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Chapter 3

An Overview of Indian Tyre Industry in the Light of

Global Perspectives

Technology generation in the Indian tyre industry has witnessed a fair amount of expertise and

versatility to absorb, adapt and modify international technology to suit Indian conditions. This is

reflected in the swift technology progression from cotton (reinforcement) carcass to high-

performance radial tyres (ATMA, 2011-12) in a span of four decades. Globalization has led to

the linking of the economies of all the nations and therefore, major Indian players in the tyre

industry are pursuing global strategies to enhance their competitiveness in world markets. The

present section broadly undertakes an overview of the Indian tyre industry in the light of global

perspectives through an examination of its growth trends with respect to production, marketing,

technology, Govt. policy, customer perspectives, and future prospects.

3.1 Introduction

Indian tyre industry has been reporting good growth figures over the past few years, spurred by

the growing passenger vehicle and two-wheeler market. It has emerged as one of the most

competitive markets in the world and with the emergence of new technology, ultra-modern

production facilities and availability of raw materials, the sector is poised to grow further. Major

technological changes have taken place in tyre design from conventional bias or diagonal ply

from the past to the current steel radial tyres, tubeless tyres, with low aspect ratio tyres, puncture

resistant tyres etc. Testing standards have also evolved accordingly to ensure high performance,

mileage, safety, reliability and longevity of the tyres. The Indian tyre industry has been quick in

adopting the latest technology trends through foreign collaborations and tailoring these to Indian

needs. The manufacturers are also investing in the development of ‗green tyres‘ and in capacity

expansion for radial tyres. Innovative technologies like self-inflation and run flat tyres (RFT) are

also gaining popularity in the Indian market. The market for radial tyres in the commercial

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vehicles segment has seen rapid growth in recent times. As per ATMA, 2011-12 report, in the

medium and heavy commercial vehicle segment the current adoption levels of radial tyres is

around 18 per cent. In the light commercial vehicle segment, it is estimated to be 20 per cent.

The passenger car segment switched to radial tyres earlier, and within a short period of time,

penetration levels reached almost 98 per cent (Table 3.1). This segment will surely be the focus

for Indian tyre manufactures as it is expected to grow at about 15 per cent over the next few

years to Rs 393 billion by 2015.

3.2 Global Scenario

As per www.ffmnag.com, (July,2013) report, increasing sales of passenger and commercial

vehicles in developing countries and a strong demand for replacement tyres is providing

significant opportunities for players in the automotive tyre industry. A projected CAGR of

around 4 per cent over the next five years for the global tyre market means an estimated $187

billion by 2017. The passenger car segment is forecast to witness the highest growth over the

next five years. Regionally, the APAC region is anticipated to lead growth during the forecast

period. It is expected to see the strongest growth in rubber demand, reflecting the strength of the

tyre market in China, India, Thailand and Vietnam. The global automotive tyre market is highly

consolidated and consists of passenger car tyres, heavy truck tyres and other segments. North

America dominates this market with approximately 30 per cent of the total global demand for

tyres. Fuel efficiency and safety concerns are key factors influencing the purchase of tyres in

developed markets, which are transitioning into higher-performance tyres. Japan and Europe

have implemented stringent tyre performance criteria (covering rolling resistance related fuel

saving, wet grip related braking distance and noise reduction). Europe anticipates a 20 million

tones reduction in traffic related carbon dioxide emissions per year due to enhanced tyre

performance.

3.2.1 Global Major Tyre Manufactures

As per Plimsoll tyre manufactures‘ analysis, in 2013 (www.marketresearchreports.biz,

22.05.2014) there are 320 largest tyre manufacturers (global) companies of which the best

trading partners winning in both financial strength and sales: Bridgestone France has ranked one.

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On sales growth, the fastest growing company is Nizhnekamskshina.

Market size: 2013 year market has increased by 15.4%.

Research report on global top 50 tyre enterprises, 2012 -13 of which top four players are-

Name Sales Revenue Rank

Bridgestone USD 29.8 billion I

Michelin tire USD 28.4 billion II

Good-Year USD 21.0 billion III

Continental AG USD 12.8 billion IV

•Top 10 Global Tyre Giants of 2012

1. Bridgestone 2. Michelin 3. Good-Year 4. Continental A G 5. Pirelli 6. Sumitomo Rubber

Industries Ltd. 7. Hankook Tires 8. Yokohama Rubber 9. Cheng Shin Rubber 10. Cooper Tire

and Rubber.

• Indian Tyre Majors in Global 50 List of 2012

Apollo Tyre Ltd. Rank – 16

MRF India Ltd. Rank – 17

J K Tyre Ltd. Rank – 26

Birla Tyre Ltd. Rank – 39

Balkrishna Industries Ltd. Rank – 44

As per www.etrma.org.(2011) report, world total tyre sales in 2010 reached $ 152,0 bn, up to

nearly 20 % from the 2009 figures and recovering from the recession of late 2008 and 2009. In

2010, the top 10 accumulates to sales of $ 100.1bn, a 17 % increase from 2009 while their

representation in the world tyre market did not significantly change, from 67 % to 66 %.

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However, more than half of the gain in value was due to price increases reflecting the rise of raw

materials and energy costs. According to the latest figures, the first half of 2011 saw a 25 %

revenue growth collectively by the world‘s largest tyre makers.

3.2.2 United States Tyre Market

As per www.researchandmarkets.com, (28th

Apr. 2014) report, the United States automobile

market is the 2nd largest automobile market in the world with domestic fleet of approx. 251.5

million passenger cars and commercial vehicles. The sector includes 16 major auto

manufacturers which has witnessed a decline due to economic recession but revived over last

few years. In 2013, auto sector produced more than 11.05 million vehicles and around 15.88

million new vehicles were sold in the country. This huge production and sales figure has

significantly contributed to the demand for tyres in the US.

The US tyre market is dominated by passenger car tyre segment which accounts for more than

three – fourth of the total tyre sales in the country 2013, with commercial vehicles tyre segment

accounting for the second largest share.

