A Study on Indian Tyre industry

Under the Guidance of

PROF. SAMIK SHOME

Prepared by:
Finance-D
Group-8
ATISH JAIN (10SBCM0135)

GUNJAN AGGARWAL (10SBCM0267)

JUTHIKA BORA (10SBCM0391)

KAUSTUBH UDGAONKAR (10SBCM0271)

P.V.SARAN KUMAR (10SBCM0526)

A project report submitted in partial fulfilment of the requirements for

the award of the degree of MASTER OF BUSINESS
ADMINISTRATION

2011

1
 PREFACE

The successful completion of this project was a unique experience for us and we
achieved a better knowledge about Tyre industry. The experience which we got
by doing this project was essential to our future. The information in this project
being submitted by us contains detailed analysis of the research undertaken by
us.

The research provides an opportunity to us to devote our skills, knowledge and

competencies during our knowledge gathering sessions of Research
Methodology.

The research is on the topic “TYRE INDUSTRY”.

 ACKNOWLEDGEMENT

The success of any project is the result of hard work & endeavor of not one but
many people and this project is no different. We take this as a prospect to a vow
that it was an achievement to have succeeded in our final project, which would
not have been possible without the guidance of PROF. SAMIK SHOME.

We also express our appreciation and gratitude towards all the faculty members
at Alliance University for making this project a memorable learning experience.

Finally we are thankful to our entire faculty who has given the full support in
collecting the required information and continuous help during the preparation
of the project.

Group-8

Finance-D
 DECLARATION

We, group 8 do here by declare that the project work entitled on the “TYRE
INDUSTRY” is the original work done by us.

This project report presented as a partial fulfilment requirement for the degree
of Master of Business Administration.

GROUP-8

FINANCE “D”
 Table of Contents
EXECUTIVE SUMMARY...........................................................................................................................6
1. INTRODUCTION.................................................................................................................................7
TYRE INDUSTRY IN INDIA.......................................................................................................................................7
ROLE OF GOVT. IN TYRE MANUFACTURING..........................................................................................................9
INDIA VS. GLOBAL.................................................................................................................................................9
MAJOR PLAYERS OF TYRE INDUSTRY............................................................................................................10

APOLLO TYRES.......................................................................................................................10
MRF TYRES............................................................................................................................11
JK TYRES13
CEAT......................................................................................................................................15
OBJECTIVE OF STUDY.....................................................................................................................17
2. LITERATURE SURVEY........................................................................................................................18
3.INDUSTRY ANALYSIS.........................................................................................................................20
MARKET SHARES AND NATURE OF COMPETITION.............................................................................................20
MARKET SHARES...................................................................................................................20
NATURE OF COMPETITION....................................................................................................21
MARKET SEGMENTATION...........................................................................................................................22
S.W.O.T ANALYSIS.......................................................................................................................................25
PEST ANALYSIS..............................................................................................................................................28
MERGER AND ACQUISITION........................................................................................................................33
INTERNATIONAL EXPOSURE (EXPORT & IMPORT).......................................................................................33
TYRE TECHNOLOGY......................................................................................................................................35
MARKETING INITIATIVES.............................................................................................................................38
FUTURE OUTLOOK......................................................................................................................................40
COMPARISON OF TYRE INDUSTRY...............................................................................................................41

4. CONCLUSION...................................................................................................................................43
5.REFERENCES.....................................................................................................................................45
EXECUTIVE SUMMARY

The robust growth in Indian Tyre industry is due to its inclination towards automobiles. We
see a consistent growth in regards to its turnover which is 18 % in the year 2019-20 as
compared to 2014-15. Total tyre production in India accounts to around 85% output in the
global market. The global tyre market currently is estimated at USD 70 billion while the
Indian market is around Rs. 100 million. The global market is dominated by Goodyear-
Sumitomo with a share of 22%. On the other hand, the domestic industry is dominated by
MRF Ltd. Other domestic companies include Apollo Tyres, JK tyres, CEAT, Goodyear.

We have seen drastic changes in the Indian Tyre Industry in terms of research and
development, technological intensity, its diversification, exposure as well as its policies.

Talking about market shares, Apollo Tyres is leading with shares worth Rs. 2842.56 Cr.
which is closely followed by MRF tyres with market shares worth Rs. 2743.73 Cr. Following
MRF, we have BalkrishInd which holds market share worth Rs. 1188.80 Cr., which is
followed by Goodyear, JK tyres, Dunlop, CEAT, Falcon Tyres, TVS Srichkr and Modi
rubber.

