Overview of Indian Tyre Industry

The Rs. 20, 000 crore Indian Tyre Industry, is extremely raw material intense 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 where 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 good for replacement market, followed by 29. 8% sold to OEMs immediately and the remaining is exported.  Michelin Australia

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 part of the country. Certainly, international auto majors in India now roll away their vehicles using Native american indian made tyres.

Slowdown in automotive aftermarket and global economical generally speaking negatively affected 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 season. Demand side was also severely afflicted 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 minimizing the excise duty on tyres from 14% to 10% in December 08, and further to 8% in February 2009.

Elevating Cost of Raw Components: Ram materials generally consist of of natural rubber, a bit crude 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 price tag on production, combined with the manufacturers’ inability to pass on the increased cost to their customers due to strong competition, within prices of these materials have a big impact on profitability.

Elevating Radialization: Unlike in the developed countries, radialization has not yet reached their dominance in India. Specifically the truck, bus and LCV segments remain generally a cross ply structured. Despite offering higher usage, lower fuel consumption and improved safety, radial tires have not yet trapped on generally because of poor road conditions and high initial cost which is approximately 25% higher than bias tyres. Additionally, the two important organic 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. Since 08, radialization as a percent of total production in passenger car tyres, LCV and heavy vehicles was 95%, 12% and 3% respectively.

Off the Highway 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 perimeter. Increasing the proportion of OTR in the product mix is seen as a measure to enhance earnings.