On the other hand, US retreading tyre market is the largest in the world. Truck tyre retreading

business is very prospective in the US as an increasing number of end users are becoming more

inclined towards retreaded tyres due to significant cost difference. The retreading market is

dominated by Bridgestone Bangdang Ö Tyre Solution (BBTS), Good-Year Tyre, Michelin, and

Marangoni.

3.2.3 Europe Trade of Tyres

As per www.etrma.org, (2011) report, according to estimates, the world medium and heavy

Commercial vehicle (truck and bus) will be triple by 2025. Most of the increase will happen in

China and other parts of Asia, although Europe will see some steady growth which mainly

happens in Eastern Europe. Total Europe has projection of 1.0 million in 2025 against 0.4

million medium and high in 2010. Sales of heavy Vehicles have showed 12 lakhs in 2010. In

2010, European tyre production recovered with a 26 % growth rate from the previous year.

However, the 2010 figure is still -11.7 % down from the year 2007.

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In the truck and bus segment, it is especially noteworthy that Chinese imports alone accumulated

to 33%. In EU-India tyre trade there has been some fluctuations in the balance but generally

speaking, Indians have sold much more tyres to the EU than vice versa. In very recent years, the

EU tyre manufacturers were happy to find out that in the truck and bus tyre segment they started

to gain space in the Indian market but the first five months of the year 2011 show a remarkable

surge of Indian truck and bus tyres to the EU. The huge increase would otherwise be difficult to

explain but one reason could be that Indian tyres without the Indian quality mark (ISI mark) were

sold outside India in massive numbers as their sale became prohibited in India in mid-May 2011.

India is also a major importer of agricultural tyres to the EU: in 2010 imports of ‗herring-type‘

tyres was around 500 times the number of exports, considering other than ‗herring-type‘ tyres,

the imports were around 850 times that of exports. The tyre retreading in 2007 was 58 lakhs and

in 2009 it touched at bottom of 45.61 lakhs, then it was recovered up to 56.06 lakhs in 2010.

3.2.4 China Emerging as a Major Tyre Manufacturing Destination

As per www.tyrereview.com, (22.05.2014) report, in 2012 among global top 50 tyre enterprises,

only 04 tyre enterprises as stated above with annual sales revenue exceeded USD 10 billion.

Among other 46 enterprise with highest annual sales revenue was Pirelli about USD $ 8 billion

and enterprise with the lowest annual sales revenue was China Shandang Jinyu Tire Co. Ltd.

(less than USD $ 400 million). In 2012, sales revenue of the top 50 tyre enterprises totaled over

USD $ 180 billion.

Over 10 of the 50 tyre enterprises are China native enterprises. In addition the top 10 enterprises

all have established plants in China. As per market research, it predicts that more Chinese

companies will enter the list in coming years. In recent years, although the cost of labour, land,

energy are increasing constantly, China tyre industry will still possess certain advantages in the

world, thanks to its complete tyre industry chain.

3.3 Indian Scenario

As per www.ffymag.com, (July, 2013) report, in 2011-12, the Indian tyre industry recorded a

turnover of Rs 43000 crore (table-3.1), producing 1254 lakh tyres (table3.2), amounting to 15

million metric tons (table-3.1). Moreover, it has recorded 958.35 lakh tube production (table-

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3.3). Tyre export realisation by value is Rs. 4209 crore with steady CARG 15% (table-3.4) which

accounts 79.2 lakh tyres in 2011 – 12 (table-3.5).

Table -3.1: Brief Statistics of Indian Tyre Industry

Financial Year 2011-2012

Turnover of Indian Tyre Industry Rs. 43,000 Crores

Tyre production (tonnage) 15 lakh M.T.

Tyre production – all categories (nos.) 1254 Lakh

Tyre export from India (value) : Rs. 4209 crores

Number of tyre companies: 39

Industry concentration 10 Large tyre companies account for over 95% of total tyre production.

Radialisation level - current (as a % of total tyre production)

Passenger Car tyres: 98% Light Commercial Vehicles: 20% Heavy Vehicles ( Truck & Bus ): 18%

Government Policy

Tyre Industry delicenced since 1987

Export (of tyres and tubes) Freely allowed

Import (of new tyres and tubes) Freely allowed.

Import policy for used / retreaded tyres:

Source: ATMA, 2011 -12

India has 39 listed tyre manufacturing companies (table-3.1), of which the top 10 account for

over96 per cent of the country‘s total tyre production (www.ffymag.com, July, 2013). They are

Apollo Tyres Ltd., MRF India Ltd., J K tyres and` Industries Ltd., Birla Tyres Ltd. (Kesoram

Group of Industries), CEAT Ltd., Balkrishna Tyre Ltd., Good-Year India Ltd., Falcon Tyres

Ltd., TVS Srichakra Ltd., Bridgestone India Ltd. The tyre export market in India is valued at Rs

3.6 billion. While the tyre industry is largely dominated by the organized sector, the unorganized

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sector dominates the bicycle tyre market. With the focus on providing better products and

services, Indian tyre manufacturers are setting up well equipped in-house research and

development (R&D) centres with emphasis on developing cutting-edge technology for new

compounds, new designs for different segments and new reinforcement materials. Cost

optimization for quality improvements and orientation towards changing customer requirements

are also areas of research. The concept of ‗green tyres‘ is now emerging as a benchmark for the

industry‘s competitiveness. Though the technology has been around since the 1990s, due to

higher manufacturing costs, it was put on a backburner until recently. Green tyres provide

numerous benefits over normal tyres, including lower fuel consumption.

3.3.1 Domestic and Export Automobile Vehicle Market: Huge Potential

As per report of www.ffymag.com, (July, 2013), in 2011 -12 India has produced 203.7 lakh new

vehicles including all categories leading to astounding increase of 13.86% in 2012 over 2011 -12

year. India is set to break into the league of the top five vehicle producing nations. The total

turnover of India‘s auto components sector is expected to almosttreble in size $ 113 billion to

account for 80 per cent of the total sales by 2020. Exports will account for the balance 20% of

the market by 2020.