Tyres can be used for commercial as well as personal purposes and its market may vary from
original equipment manufacturers, replacement demand as well as exports. There are two
types of tyres: Cross ply tyres and Radial Tyres.
1. INTRODUCTION

Tyres manufactures involves a complex blend of materials and assembly process to produce
thousands of different products used on equipment ranging from bicycle to huge earth
movers. Tyre industry in India divided into 3 parts i.e. large, small and medium and cycle
manufacturer. It includes different tyre ranges for different products.

TYRE INDUSTRY IN INDIA

The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set
up the first tyre company in West Bengal. MRF followed suit in 1946. Since then, the Indian
tyre industry has grown rapidly.

In the pre-Independence period, the tyre manufacturers were mainly foreign companies. Raw
material in the form of natural rubber was easily available and labour was cheap. Sometime
in 1956, based on the recommendations of the Tariff Commission, the Government
encouraged domestic companies to set up their manufacturing facilities. A number of
companies set up their plants in India, usually with technical support from foreign companies.
Over a period of time the tyre industry was dominated by Indian players. After the onset of
liberalization a few foreign companies entered India. However, they were not able to make a
dent in the market share of Indian companies. Some foreign companies like Michelin,
Continental Tyres and Pirelli are planning to enter India in the near future. Over the last few
years, import of tyres into India from countries like China, South Korea and Thailand has
been on the rise. The tyre manufacturers feel that due to the inverted duty structure foreign
tyre manufacturers have an unfair advantage.

The Indian tyre industry has grown over the last ten years. The reasons for growth are the
robust growth of the economy and the automobile industry. Besides domestic growth, there
has been a smart growth in the export of tyres also. The future is likely to see more growth in
exports as the supply of natural rubber goes down. It is expected that the Indian tyre industry
will have a very bright future.

Transportation industry and tyre industry go hand in hand as the two are interdependent.
Transportation industry has experienced 10% growth rate year after year with an absolute
level of 870 billion ton freight. With an extensive road network of 3.2 million km, road
accounts for over 85% of all freight.

Demand for tyres is derived from demand for automobiles. Therefore it is a derived demand
product and its fortunes are very closely linked to those of the auto segment. Within the tyre
industry the trucks and buses (T&B) segment accounts for more than 70% of sales. Though
scooters and motorcycle tyre demand also plays a vital role, in value terms, CVs gain
significance.
Tyre Industry turnover from 2014-2015 to 2019-2020 has been grown up from Rs.13500 Cr.
to Rs.25000 Cr. i.e. 85.18percent growth has been observed. But in 2014-2015, there were 47
tyre factories which got reduced to 36 in 2019-2020.Top seven large companies in India
account for 85% of total tyre production around globe1.

Segmentation for tyre industry can be as follows:

1. Replacement Market (Aftermarket)

2. Original Equipment manufacturers (OEM) i.e. Vehicle manufacturers
3. Export
4. State transport undertakings. (STUs) Primarily for bus tyres
5. Govt. purchases.

From above segments also there are, three major consumer segments for tyres namely
replacement segment, (OEMs) and exports. Though fortunes of the sector are closely tied
with the automobile industry, replacement demand continues to remain the key growth driver.
Replacement demand accounts for as high as 57% of industry volumes. However, the
contribution from OEM and replacement segments varies across sub segments in the auto
sector. For instance, for the passenger car segment, demand is balanced from replacement and
OEM categories i.e. 50:50.

Another key transition that is taking place in the industry is the entry of multinationals like
Good Year, Bridgestone and Michelin in the domestic market. MNC tyre makers have
cornered a higher market share in India in the last three years due to their international
relationships apart from superior technology. Since Honda, Hyundai and Toyota have an
international sourcing agreement with Bridgestone; it is also the preferred supplier in India.
Goodyear is believed to be the preferred supplier for Ford India.

