Tyre

Ghalla Bhansali Stock Brokers Pvt. Ltd.
23rd August, 2010
Tyre Industry
The Indian tyre industry accounts for around 5% of the global demand as
well as global supply of tyres. 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. On an average, 55% of the production is for
replacement market, followed by 29.8% sold to OEMs directly and the remaining
is exported.

Turnover of Indian Tyre Industry Rs. 25,000 Crores
Tyre Production (Tonnage) 13.50 lakh M.T.
Tyre Production – All Categories (Nos.) 971 Lakh
Tyre Export from India (Value) Rs. 3000 (est.) crores
Number of tyre companies 36

Category wise Tyre Production in India (In Lakh Nos.)
Tyres for: 2008‐09 2009‐10 % Change

Truck & Bus 128.39 148.11 15
Passenger Car 165.7 200.47 21
Jeep 14.69 14.02 (‐)5
Light Commercial Vehicle 52.98 57.39 8
Tractor Front 18.42 23.86 30
Tractor Rear 13.15 16.34 24
Tractor Trailer 7.58 9.03 19
Animal Drawn Vehicle 2.81 2.94 5
Scooter / Moped 108.83 135.57 25
Motor Cycle 301.48 356.64 18
Industrial 5.68 5.38 (‐)5
Off the Road (OTR) 1.36 1.61 18
Total 821.07 971.36 18
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23rd August, 2010
Growth of Indian Tyre Industry (In 000 Nos.)
120000 97136 20.00

100000 81103 82107
73545 15.00
80000 60082 66032
51585 54690
60000 10.00
40000
5.00
20000
0 0.00
2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10
Total Typre Production (In 000 Nos.) Growth % (YoY)
Total Tube Production in India
80000 70810 69733

70000 62376
60000 53421
46273
In 000 Nos.
50000 40342
36979
40000
30000
20000
10000
0
2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09
Export Realization/Value
4000 3500
3500 3100
2850
3000
2383 2367
2500
Rs Cr
1834
2000
1460
1190 1250
1500 1100
864
1000
500
0
1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10*
*2009-10 Figure excluding tyre co's which are not members of Automotive Tyre Manufacturers’ Association
23rd August, 2010
Raw Materials of Tyre Industry
Tyre Industry is highly raw‐material intensive. It produces all categories of
tyres, except Snow Tyres and Aero Tyre for which there is no demand
domestically. Raw materials primarily comprise of natural rubber, crude and steel
based materials which have historically experienced volatility in prices. Given the
fact that raw materials constitute around 70% of the cost of production, combined
with the manufacturers inability to pass on the increased cost to their customers
due to intense competition, rise in prices of these materials have a huge impact on
profitability. Raw materials cost accounts for approx. 63% of tyre industry
turnover and 70% of production cost.
Given below is the composition of raw‐materials as a percentage (%) of
Total Raw Material Cost:

Natural Rubber 43%
Nylon Tyre Cord Fabric 18%
Carbon Black 11%
Rubber Chemicals 5%
Butyl Rubber 4%
PBR (Polybutadiene Rubber) 5%
SBR (Styrene Butadiene Rubber ) 5%
Others 9%

Production, Consumption & Imports of Natural Rubber (in Tonnes)
Consumption Total Imports
Year Production
Tyre Sector Non Tyre Sector Cons. Total
2004‐05 749660 406220 54% 349170 46% 755400 68700

2005‐06 802625 442921 55% 358189 45% 801110 45285
2006‐07 852895 462081 56% 358224 44% 820305 89799
2007‐08 825345 495577 58% 365878 42% 861455 86394
2008‐09 864500 508121 58% 363599 42% 871720 77616
2009‐10 831400 576799 62% 353766 38% 930565 170679

FY 2009‐10
o Total weight of raw‐materials consumed by tyre industry – 15.50 Lakh
M.T.
o Total Cost of Raw Materials consumed by tyre industry – Rs.16,000
Crores

23rd August, 2010
Key Tyre categories to various segments
Production Segment wise Percentage supply
(Nos.) (as % of Total Production)
Category
2009‐10 Replacement
OEMs Export
Market
Truck/Bus 14811183 71* 15 14
Passenger Car / Jeep 21648900 42* 54 4
LCV 5739480 44 30 26
Tractor Front 2385672 63 36 1
Tractor Rear 1633860 44 53 3
Scooter / Moped 13557529 42 55 3
Motor Cycle 35664073 52 47 1
* Includes supply of 4.1% of Truck /Bus Tyres and 0.07% Passenger Car tyres to
Governments/STUs
Demand drivers
o A major chunk of demand comes from the replacement market on account
of previously sold vehicles.
o OEMs such as Maruti Suzuki, Hyundai Motors, Tata Motors and Mahindra
& Mahindra; their demand is dependent on auto‐motive production
trends.
o Bulk of exports from India is mainly of cross ply trucks and bus tyres
catering to the replacement market of older vehicles abroad. Since globally,
tyre companies have phased out cross ply tyres, exports from India have
remained steady, especially to emerging and low‐income markets where
cross‐ply tyres are still in vogue. However, overall exports — especially of
radials — are constrained because tyre manufacturers have to buy
“product liability insurance” before they can sell their products in
developed markets, such as USA. This is necessary since accidents can
always take place and law suits against defective products can run into
billions of dollars.
o Some demand comes from government undertakings and defence forces.