The current market status of India‘s automotive industry is as under -

1. The Indian automotive market is one of the most competitive markets with low

manufacturing costs, which makes it an attractive assembly base for foreign automobile

manufacturers.

2. India is the second fastest growing automobile market in the world after China.

3. Cars comprise the major segment in the Indian automotive industry with a growth rate of

more than 19 per cent annually.

4. The large population growth of more than 20 million a year and the rising living standards

are two important indicators that logically lead to an increasing demand for automobiles in

India.

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5. The Indian car industry is witnessing a shift from two wheelers to cars, due to the rising

availability of low-cost cars and the car becoming a status symbol.

6. Based on the overall production of cars in the country, the Indian automotive industry is

now the sixth largest in the world between South Korea (5th) and Brazil (7th). India is the

fourth largest in the Asian region after China, Japan, and South Korea, in that order.

7. Car brands like Jaguar have an advantage when they are produced in India, since they

become less expensive to sell. Imported cars are very expensive to acquire in India, due to

the many import licenses and tariffs that lead to higher prices of imported cars.

The industry produced 1,684,011 vehicles in April 2013 as against 1,721,455 in April 2012,

showing a decline of (-) 2.81 per cent over the same month last year.

3.3.2 Tyre Production and Export Growth

As per ATMA, (2011-12) report, Automobile Tyre India has witnessed -2% growth in 2012 – 13

comparedto 2011 – 12 tyre production in terms of category wise as shown in thetable-3.6. But

category wise there is a different scenario. Positive growth rate is registered in truck and bus

segment (6%), passenger car segment (12%), and OTR (56%). Negative production growth is

observed in LCV i.e. light commercial vehicle (-11%), scooter/ moped (-27%), and motor cycle

(-6%).

Export of tyre has an overall growth of 7% in 2012 – 13 over 2011 – 12 as calculated from table

-3.5 where number of tyres exported category wise is given. It is the case that in all the tyre

categories growth is not in equal proportion, but varies individually. Excepting tractor trailer (-

21%), scooter (-6%), and OTR (-32%) where negative production growth is recorded, but in

other main segments like truck and bus (6%), passenger car/ jeep (4%), LCV (12%), implements

i.e. specialty tyres (50%) and others i.e. industrial and ADV i.e. animal driven vehicle (46%)

increase in export is recorded.

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Table – 3.2: Total Tyre Production in India, 2004-05 to 2011-12

CATEGORY 2004-

05

2005 -

06

2006 -

07

2007 -

08

2008 -

09

2009 -

10

2010 -

11

2011 -

12

Truck & Bus 11092 11941 12367 13137 12839 14811 15668 16085

Passenger Car 11862 13605 14264 16437 16571 20047 26201 27141

Jeep 1462 1272 1368 1467 1469 1402 1500 1595

Light Comml. Veh. (L.C.V.)

3945 4529 4820 5320 5298 5739 6029 6688

Tractor Front 1311 1383 1754 1814 1842 2386 2595 2756

Tractor Rear 1096 1134 1296 1234 1315 1634 1777 1889

Tractor Trailer 408 596 823 886 758 903 1051 1022

A.D.V. 197 325 381 409 281 294 311 293

Scooter 9992 9519 9643 11604 10882 13558 20140 22194

Motor Cycle 18127 21053 26079 27921 30148 35664 43118 44857

Moped 124 55 0* 0* 0 0 0 0

Industrial 377 514 635 733 568 538 616 681

O.T.R. 89 106 115 141 136 161 191 196

Aero 0 0 0 0 0 0 0 0

TOTAL 60082 66032 73545 81103 82107 97137 119197 125397

*w.e.f April 2006 moped tyre production included in scooter category Source: ATMA, 2011-12

In 000 Nos.

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Table – 3.3: Total Tube Production in India, 2004-05 to 2011-12

(In 000 Nos.)

CATEGORY 2004-05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12

Truck & Bus 9439 10522 11257 12016 11911 14142 14990 15404

Passenger Car 5947 6990 8509 11490 10773 9922 9127 10219

Jeep 1040 1066 1132 1416 1411 1430 1746

Light Comm.

Veh. (L.C.V.)

3100 3775 4156 4147 4213 4912 5232 5417

Tractor 1053 1232 1425 1443 1334 1970 2006 2145

A.D.V. 140 165 213 181 184 235 198 166

Scooter 6439 7044 7461 9128 8242 11610 16321 17177

Motor Cycle 18671 22263 28067 30817 31526 37095 43156 45091

Moped 347 227 0* 0* 0 0 0 0

Industrial 71 99 108 112 79 64 74 100

O.T.R. 26 38 48 60 60 68 97 112

Aero 0 0 0 0 0 0 0 0

TOTAL 46273 53421 62376 70810 69733 81448 92947 95835

*w.e.f April 2006 moped tube production included in scooter category

Source: ATMA, 2011-12

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Table-3.4: Export Realisation/ Value

Year Value (Rs./crores) % Change CAGR

1999-00 864 7 15%

2000-01 1190 38

2001-02 1100 (-)8

2002-03 1250 14

2003-04 1460 17

2004-05 1834 26

2005-06 2383 29

2006-07 2850 20

2007-08 3100 9

2008-09 3585 16

2009-10 3650 1

2010-11 4200 15

2011-12* 4209*

Source: ATMA, 2011-12

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Table -3.5: Category wise Tyre Exports -2004-05 to 2011-12