Some technological information regarding tyre manufacturing:

There are total 16 different types of tyre technologies producing 16 different types of tyre
technologies got upgraded from 19th century till now. Latest technology involves

1. Run flat (Puncture proof)

2. Green tyres (Environmental friendly)
3. Fuel Economy tyres.

1
ATMA
 ROLE OF GOVT. IN TYRE MANUFACTURING2

1. Bureau of Indian standards (BIS) has prescribed standards for various categories
which are voluntary in nature.
2. Govt. of India come up with safety standards for tyres
a. Formulation of AIS(Automotive Industry Standards)
b. Mixture of AIS & BIS for BIAS and Radial type tyres
3. BIAS: Cotton, Teflon, and Rayon plies are used as main reinforcing materials.
4. RADIAL: help to overcome problem of high heat development and poor life radial
technology came into existence. Plies are made highly flexible by keeping the cords
(threads of primary material) at go and inextensible (stiff) belts were place on the top
of the carcass under thread.

5. Government of India came to consensus for regional trade agreements which is an

outline with reference to tyre industry.3

INDIA VS. GLOBAL

The global tyre market currently is estimated at USD 70 billion while the Indian market is
around Rs. 100 million. The global market is dominated by Goodyear-Sumitomo with a share
of 22%. On the other hand, the domestic industry is dominated by MRF Ltd. Several mergers
and acquisitions have characterized the global market, in the recent past. This is essentially to
acquire technology, gain wider access to markets and be competitive. Indian players are also
reengineering their businesses and looking at strategic tie-ups in this segment.

In terms of technology, radial tyre usage has been catching up at a quick pace in the global
market. Almost all the automobile segments have shifted to radial tyres and the usage of cross
ply is restricted to trucks and buses only. On the other hand, in the domestic market, the
radial tyres are being used only in the passenger car segment while the rest of them still stick
to the cross ply variety. This is because of the lower price of cross ply and its re-treadability.
In addition, the poor quality of roads in India restricts the use of such tyres.

2
www.cci.gov.in
 MAJOR PLAYERS OF TYRE INDUSTRY

Indian tyre industry have the following major key players:

APOLLO TYRES

Apollo tyres Ltd. is leading player in Indian tyre industry and also contributes major part in
global tyre industry. Apollo tyres Ltd. got established on 1976 in state of Kerala, southern
India.

Company Snapshot:

 Turnover of the company- US$ 1.74 billion

 16000 Employees are working currently
 They manufacture 9 facilities of tyre in 3 continents Asia, South Africa and Europe,
with 3 headquarters at India, South Africa and the Netherlands.

Brand Portfolio of Apollo tyre can be given as follows:

1. Apollo- Global brand catering to Vehicle across categories.

2. Vredestein- Global niche brand for passenger and speciality tyres.
3. Dunlop - Brand for 32 African countries across categories.

(Dunlop marks are licensed to Apollo tyres South Africa which is wholly owned
subsidiary of Apollo tyres ltd. in 32 countries in Africa).

4. Kaizen Tyres - Global challenger brand for trucks tyres.

5. Maloya Tyres- Global challenger brand for passenger car tyres.
6. Regal Tyres - Global brand truck- bus and passenger car types.

Product Portfolio of Apollo tyres:

1. Passenger car
2. 4x4
3. Light Truck
4. Truck and Bus
5. Bicycles
6. Agriculture.
7. Off the Road & Earthmover.
8. Speciality tyres.
 MRF TYRES

MRF Limited is one of India's world class manufacturing companies. The company,
established in 1946, progressed into manufacturing tread-rubber and entered into the
manufacture of tyres in 1961. MRF now enjoys the distinction of being the largest tyre
company in the Indian subcontinent and 12th largest in the world. The Far Eastern
Economics Review's annual 'Review 200' has consistently rated it amongst India's top 10
companies.

MRF operates six grant tyre manufacturing plants in India. Relevant ISO quality certification
has been awarded to its entire tyre manufacturing plants. The company manufactures the
largest range of tyres in India-heavy duty truck/bus tyres, light commercial vehicle tyres,
passenger car tyres, off-road industrial tyres, two-wheeler tyres, farm service tyres and motor-
sport tyres to cater to every segment of the tyre market. MRF is the only Indian company to
put its expertise into the manufacturer of F3 tyres for the motor racing circuit. Maintenance of
high quality standards and constant innovation has become synonymous with the
organization, giving all products the unique status of highest brand preference in India for
their superior quality and performance.

In a fitting tribute, MRF has been rated by JD Power Asia Pacific, as #1 in customer
satisfaction for tyres in India for the year 2002.The MRF R&D team has made great strides in
developing radial tyre technology for Indian roads based on its Cross-Ply technical
competence. MRF has laid great emphasis on strong R&D and continuous product up-
gradation, which has led to the successful development of the unique tyre technology for
Cross-Ply Tyres to suit the tough service conditions of Indian roads.MRF tyres are today
acknowledged as premium products in overseas markets where they compete with
international tyre majors. With its focus on exports, the company plans to increase market
share and start operations in several new countries. The company has recently opened
representative offices in Dubai, Vietnam, Bangladesh and the USA to help increase its market
share and also intends to make forays into several new markets.

