The Rs. 20, 000 crore Indian Tyre Industry, is extremely raw material rigorous and predominantly a Mix Ply (or Bias) tyre manufacturing industry. It produces all categories of tires, except Snow Tyres and Aero Tyre for which there is no demand domestically. Indian tyre industry is extremely concentrated in which 10 large manufacturers accounts for over 95% of the total tonnage development of 11. 35 lakh M. T. On an average, 55% of the production is made for replacement market, followed by 29. 8% sold to OEMs immediately and the remaining is exported.
Over the years, tyre manufacturers allow us a vast marketing network using dealers and depots and thus all types of tires are now easily obtainable even in the remotest spot of the country. Without a doubt, international auto majors in India now roll away their vehicles using Native american indian created tyres. find out more
Slowdown in automotive aftermarket and global monetary generally speaking negatively influenced the Indian tyre industry in 2009. The industry tonnage growth was only 2. 19% during first nine months of FY09, compared to 7. 38% growth experienced during the same period last yr. Demand side was also severely damaged as almost all auto manufacturers were forced to adapt their production last year. A major relief for tyre manufacturers was provided by the government by lowering the excise duty on tyres from 14% to 10% in December 08, and further to 8% in February 2009.
Elevating Cost of Raw Elements: Ram materials generally consist of of natural rubber, raw and steel based materials which have historically experienced volatility in prices, especially during the last few months when price of domestic natural rubber increased almost 40%. Given the fact that raw materials constitute around 70% of the expense of production, combined with the manufacturers’ inability to pass on the increased cost to their customers due to powerful competition, within prices of these materials have a big impact on profitability.
Raising Radialization: Unlike in the developed countries, radialization has not yet reached it is dominance in India. Especially the truck, bus and LCV segments keep on being generally a cross ply established. Despite offering higher miles, lower fuel consumption and improved safety, radial tires have not yet captured on generally because of poor road conditions and high initial cost which is approximately 25% higher than bias tyres. Additionally, the two important uncooked materials required for producing radial tyres (Steel Tyre Cord and Polyester Tyre Cord) are not made domestically. Moving towards radialization will be essential if tyre producers want to protect their share in international markets. By 08, radialization as a percent of total production in passenger car tyres, LCV and heavy vehicles was 95%, 12% and 3% respectively.
Off the Street Tyres: Last year observed the top manufacturers, including CEAT and JK Tires increasing their capacity of OTR (Off the Road) tyre production. OTR tires are custom-made tyres and provide relatively higher border. Increasing the proportion of OTR in the product mix is seen as a measure to further improve success.
Increased Dumping: Besides materials price fluctuations and shortage of radialization, the industry is also suffering powerful competition from low costed tyres from China and other South East Asian kitchenware countries. Despite being of an improved quality, Indian created tyres loose ground when it comes to costs. Moreover, slowing automotive demand from developed countries has made India a rewarding market for less tires, thus resulting in increased dumping of cheap tires supply by china company.
Retreading: Another area of concern for the tyre manufacturers is the increasing retreading, where worn away tread of the tyre is replaced with a brand new tread. Retreading costs roughly 20% of a new tyre and is therefore gaining popularity, specially in The southern part of part of the country. Elgi Tyres and Stand Ltd are the two major retreaders in India. Significance of such retreaders can be gauged by the fact that around 85% of the tyre demand is for alternative.
Unresolved Tax Issue: The void of inverted tax structure, whereby the import duty on natural rubber is twenty percent but import duty on finished tyres is as low as 10% still remains unaddressed. Operational ineffectiveness and taxation issues have being denting the competition of Indian tyres.
Global Expansion: Several manufacturers are now moving global and are preparing manufacturing angles overseas. After acquiring Dunlop three years ago, Apollo Tyres recently acquired Vredetein Banden in Europe. JK Tyres acquired Tornel, a Mexican company recently to penetrate into American tyre market.
Despite these issues, according to CARE Exploration, while the industry may register a tonnage regarding only 4. 27% in FY09, the permanent possible appears to be bright. They expect the industry to experience a CAGR of roughly 8. 21% between FY08 to FY13. Automotive companies have started experiencing increasing sales and raw materials prices are stabilizing which will boost tyre sales over the coming several weeks. Nevertheless , experts suggest there will be a little while separation before profitability covers as tyre manufacturers continue to be transporting high cost inventories.