[Nos.] CATEGORY 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12

Truck & Bus 2503956 2408759 2276049 2431545 1933959 2052946 2008859 2247268

Passenger Car 1024561 1052874 966046 1091715 991558 845688 1116192 1564804

Jeep 391 885 1420 7461 10263 6946 93356 119292

Light

Commercial

Vehicle

1130908 1390814 1599230 1621880 1630483 1465991 1454027 1692673

Tractor Front 18202 13408 11078 17072 13051 12052 10899 18463

Tractor Rear 84684 98807 56186 66644 46347 46206 43472 33305

Tractor Trailer 3686 3833 8665 17468 20067 4692 1320 3537

Motor Cycle 62710 84908 151677 322630 453226 362784 755892 950236

ADV 0 0 0 30 0 0 0 0

Scooter 202656 289984 320536 45338 435778 441965 627093 913157

Implements 2096 2447 4045 5637 9962 15693 106430 88675

Industrial 9885 7303 11543 12777 7605 8002 124943 105063

OTR 23375 33480 43085 45919 36774 35515 111902 184635

Antique 0 0 0 0 0 0 0 0

TOTAL 5067038 5387502 5449560 6094116 5589043 5298480 6454385 7921108

NOTE: E=Estimate(s); F.Y.=Financial Year (April-March) 12 months; 1Lakh=100,000; 10

Lakhs=1 Million; 1 Crore= 100 Lakhs (10 Million). Source: ATMA, 2011-12

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Table –3.6: Category wise Tyre Production in India, 2011-12 to 2012-13 (April-December)

(In Lakh Nos.)

Tyres for: 2011-12 2012-13 % Change

Truck & Bus 119.51 127.09 6

Passenger Car/Jeep* 213.79 238.83 12

Light Commercial Vehicle 50.52 44.95 -11

Small Comm. Vehicle (SCV)** 16.97

Tractor Front 20.59 21.13 3

Tractor Rear 14.130 14.26 -0.3

Tractor Trailer 7.48 6.77 -9

Animal Drawn Vehicle***

Scooter / Moped 166.36 121.58 -27

Motor Cycle 340.67 320.80 -6

Industrial

Off the Road (OTR) 1.44 2.25 56

Other Tyres(Industrial &ADV)***

7.18 7.42 3

Total 941.84 922.05 -2

* W.e.f. FY 2012-13 Jeep tyre production merged with passenger car tyre category. ** New Category-Small Comm. Vehicle (SCV). *** W.e.f 2012-13 Industrial and ADV tyre production merged as "Other Tyres" (New category). Source: ATMA, 2011-12

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3.3.3 Marketing Perspectives

Segment wise Tyre Supplies: 2012 - 13 (April - December)

Tyre supplies are broadly to the following segments:

Replacement market (aftermarket)

Original Equipment Manufacturers (OEMs), i.e. vehicle manufacturers

Export

State Transport Undertakings (STUs) (primarily for bus tyres)

Government purchases (primarily for defense usage)

Tyre supplies to domestic replacement market in the different segments take the larger pie of

total production which is followed by OEM and export market (table -3.7).

Table -3.7: Estimated Supplies of Key Tyre Categories to Various Segments

Category Production

(Nos.)

2012-13

(April-

December)

Segment wise percentage supply

(as % of total production)

Replacement

market /Govt. OEMs Export

Truck/Bus 12709061 73 14 13

Passenger Car / Jeep

23883000 53 42 5

LCV 4495000 42 35 22

Tractor Front 2113000 58 41 1

Tractor Rear 1426000 37 61 2

Scooter / Moped 12158000 37 56 7

Motor Cycle 32080000 39 58 3

Source: ATMA, 2011 - 12

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3.3.4 Market Share Analysis of Domestic Tyre Majors

In 2011 – 12, among Indian tyre manufactures, Apollo Tyres Limited has the largest domestic

market share of 27%. MRF has second largest market share of 21% followed by J K Tyre of

19%, Birla Tyres 14%, and, CEAT 11%. Import is having 4% share and others constitute 4%

(chart -3.1).

Chart -3.1: Market Share of Indian Tyre Majors in Truck and Bus Segment, 2011 – 12.

Source: www.apollotyre.com : July, 2013

• Brief Introduction of Birla Tyres, India

The researcher views that it is necessary to give a brief knowledge of Birla Tyres, India whose

monthly tyre sales reports are considered as case study in statistical analysis to fulfill research

objectives.

As given in www.birlatyre.com ,(June, 2014), since its inception in 1991, Birla Tyres a division

of the B K Birla flagship Kesoram Industries Limited has come a long way to be recognized as

one of the best tyre manufacturers in business today. Kesoram Industries is engaged in the

manufacture of cement, tyres, tubes, Rayon, paper, and heavy chemicals.

Birla Tyres prides itself on delivering innovation and operational excellence. The state of the art

factory at Laksar, Haridwar, Uttrakhand, has a production capacity of over 44 lakh truck tyres

Apollo, 27%

MRF, 21%J K Tyres, 19%

CEAT, 11%

Birla

Tyres, 14%

Imports, 4%Others, 4%

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per year. Today with integrated plant at Balasore, Odisha, Birla Tyres has a combined capacity

of 298,660 MT. With plans to expand into the production of passenger car tyres, it is poised to

become one of the most comprehensive tyre manufacturers in the region. The company enjoyed

a turnover of Rs. 2849.61 crore in 2009 and looking forward to reach a target of Rs. 5500 crore.

To provide unmatched accessibility in domestic sales terrain, Birla Tyres has 10 zonal offices,

with more than 170 sales depots regionally with more than 491 sales engineers and 8831 dealers

at major locations.

Export business has been consolidated through access of Birla Tyres‘ international network that

stretches across 50 countries worldwide. In 2009, export turn-over exceeded Rs. 375 crore.

3.3.5 Dealer Network

As per ATMA, (2012 -13), report, dealers of multi-brand (different companies); single brand;

and company owned exclusive showrooms are the leading outlets of tyre sales and customer

interactions. Dealers of commercial vehicle tyres and passenger segment tyres are different;

though some overlap does exist. Dealers of commercial vehicle tyres are also financing purchase

of tyres for commercial vehicles and agricultural tyres. Dealers are also an important link

between the tyre companies and the end consumers and replacement/ warranty schemes are

implemented by the companies through the dealers.

3.3.6 Distribution of Domestic Tyre Production

As per ATMA, (2012-13) report, the tyre and its accessories‘ distribution system consist of

distributors, followed by large dealers and also small/ sub dealers. Some tyre companies also

follow a system of appointing C&F (carrying and forwarding) agents, in place of distributors.