MRF's interests now extend beyond just the manufacture of tyres into Procured Tread Rubber
and into the area of material handling with its 'Muscleflex' Industrial Conveyor Belting.The
pioneer of motor racing in India, MRF is also the winner of several rallies in Asia. The
organization's commitment to motor racing, serves as a reliable test-base, wherein the
performances of MRF tires is tested in rigorous competition with international brands. In the
Asia Zone Rally Championship, the MRF rally team has won in India, Malaysia, Thailand
and China on MRF tires.

To bolster India's capabilities in cricket, MRF introduced a novel concept, the MRF pace
Foundation. This institute, under the aegis of the legendary pace maestro Dennis Lillee of
Australia, has been grooming youngsters in the art of pace bowling for the past 15 years.
Besides, the two premier batsmen in the world cricket, Sachin Tendulkar and Brian Lara are
the brand ambassadors of MRF.

MRF Ltd. is the first Indian company to export tyres to the US, the very birthplace of tyre
technology. It is the first company in India to manufacture and market Nylon tyres passenger
tyres commercially. In 2004, the company's turnover crossed INR 30 billion mark. The
company was given the title of most ethical company by 'Business World' magazine after a
survey conducted in 1999.

Products

 MRF is the leading manufacturer of tyres in almost all segments.

 Being driven by technology and product innovation, every tyre that comes out is of
the highest standards and tested to weather the toughest conditions take on any road.
 MRF has diverse business interests which also include Pretreads, Paint and Coats and
Toys.

Services

 MRF offers a whole host of services to its customers, ranging from helping them pick
the tyre of their choice to helping them maintain their vehicle.

Exports

 MRF exports tyres and conveyor belts to over 65 countries in America, Europe,
Middle East, Japan and the Pacific region.
 These markets are serviced by our offices in Dubai, Vietnam and Australia.
 JK TYRES

The company was incorporated as a private limited company in West Bengal in 14th
February, 1951. Until 31st March 1970, the company was engaged in the managing agency
business.

Thereafter the company decided to undertake manufacturing activities and obtained a letter of
intent in February 1972 for the manufacture of automobile tyres and tubes. The letter of intent
was converted into an industrial license In February 1974 for the manufacture of 4 lakh nos.
each Automobile tyre and tubes per annum. The company was converted into a public limited
company on 1st April 1974. The manufacturing project was promoted by Straw Products Ltd
and J.K. Synthetics Ltd. The company entered into technical collaboration with General Tyre
International Co., U.S.A.(a subsidiary of General Tyre Rubber Co., U.S.A.) for technical
services for a period of 5 years and sales agreement for the supply of technical know-how,
engineering and documentation for operational facilities (for A period of 8 years from
23.8.73). Under the collaboration agreement, the Company has the right to use on its products
the wording Made in collaboration with General Tyre International Co., USA.

Mr.Hari Shankar Singhania, the President of J K Organization and Chairman President of JK

Organization and Chairman of JK Tyre & Industries Ltd are a renowned business leader in
India. He has been bestowed the prestigious national award "Padma Bhushan" by the
President of India

He has been the President of International Chamber of Commerce (ICC), Paris, being the 2nd
Indian and3rd Asian in the last 80 years and has made significant contributions in national
and international business arenas. Recognizing his contribution to Indo-Swedish business
relations, the King of Sweden honoured him with "Royal Order of Polar Star" one of
Sweden's highest awards. His vision, dynamism and charisma is steering JK Tyre to greater
heights.