There are 36 companies in this industry with 10 large companies (including
MRF, Apollo Tyres, Ceat, J.K. Industries, Modi Rubber, Goodyear India)
accounting for 95% of total tyre production.
23rd August, 2010
Radialisation
Globally, tyre‐makers have adopted radialisation — classified as the most
important innovation in tyre technology. Radial tyres give higher mileage and
improve driving. Despite its introduction in India in 1978, its usage didn’t catch
up because, on the one hand, Indian roads and the geometry of Indian vehicles
were not suitable, and on the other, consumers were unwilling to pay a higher
price for them.
However, the situation has changed radically in recent years. In the
passenger car tyres segment particularly, radial tyres as a percentage of total
production crossed a remarkable 98% in FY10. In the light commercial vehicle
segment, this figure is 18%, while for medium and heavy commercial vehicle
segments, radial tyres constitute up to 12%. Now the radialisation of trucks, buses
and LCV tyres is gaining momentum.

Conclusion
The Indian tyre industry is enjoying strong growth and will continue to do
so in the near future on the back of several demand drivers that include the
countryʹs fast paced GDP growth, growth in the automobile industry, faster
development of road infrastructure, increasing levels of radialisation as well as
growing demand from the OTR segment.
With radialisation still nascent, there is lot of scope in this area. Hence, to
meet the increasing demand for tyres and the need to move towards radialisation,
tyre companies are setting up manufacturing facilities. Global tyre leaders such as
Michelin and Bridgestone are also eyeing India as a hub for radial tyres.
Barring the price crimp in the raw material pipeline, the tyre industry
looks perfectly poised to register impressive growth in the coming years.

Company Section

MRF Ltd.
MRF Limited (MRF) is a well known Indiaʹs No. 1, which was incorporated
on 5th November 1960. The Company manufactures the largest range of tyres in
India and is the market leader with the largest market share in almost every
segment of the tyre industry, product portfolio of the company includes Tyres,
Pretreads and Conveyor Belts. MRF has six manufacturing plants in India. It has a
distribution network of over 2,500 outlets in India and also has overseas offices in
United Arab Emirates, Bangladesh and Vietnam. Apart from the domestic, the
company exports its products to over 75 countries worldwide.
23rd August, 2010
Particulars Quarter Ended Quarter Ended

Jun. 2010 Jun. 2009 % Var. Mar. 2010 Mar. 2009 % Var.
Sales 1924.44 1433.55 34 1767.58 1404.72 26
OPM % 8.51 17.54 ‐51 11.84 12.39 ‐4
PBDT 154.98 248.67 ‐38 197.91 158.15 25
PBT 87.52 188.06 ‐53 142.58 103.07 38
NP 61.59 125.7 ‐51 95.82 68.69 39
As Financial year is ending is in September, Results of latest two quarters is shown.
Ceat Ltd.
Ceat Ltd. is a part of the RPG conglomerate. The company offers the
widest range of tyres to leading Original Equipment Manufacturers across the
world. They manufacture a range of tyres catering various segments. The
company operates two plants in Maharashtra. The company has a robust national
network consisting of 34 regional offices and over 3,500 dealers. The company has
their presence in 110 countries.
Particulars Quarter Ended Year Ended
Sales 772.22 639.06 21 2807.47 2366.49 19
OPM % 5.3 17.13 ‐69 10.82 1.86 481
PBDT 29.06 97.84 ‐70 265.86 ‐11.55 ‐‐
PBT 21.01 91.53 ‐77 238.98 ‐37.17 ‐‐
NP 13.87 60.2 ‐77 161.03 ‐16.11 ‐‐

Apollo Tyres Ltd.
Apollo Tyres Ltd is engaged in manufacturing automobile tyres and tubes.
They are having their manufacturing facilities at Trichur in Kerala and Vadodara
in Gujarat. They are the first Indian tyre company to launch exclusive branded
outlets for truck tyres and also the first Indian company to introduce radial tyres
for the farm category.
Particulars Quarter Ended Year Ended
Sales 1121.27 1180.14 ‐5 5036.56 4070.44 24
OPM % 10.42 16.46 ‐37 15.57 8.01 94
PBDT 91.65 174.59 ‐48 720.97 269.18 168
PBT 57.51 143.44 ‐60 598.19 171.17 249
NP 40.61 94.67 ‐57 414.99 108.12 284

23rd August, 2010
Mahesh Babaria
maheshb@ghallabhansali.com
Mittal Chheda
mittald@ghallabhansali.com

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Ghalla Bhansali Stock Brokers Pvt. Ltd.

23rd August, 2010

Tyres for: 2008‐09 2009‐10 % Change

120000 97136 20.00

80000 70810 69733

2004‐05 749660 406220 54% 349170 46% 755400 68700

Particulars Quarter Ended Quarter Ended

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