Replacement Market: Tyre companies sell tyres through widespread dealer distribution net-

work (over 5000 in the country), either through exclusive dealer of the companies or through

multi-company dealers.

OEM: Direct supply by tyre companies through negotiations.

STU: Direct supply by tyre companies through tender system.

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Government: Direct supply by tyre companies through tender system.

Export: Through dealers in the exporting countries.

Import: Some tyre companies also import tyres for the domestic market. Such imports are

generally from the principal company overseas or from technical collaborator or from tyre

companies with which it has an alliance for a particular line of tyres, for example, passenger car

tubeless tyres;

With tyre import freely allowed (except Truck/ Bus Radial Tyres) import of various categories of

tyres is also taking place.

Tyres are imported by importing agents and then marketed through the dealers who are

marketing Indian tyres also.

3.3.7 Trade Policy - Tyres and Raw Materials

Tyre trade and raw material trade policy including custom duties of 2012 -13 of Govt. of

India is given in the table –3.8.

All categories of new tyres can be exported freely.

All categories of new tyres can be imported freely.

No WTO bound rates for tyres& tubes.

All raw materials required for the manufacture of tyres can be imported freely (OGL).

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Table -3.8: Custom Duties: Tyres

Normal rate of basic Customs Duty (MFN) 10%

Preferential/ concessional Customs Duty under Trade Agreements

* Asian Pacific Trade Agreement (formerly known as Bangkok Agreement)

8.60%

* Indo Sri Lanka Free Trade Agreement Nil Duty

* SAPTA ( SAARC Preferential Trading Agreement)

Nil Duty* 5%**

* India Singapore Comprehensive Economic Cooperation Agreement (CECA)

Nil Duty (For Bias Tyres)

* India South Korea CEPA No Concession

* ASEAN FTA 7%(passenger car, truck / bus and scooter / motorcycle) 5% (other categories of tyres).

Excise Duty:

All categories of Tyres 12%

* When import from Bangladesh, Bhutan, Maldivies and Nepal.

** When import from Pakistan and Sri Lanka.

Source: ATMA, 2011 -12

3.3.8 Indian Tyre Industry Revenue Segmentation

The revenue segmentation of Indian tyre industry in 2011 - 12 is given in the pie chart -3.2. The

mainstay is truck and bus segment which takes more that 50 % i.e. 54% of the total value pie.

The immediate next segment is passenger car segment accounting 14%. Two wheelers segment

including motor cycle, scooter, and moped tyres takes 13% of total revenue generation. LCV

segment generates 9% of total value followed by 8% contribution of farm (agricultural) tyres.

Others include OTR and specialty tyres which have contribution of 3% of total revenue

generation.

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Chart - 3.2: Domestic Tyre Industry Revenue Segmentation, 2011 - 12

Source: www.apollotyre.com, July, 2013

3.3.9 Radialisation in India - Current Status and Future Trends

As per ATMA, (2011-12) report, rate of radialisation in India is actually an index of the status of

road development, vehicle engineering, and the economy in general. Notwithstanding the

problem areas, constraints and limitations, the tyre companies have kept pace with the

technological improvements that radialisation signifies and offer state-of-the-art product (tyres),

comparable to the best in the world.

Truck and Bus, 54%

Light truck, 9%

Passenger car, 14%

Farm tyres, 8%

Two wheeler, 13%

Others, 3%Truck and Bus

Light truck

Passenger car

Farm tyres

Two wheeler

Others

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Chart-3.3: Truck Radial Market Share: Domestic Production Capacity vs. Imports

Source: www.apollotyre.com : July, 2013

In the chart – 3.3 it is seen that most of the domestic demand is met by domestic production.

Majority of market requirements is fulfilled by domestic production which is 82%. The rest 18%

is met by imports.

Radialisation can be aptly classified as the most important innovation in tyre technology.

Despite its several advantages (additional mileage; fuel saving; improved driving)

radialisation in India earlier did not catch on at a pace that was expected, since its

introduction way back in 1978. This could be attributed due to several factors, viz. Indian

roads generally not being suitable for ideal plying of radial tyres; (older) vehicles produced

in India not having suitable geometry for fitment of radial tyres and hence the general, and

wrong perception that radial tyres are not required for Indian vehicle; unwillingness of

consumer to pay higher price for radial tyres etc.

However, the situation has radically changed inrecent years, especially for the passenger car

tyre segment where radialisation has crossed 98% mark and is expected to reach 100% in

two to three years. In the Medium and Heavy Commercial Vehicle (MHCV) segment

Imports, 18%

Domestic, 82%

% Truck radial market share

Imports

Domestic

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current level of radialisation is up to18% and that in the LCV segment is estimated at 20%

(table-3.1).

A few years back a beginning was made in radialisation of truck and bus and LCV tyres and

this process is gaining momentum.

3.3.10 Future of Radialisation

The future of radialisation will be governed by the following factors:

Cost - Benefit ratio

Road development

Overload control

User education

Retreading infrastructure

Radialisation in India is expected to reach 35% plus in the next years owning to infrastructure

development and OEM thrust. The world average radialisation level is 68% in which Western

Europe has reached 100% and India has got only 21% considering all the tyre market segments

(Chart-3.4).

Chart-3.4: Level of Radialisation across the World

Source: www.apollotyre.com, July, 2013

68%

72%

21%

65%

96%

72%

95%

100%

0% 20% 40% 60% 80% 100% 120%

World

Africa/ Middle East

India

Asia

North America

Eastern Europe

Central Europe

Western Europe

% of radialisation

84

3.3.11 Curb on Overloading of Commercial Vehicle

Supreme Court had in November 2005 passed an Order directing State Governments to ensure

that commercial vehicles are loaded only as per norm prescribed under the Central Motor

Vehicle Rules (ATMA, 2011-12).