Dr.RaghupatiSinghania is the Vice Chairman & Managing Director of JK Tyre & Industries
Ltd. His vision and entrepreneurial zeal have revolutionized the Indian Tyre Industry - from
introducing Radials in India to setting up world-class R & D facilities. He has put India on
the Motorsports map of the world by promoting and supporting the sport. Apart from being
associated with many Apex Chambers and many government bodies, Dr.Singhania's
illustrious career is studded with numerous prestigious recognitions and awards.
J K tyres is economical Jetar mile is one of the best mileage tyres in JK, LCV of JK is also
better .Four wheeler tyres of JK is best customer prefer JK tyres than any other tyres in four
wheeler segment JK is best in 4w tyres Services 4 wheeler tyres is better than any other
branded tyres product of Four wheeler is costly steel customer prefer JK due to their service.
Other CEAT is ahead in giving consumer scheme and offer CEAT is also ahead in adverting
sector. Apollo focus on seminar conduct seminar time to time and occasionally give parties to
particular class also Birla - is new in Akola market and their carrying and forwarding agent is
also new JK is behind in all the aspect regarding seminar adverting parties. The officer of
different companies in tyres industries they are very care less specially the carrying and
forwarding agent they all will come in 3-4 months because off that they don’t know taste of
consumer they don’t conduct seminar for consumer less schemes for consumer specially JK.

Consumers are also complaining that all the companies adopting careless attitude to settle
claim for consumer. They are all suggesting that if company wants to achieve their target
policy for particular city then they all have to focus on consumer need speedy claim
procedure .If they will hammerize consumer mind by taking their feedback giving schemes
time to time and advertising regularly .In Akola market all the commercial terms are
important which necessary for selling are and achieving the market leader position but one of
the major important terms is giving the credit facility. The market of Akola city mainly runs
on credit facility with one month site to pay Cash discount is also there with 6% on MRP.
 CEAT

CEAT Limited is a tyre manufacturing company based in Mumbai,India.CEAT standards for

Cavi Electric AffiniTorino(Electrical Cables and Allied Products of Turin).The tagline is
“Take it on”.CEAT is one of largest tyre manufacturers in India and Srilanka with an annual
turnover of Rs 2,760 crores and has about 20% of the local truck and light truck tyre market.

CEAT manufactures a wide range of tyres for various customers radials for Indian vehicles
and caters to various user segments including

 Heavy-duty Trucks and Buses

 Light commercial vehicles
 Earthmovers
 Forklifts
 Tractors
 Trailers
 Cars
 SUVs
 Motorcycles and Scooters
 Auto-rickshaws

It exports to over 110 countries across the world.in April 2007 the de-merger of its
investment business to a separate investment and finance company was approved.CEAT is
only tyre company to be awarded the ISO/TS 16949:2002 certification.It is also the 1st Indian
tyre company to get a TUV certificate.

Market share:

In 2018 CEAT manufacturer has market share 428.86 crores (4.3048%) and in 2019 market
share 414.13 crores (4.336%) in 2020 market share 403 crores (4.226%).By observing
this,we can say that market share decreases (negligible portion)

Nature of competition:

CEAT company have many features than other companies in market.Interms of tyre trade in
world,chia has become the world largest tyre export country in 2014.Tyre industry has more
demand this leads to more competitors. This can be given as follows.

 Most of the players have their respective areas of strength

 HHI indicated diversity in player concentration ratio between segments and industry
 Apollo continued to dominate T&B category
 Appollo surpassed MRF to become leader in car&jeep category
 MRF continued to hold leadership position in LCV category
 MRF dominated two and three wheeler category tyres
 Goodyear remained market leader in tractor tyres
  MRF,CEAT and JK are the market leaders in OTR category

Competition exists between various companies as already given like large scale and small
scale from 2004 the demand for tyres increases so many companies came with various special
features for tyres.CEAT company competing with others as,it manufactures a range of tyres
or trucks and buses(T&B),light commercial vehicles(LCVs),passenger cars(PCs),tractors and
trailors,two and three wheelers,off the road (OTR)vehicles and industrial vehicles. This
company also markets tubes and flaps which are outsourced from its partners.

Market Segmentation:

Tyre industry segmentation mainly based on user expectations. This can be given as follows.

Vehicle categories

 Commercial usage
 Personal usage

Markets

 Original Equipment manufacturers(OEMs)

 Replacement Demand
 Exports

Design

 Cross-ply tyres
 Radial tyres

Consolidation:

 To improve the growth companies are merge with others.CEAT mergers are
 Associated Ceat Holdings Co.(pvt.) Ltd on 4th June Takeover as its deal type, with
same company on July 8th.
 Ceat ventures Ltd. as merger,Ceat Holdings Ltd.on 24th sep 2005
 Meteoric Industrial Finance Co.Ltd.
 Harrisons Malayalam Ltd. On 19th march 2003 sale of asset as deal type
 Murphy India Ltd. On 31st march 1980

Above all are various mergers for CEAT and these are used to get good position for
company now a days.

