kouzov saying that he expected demand for urban bikes to increase in the near future.

Bulgarian bikes
Six companies in Bulgaria assemble bicycles: Kros, Lider 96, Velomania, Balkanvelo, Blagoevgrad-based Robifir Bike and Maxcom in Plovdiv. The six companies assembled, according to preliminary data, about 500 000 bikes in 2008, most of them for export.

The industry union expects both production and demand to rise despite the crisis.
German consultancy firm Lokal Global forecast in 2007 that by the end of 2010, Bulgaria would be making one million bikes annually. Now that forecast looks unlikely to be validated, but production will nevertheless continue to grow.

Maxcom launched at the end of 2007 a new production line, with an annual capacity for 500 000 bikes, which makes it one of the biggest bicycle makers in Europe. Lider 96 has a production capacity of 150 000 bikes after investing three million leva in expansion.

Kapital weekly, issue 16