3.4 Tyre Retreading

As per ATMA, (2011-12) report, in the manufacture of a new tyre, approximately 75%-80% of

the manufacturing cost is incurred in tyre body and remaining 20% -25% in the tread, the portion

of the tyre which meets the road surface. Hence, by applying a new tread over the body of the

worn tyre, a fresh lease of life is given to the tyre, at a cost which is less than 50% of the price of

a new tyre. This process is termed as 'tyre retreading'. However, the body of the used tyre must

have some desirable level of characteristics to enable retreading. Retreading cannot also be done

if the tyre has already been over used to the extent that the fabric is exposed/

damaged. Retreading could be done more than once.

The present all India pattern, by type of retreading, is as follows:

Pre-cured - 50%, Conventional 50%.

Retreading is primarily done in the truck and bus tyre segment. On an average a truck/ bus tyre is

retreaded 1.5 times. At present only 3-4 large companies are in the organized sector of tyre

retreading .Organized sector is classified as that comprising of companies which operate through

the franchisee route.

3.4.1 Expected Future Trends in Tyre Retreading in India

Tyre retreading in the commercial vehicle segment is poised for growth in the future. This

growth will be aided by the following favourable factors and major developments taking place:

Increased level of Radialization in the commercial vehicle segment (due to reduced

incidence of overloading of commercial vehicles);

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Growth in and increased share of multi-axle trucks (with the catching up of the concept of

'hub & spoke' transportation, long distance movement of road freight will be by multi-axle

trucks whereas distances within and around the cities will be catered by smaller commercial

vehicles); National Highway projects, especially Golden Quadrilateral project and highways

connecting North-South and East -West corridors (coupled with reduction in overloading

and improved condition of road network, higher level retreading will offer added financial

benefits).

3.5 Raw Materials of Tyre Industry – Overview (FY 2011-12)

Tyre Industry is highly raw material intensive. Raw materials cost accounts for approx. 72% of

tyre industry turnover (ATMA, 2011-12). Given below is the composition of raw-materials as a

percentage (%) of total raw material cost:

Table -3.9: Composition of Raw Material as a % of Total RM Cost of a Tyre

Natural Rubber 44%

Nylon Tyre Cord Fabric

19%

Carbon Black 12%

Rubber Chemicals 5%

Butyl Rubber 4%

PBR 5%

SBR 5%

Others 6%

Source: ATMA, 2011-12

As given in the table 3.9, 65% of total Natural Rubber consumption is by the tyre sector balance

by rubber based non-tyre industries. Natural rubber is the principal ingredient which accounts

44% of rubber composition followed by nylon fabric cord 19%. Carbon black % is 12%

incorporated into the rubber mass that acts as reinforcing material to rubber to give adequate

strength and other properties to meet performance requirements. PBR (Poly Butadiene Rubber)

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and SBR (Styrene Butadiene Rubber) each is of 5% of total tyre material requirement required

for special property enhancement of the tyre.

Total weight of raw-materials consumed by tyre industry – 18 Lakh M.T.

Total cost of raw materials consumed by tyre industry – Rs.30,000 Crore

Chart –3.5: Raw Material Cost Trend

Source: www.apollotyre.com : July, 2013

Raw material price hike and fluctuation is a major concern of determining tyre price. Hence, this

makes a significant dent in customers‘ wallet and manufacturers‘ profits. In the bar chart –3.5, a

matrix is made for increase or decrease of base price index of principal tyre raw material (natural

rubber, SBR 1502, steel cord and carbon black) against years from 2008 to 2012. Year 2008 is

taken as a year where the price (taken price index) of the respective raw materials is taken as

Rs.100. Hence, NR price increase from 2008 to 2012 is Rs. 134, SBR 1502 is Rs. 137, steel cord

is Rs. 25, and carbon black is Rs. 76. It is understood that rubber price is the main instrumental

of tyre price determination. In the chart-3.6, the overall raw material cost trend per tyre per Kg.

from 2008 to 2012 is Rs. 90 taking Rs. 100 as overall RM base price of FY 2008.

100

118 115

195

234

100

146

87

140

237

100

122 125116

125

100

133

118

138

176

0

50

100

150

200

250

2008 2009 2010 2011 2012

Ba

se p

rice

in

de

x

NR

SBR1502

Steel cord

Carbon black

87

Chart – 3. 6: Overall Raw Material Cost Trend

Source: www.apollotyre.com : July, 2013

3.6 Presence of Global Tyre Firms in India

As per www.mydigitalfc.com, (Aug01, 2011) report, after losing their market share to domestic

tyre companies in the past, global tyre makers are coming back with aggressive expansion plans

in Indian in view of the favourable market outlook. Companies like Michelin, Bridgestone, and

Continental are chalking out new strategies for Indian market on the back of increasing

radialisation of truck and bus tyres. In coming years, the industry is expected to see greater

competition as international players are setting up manufacturing units in the country.

• Michelin is selling its imported tyres in the replacement market over last few years. It is setting

up a Rs. 4,000 crore production unit in Tamil Nadu for truck and bus radials and Bridgestone

have set up dedicated truck bus radial tyre units, while Continental has completed an entry

through the acquisition of Modi Tyres.

• Bridgestone has been producing and selling passenger car and SUV (Sports Utility Vehicle)

radials for almost a decade and is ramping up its production base at an investment of Rs. 3040

crore to make truck and bus tyres here.

100

125

114

147

190

0

20

40

60

80

100

120

140

160

180

200

FY2008 FY 2009 FY 2010 FY 2011 FY 2012

Ba

se p

rice

In

de

x

Base price Index

88

• Good-Year shared a similar fate like other MNCs and has a relatively small market share in all

segments except agricultural tyres.

• Players like Hankook and Yokohama operated in the replacement market to a limited extent

through imports from China and Thailand.

In the next couple of years, Indian tyre consumers will have an ample opportunity to choose

global brands – Michelin, Continental, Yokohama, and Bridgestone. Tyre dealers and end users

can now expect the healthy competition to break the cartelization in the tyre market. There is a

shortage of tyres in the country and tyres of global majors will cost less in the total cost of

ownership of fleet owners.

