Special report: Tapping the Market for Quality Bicycles in Africa

Posted: 01 Dec 2005

Related to: California Bike Project, Strengthening Bicycle and Rickshaw Industries,
Contributed by: Aimee Gauthier and Walter Hook, ITDP

Corporate executives previously dismissed Africa as a serious market, until sales for cell phones and other goods exploded. Higher quality, utilitarian bikes like the California Bike could be the next big thing.

Most people in Africa are written off as too poor to afford most consumer goods, especially quality goods and services. But recent developments in markets like telecommunications show otherwise.

In the United Kingdom, it took 20 years for subscriptions to mobile phones to overtake fixed line services. In Tanzania, it took four years. ITDP’s recent success in the California Bike project provides compelling evidence that the market for better quality bicycles in Africa is also ripe for private sector investment.

In the absence of other transportation options, people in rural Africa need a robust, affordable bicycle that requires minimal maintenance. In urban areas, customers want a bicycle with some style and some gears, and they are ready to pay more to get it.

ITDP created the California Bike in 2003 to test these markets. ITDP’s technical team, working in partnership with Trek and Sram, developed the six-speed “California Bike – Los Angeles” for this market niche.  The production was competitively bid and the Giant factory in Shanghai won the tender because it had a reputation for high quality.

Today, 2,213 California Bikes have been sold in Tanzania, South Africa, Ghana, and Senegal through 35 local independent bicycle retailers that make up the California Bike Coalition.
ITDP has recovered all of its $144,000 initial investment, and with the money recovered, ordered six more containers.  The bikes are retailing from between $80 and $120 depending on tariffs and value added taxes, averaging around $100.

At this price, it is one of the most expensive bicycles widely available in Sub-Saharan Africa outside of South Africa, but it costs 25% less than any bike available of equivalent quality. For the first time, the African consumer has a brand name it can trust at a price it can afford. ITDP is now expanding the CBC project to introduce a one-speed bike for rural use, and to include spares and accessories to allow for product and services diversification within the Coalition.

Ghana is buying more bicycles per capita than China.

World bicycle production has doubled in the last 25 years, and today sales are over 100 million annually—more than twice the number of automobiles sold on a per unit basis. The growth market in the 21st century will be the four billion people in the developing world that make up 80% of the world’s population. The automobile industry is already acting on a marketing strategy with this in mind.

Bike sales are mainly a function of per capita income, though the level of bicycle use for both recreational and utilitarian cycling is the next most important factor. Countries above the trend line (see Graph “Influence of Income on Bike Sales”) tend to use bicycles for commuting and utilitarian use, while those below tend to use bicycles for recreation and sport.
Much of Anglophone Africa (Kenya, Tanzania, Ghana) is buying more bikes than would be predicted based on their income levels. In fact, Ghana is buying more bicycles per capita than China.

The strategy for the California Bike Coalition in the next five years is to target countries that are growing the fastest, have the highest existing bike use and sales, and have the lowest tariffs.
Based on ITDP’s analysis, annual sales by the Sub-Saharan Africa bicycle industry could reach $1.5 billion by 2020 from the current market of about $276 million.  The market in the projected Phase I CBC countries should increase from an industry with roughly $64.5 million in annual sales to some $369 million by 2020.

As these countries take off, African cities find themselves at a critical crossroads. They will either become automobile dependent cities or bicycle-friendly cities. The automobile industry has already noticed that Africa is a market to take seriously, and cars are flooding into African cities. Ultimately, cycling in Africa will only survive if a dynamic private sector industry exists there to support it.