Indian Tyre Industry

Indian tyre industry is on a brink of major structural change

Domestic tyre industry has witnessed a remarkable recovery in FY10, after a slowdown in FY09. This growth was driven by strong revival in automobile demand on the back of resurgence in economy, rise in employment levels, and easing of interest rate scenario. Although strong demand growth is an encouraging scenario for the domestic industry, rising imports has become key concern factor off-late. Conservative estimates of tyre manufactures on automobile demand scenario for FY10, led to supply constraints in the industry and in-turn pushing imports. The situation was graver in T&B and passenger car category tyres as compared to any other category. However, gauging the immense market potential almost all the major manufacturers have announced aggressive expansion plans for next 4 – 5 years which is expected to ease out the supply constraint situation in the industry.

The tyre industry is on a brink of a major structural change. T&B which is a dominant segment in terms of tonnage is witnessing a gradual rise in the proportion of radial tyres. Going by the global trend it seems that the radial tyre demand in India is at inflection point and with almost 97 – 98 per cent of the passenger car tyre production has been radialised, T&B tyre category is the next major category to witness spurt in the demand for radial tyres. And with improvement in road infrastructure and better cost economics the proportion of radial tyres in T&B category is expected to expand by around seven times from the current levels. Sighting this opportunity, almost all the expansion plans for T&B category tyres are for radial category tyres.

In FY10, almost all the manufacturers reported healthy rise in their top-line, driven by growth in both volumes and realisation. Operating margins also observed improvement owing to sharp drop in raw material prices. Going forward it is expected that, industry’s top-line will continue to witness healthy growth scenario, however industry would face challenge of rising raw material prices and increase in interest cost.

CARE Research has developed detailed model for forecasting OEMs as well as replacement demand for all the tyre categories like Truck and Bus (T&B), passenger vehicles, two-wheelers, three-wheelers, tractors and light commercial vehicles (LCV). Strong understanding of automobile as well as tyre sector is percolated down to the auto component sector and thus the demand for tyres is forecasted as well on the basis of projected automobile sales and population.

According to CARE Research, the domestic tyre industry is on a brink of a major structural change. T&B which is a dominant segment in terms of tonnage is witnessing a gradual rise in the proportion of radial tyres. Going by the global trend it seems that the radial tyre demand in India is at inflection point and with almost 97 – 98 per cent of the passenger car tyre production has been radialised, T&B tyre category is the next major category to witness spurt in the demand for radial tyres. And with improvement in road infrastructure and better cost economics the proportion of radial tyres in T&B category is expected to expand by around seven times from the current levels. Sighting this opportunity, almost all the expansion plans for T&B category tyres are for radial category tyres.

This report is divided into four section, Section I presents CARE Research’s outlook on domestic offtakes as well as exports and imports of tyres for next five years till FY15. This section also provides insights on the growth in penetration levels of radial tyres in truck and buses tyre category and has also studied about the comparative cost advantage of radial tyres over cross-ply. Section II provides insight of the industry encompassing its size, segments, characteristics, trend analysis of domestic market, export market, competition and imports. Section III provides a snapshot of financial as well as operational performance of the four leading players in the industry, while Section IV contains data points on category wise tyre production in OEM as well as replacement market. It also provides production data of key automobile segments.

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