3.7 Overview of Customer Value of Truck Bus Radial over

Truck Bus Bias Tyre

As per report of www.motorindiaonline.in, (8th

Sept., 2008) in an era of global warming and

soaring crude prices, an increasing resort is made to tyre radialisation for commercial vehicles

with a view not only to saving fuel costs but reducing emission of harmful green house gases and

easing pressure on global oil reserves. Radialisation also ensures a longer life for tyres. This is

due to the phenomenon known as lowering rolling resistance. In today‘s truck and bus tyre

market, two standards exist.

• The first is cross-ply, or bias or nylon tyres, which is predominantly sold in India‘s truck and

bus market today. The main benefit of cross-ply tyres is the initial purchase cost being lower

than a radial tyre. However, there are drawbacks, including faster wear, greater fuel

consumption, lower vehicle steering control, and greater heating of tyres necessitating stops

when traveling long distance.

•In a radial tyre, the casing is composed of only one ply made of cords running from bead to

bead at 90 degrees to the rolling direction and radially oriented relative to the centre of the tyre.

This results in the ability to drive much more comfortably at much higher speeds without

stopping, better steering control and better tyre wear.

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3.7.1 Key Aspects of Radial Tyres over Cross Ply Tyres

• Rolling resistance is a major force - a vehicle must overcome in order to keep moving. The

challenge of low rolling resistance technology is to maintain a tyre‘s performance in other areas,

particularly safety and wear life.

• Another key aspect which is less known is that the tyre actually plays a vital role in a vehicle‘s

energy consumption. At normal driving speed, a tyre accounts for 30 per cent or more of a

truck‘s fuel consumption.

• Radial tyres help to boost mileage considerably, and the result is a net saving of up to 10 per

cent on fuel bills. That‘s not a small amount considering that fuel costs account for up to 40 per

cent of the cost of operation for trucks and buses. Comparative tests were done on radial tyres

versus bias tyres in different conditions across India; the fuel savings recorded was 4-10 per cent

on average.

3.7.2 Benefit Comparison between Cross Ply and Radial Tyres

Performance factors: Radial. Cross Ply

Life √

Fuel Consumption √

Safety √

Total cost of Ownership √

Maneuverability √

Overloading √

√- indicates better performance

All product features directing to life, fuel consumption, safety, total cost of ownership (TCO),

and maneuverability of an automobile tyre are better in a radial tyre than a bias tyre in like to like

application situation but in overloading situation its performance is worse than a bias tyre.

Then the next advantage of truck radial technology is that after the tyre is worn out there is some

extra rubber provided below the tread, which allows one to re-groove the tyre i.e. retreading of

tyre. This enables the tyre to run a further 15-25 per cent. Radial tyres can also be retreaded quite

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easily. This, in turn, will provide 70-80 per cent more mileage (second life). After the second

life, the whole cycle of re-grooving and retreading can be repeated. This allows one to get a

significantly lower cost per km (CPKM).

3.8 Opportunities in India

• India continues its steady economic ascent, estimating an annual growth rate of around 8%

annually (www.motorindia.in,8th, Sept., 2008). Of course, there are restraining factors for

radialisation, but at the same time opportunities are plentiful.

• Among other factors that limit the pace of radialisation is the road condition. Transport

congestion with stop and go, low average speed, poor average distance per day, etc., are the other

deterrents. Maintenance of certain vehicles, geometry maintenance and size of rims may not be

favourable to radials as tyres are to be more sensitive to misalignment. This can create uneven

wear and reduce the mileage potential. Further, radialisation may be affected by the rising input

and fleet maintenance costs.

• However, overloading used to be rampant everyday in the trucking industry, and regardless of

the tyres used, overloading will cause tyre damage, shorten tyre life, crack rims, and cause

accidents due to poor vehicle handling. Overloading also damages the road infrastructure over

time. It was not uncommon in India for a vehicle with a maximum load capacity of 9 tonnes to

carry up to 13 tonnes. It is estimated that a 30% reduction happens in the life of the highway.

• On the other hand, opportunities for radialisation start with the legal environment, the right

road infrastructure which is being strengthened and improved transportation facilities.

• With the Supreme Court‘s judgment of November 2005 against overloading of trucks and

goods vehicles, it is expected that there will be a lot of re-positioning in different tyre segments,

and we can foresee a push towards ‗radialisation‘ of truck tyres. The scenario will encourage the

trucking industry to increase the use of radials. Greater acceptance and fitment of radial tyres by

OEMs will act as catalysts and is expected to bring about the transformation in radialisation of

the truck and bus segment in India.

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• The increasing number of multi-axle vehicles (MAVs) is considered another important factor

that will give an impetus to radialisation in the CV (Commercial Vehicle) segment. MAVs are

capable of carrying at least 50% more loads compared to normal trucks. This will help reduce the

turnaround time as it suits the Indian habit of loading extra weight of goods i.e. overloading

tendency.

• An additional need to help with the smooth transition for radialisation is the need to provide the

right level of information andtraining to both dealers and end users. For dealers, it would mean

ensuring that the products are matched by the right level of service and technical know-how. For

end-users, generating the right awareness by providing personal education on the benefits and

usage of radial products will be the key.

In India, one of the fastest-growing economies in the world today, radialisation is almost

complete as far as the passenger car tyres segment is concerned, and is starting to gain

momentum in the truck and bus tyres segments. India‘s tyre industry has grown rapidly, and is

estimated to be around Rs.43,000 crore in 2011-12, (ATMA, 2011-12) and a sizable percentage

of new investment in India‘s tyre industry will be spent on improving the radial tyre segment,

both for passenger car, as well as for truck and bus.

As per industry estimation more than half of all truck tyres in the world are radial truck tyres.

The Asian rate of radialisation is also up at 50 per cent. Markets like Thailand and China, this

radialisation rate is upward of 30 per cent. India alone accounts of seven per cent of the world

truck tyre consumption. It is just a matter of time since radial technology provides tangible

benefits to the consumer; radialisation in India has poised to join the radial revolution. This

technology will pave the way towards achieving sustainable mobility in the country. This is one

technology which benefits the individual directly and at the same time helps conserve the

environment and precious natural resources.

3.8.1 Demand –Supply Gap of MHCV Radial Tyres in Domestic Market

As per Tata Strategic Management Group‘s (www.tsmg.com, Jun, 2014) market research report,

assuming total supply at 80% utilization of installed capacity, radialisation level (11%) in the

year 2010 -11 domestic demand has already crossed the introductory level (10%) of 1.5 million –

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marking the likely beginning of the S-curve in cross ply dominated Indian market. Operating on

this curve, It is sharply galloping to reach 25% level in the coming 2015-16 requiring MHCV

(medium and heavy commercial vehicle) radial tyres‘ annual demand up to 45 lakh tyres (chart -

3.7). The domestic players, who dominate the MHCV tyre industry segment, have gone for green

field projects and capacity expansion. OEMs, STU, and other bulk buyers have already started

using radial tyres and expressed positive concerns on the ability of domestic tyre manufacturers

to support them. Trading organizations are importing to market foreign tyres, especially Chinese

tyres in a big way. Meanwhile, global tyres majors like Michelin, Bridgestone, Continental,

Good-Year, and Yokohama having global capacities on tap, have already done their market

research on Indian market, and marked their presence by setting up manufacturing unit or

acquiring Indian company.

Chart-3.7: Possible Demand –Supply Scenario in MHCV Radials

3.8.2 Salient Points of Gap Analysis

Analysis given by www.tsmg.com, (22.06.2014) reveals the following gaps in domestic tyre

radialisation process.

• 25% radialisation levels in 2015 will require huge capacity additions.

460

1500

4500

240

1400

3200

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2007-08 2010-11 2015-16

Demand

Supply

4%

11%

25%

GAP

Radialisation level

Qty in ‗000 only

Source: www.tsmg.com, Jun, 2014

93

• Planned capacities by domestic players may not cope with the surge in demand.

• Huge investments required to ramp up capacities will be a big challenge for domestic industry.

3.9 Conclusion

There are four areas of strategic concerns which are understood while going–through this

chapter. The first one is the ‗the right tyre changes everything‘. Core competency of a tyre

manufacturer is the ability to deliver a balanced performance of tire safety, durability and fuel

efficiency, higher mileage, while developing services that meet the expectations of each

customer. As the only point of contact between a vehicle and the ground, tyres must support the

vehicle‘s weight, transmit steering, acceleration and braking inputs, absorb surface irregularities

and noise, all while using as little energy as possible. The challenge for tyre technologists and

marketers is to develop tyres that efficiently perform all of these functions for as long as

possible, to continuously improve their ability to do so and to sell them at a price that is both

affordable for the customer and profitable for the Company. Meanwhile, every user is concerned

about protecting the environment. Meeting these expectations demands tyre solutions that are

dedicated, differentiated and increasingly technology and innovation-driven.

The second is a source of solutions for OEM and subsequently for replacement markets‘. The

original equipment segment accounted a sizeable market share of total global tyre production.

Leveraging expertise, it is necessary to work jointly with car makers and other original

equipment manufacturers to develop innovative solutions for safer, quieter and more

environmentally friendly vehicles. As the modern day tyres should have low rolling resistance,

tyre manufacturers must help OEMs cost-effectively reduce their vehicles‘ carbon footprint with

tyres whose technology truly makes a difference. High performance tyres have been significantly

reducing CO2 emissions. This type of performance is required to be delivered by the tyres that

need to be developed especially for new generation electric vehicles (www.michelin.in, 2005).

The third is ‗high value added service‘. In the replacement tyre market, which accounted for

largest part of total tyre consumption, tyre makers serve all types of user needs with a

comprehensive brand portfolio marketed through a diversified array of channels, including

specialty wholesalers, dealers, auto centers, service stations and superstores.

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The forth is ‗optimize customerrelation‘. Automobile tyre is a high involving, high risk prone,

and high monetary product. Hence, it requires high customer relationship marketing emphasizing

customer service. To improve further customer service, an innovative integrated customer

relationship management application needs to be deployed with company‘s sales representatives

across the marketing value chain.

In addition to above four major concerns of tyre marketing with detailed study and analysis of

Indian tyre industry in the light of global perspective, this study unveils one major critical aspect

that the domestic tyre industry is in a structural inflection in the market from cross-ply nylon bias

tyre to steel radial tyre in the mainstay truck and bus tyre segment. Radialisation in this segment

is picking up momentum which has already acquired 18% market share in 2011-12 (ATMA,

2011-12). This market radialisation is a force which is onset of aligning with the global market

from where customers (both OEMs and replacement markets) will avail full value realization

from tyre in terms of greater mobility of people and goods by facilitating higher safety,

efficiency, and enjoyment of travel, besides holding on their value for money expectation.

Raw material cost is a very important factor (contributes 72% of manufacturing cost - ATMA,

2011-12) of tyre manufacturing that determines ultimate price of a tyre. Among price hike of

various raw materials, natural rubber price fluctuation and its availability and maintaining

inventory is a great challenge to supply chain procurement management. Majority of NR

consumption with other synthetic rubbers (PBR, SBR, Butyl rubber, EPDM) are imported by

domestic tyre majors.

Within the known and unknown challenges and opportunities of Indian tyre market, the industry

as whole is poised to grow at faster rate riding on India‘s economy‘s growth prospect, booming

of auto sectors and hence, rising demand of OEMs, after economic recession, proven benefits of

radial tyres over cross ply bias tyres, Govt. investment on infrastructure and high way

development, overloading restriction, growth in multi-axle vehicles, strict Govt. norms on carbon

emission and other pollution control measures, and overall end users‘ positive attitude towards

radial tyres. Clearly, the structure of the industry is heading for a major transformation. Players

who assess this discontinuity dispassionately and correctly will emerge as the winners.