International Exposure:

CEAT company exports tyres to nearly 112 countries across America, Europe, Africa, and
other Asian countries. Company increased its stake in its Sri Lankan investment arm from
18% to 54.84% by purchasing the entire stake of its Sri Lankan Partner. As a result of this,
CEAT investment arm-associated CEAT holdings company (private) Limited has become its
subsidiary.

From five world-class plants, three in India and one in Sri Lanka, we manufacture a wide
range of tyres for all user segments including trucks, buses and LCVs. We also export farm ,
industrial, grader, OTR , car, scooter, auto-rickshaw, motor cycle and passenger car radials.

OBJECTIVE OF STUDY

The objective of this research is

to conduct an extensive analytical study on the various features of the Tyre Industry

which would enable us to put forth our research views on different aspects such as
framework, growth, development, research & development etc.

This would finally empower us to foresee India’s standing in global market.

2. LITERATURE SURVEY:

(Kaur, 2010)4 analysed that The last two years have been the toughest for the Indian tyre
industry with continuing slump in the market of commercial vehicles which sustains the
domestic tyre industry and the spurt in the prices of Raw materials. As a result, India’s tyre
industry is re industry not likely to lift itself out of its recession for some more time as the
market shows no signs of any dramatic recovery. The recession seems there to stay for a
period of time and to ensure the domestic tyre industry does not succumb under the pressure
it is important for the government to take immediate effective steps will the economy is back
on the road of recovery.

(S MohanaKumar & TharianGeroge K , 2001)5 come to conclusion that, The emerging

trends in production, export and imports of major categories of tyre in the post reforms phase
till 1996- 97 . The analysisindicate that there are well defined limitations in sustaining the
domestic demand driven export growth to reap the advantages of scale economies. Despite
the boom in the exports in the initial phase the exports of truck and bus tyres has a percentage
of its production has declined from its pick level of 33.87 % in 1994- 95 to 21.49 % in 1996 -
97.

(ATMA,2004)6 Summed up on accelerating radicalization in commercial Vehicle segment

facilitated by reduction in customs duty on steel tyre cord and polyester tyre cord to 10%,
from existing level of 20 %. The practice of embossing of MRP on truck and Bus tyres
should be allowed to be done. Reduce excise duty on tyres from existing 24% to 16% in the
next union budget. They imposes a complete ban on import of used tyres, raw materials of
tyres should also be eligible for concessional customs duty under Bangkok Agreement of
preferential customs duty under regional trade agreements. Automotive Industry standards
(AIS) should be merged with BIS. They ensure that non tariff barriers (NTBs) on Indian tyres
are removed and reciprocal agreements for acceptance of national standards are entered into.

(Iyer & Upadhyay 2004)7 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 in a span of four
decades. R&D in the Indian tyre industry, is basically geared towards applied research,
involving the development of new designs in different segments, the changing of tread
design, reinforcement material, compound development, cost optimization for quality
improvements and orientation towards changing customer requirements. This paper attempts
to map the broad contours of technology generation and absorption in the Indian tyre
industry, through an emphasis on the socio-economic determinants driving the nature of
R&D, thrust areas and the collaborative activities of firms, the nature and extent of

4
Impact of recession on tyre Industry
5
Impact of reforms on tyre Industry
6
7
Indian Industry tyre report
R&D Activites in Indian Tyre Industry
automation and its impact on the organization of the production process, the increased quality
on consciousness and its repercussions on in-house R&D and the impact of Liberalization
and its influence on broad strategic options for the future.

From Effect of tyre overload and inflation pressure on rolling loss (resistance) and fuel
consumption of automobiles and trucks/bus tyres (Padmanabha S Pillai (October 2004))
demonstrated that the direct proportionality between R (rolling resistance) and W (Tyre
Load) and the inverse relationship between R and P were quantified as R= C1W and R= C2
1/ p^0.5 respectively Where P= Pressure , C1, C2 = constant.
3. INDUSTRY ANALYSIS:

MARKET SHARES AND NATURE OF COMPETITION

Nowadays in INDIA Tyre industry place a major role. Tyre industry mainly involves Raw
material intensive and Tyre manufacturing. It produces all categories of Tyres based on
demand except snow Tyres and aero tyres . 55% of production is for replacement market
followed by 29.8% sold to OEM (Original equipment manufacturers) directly and the
remaining is exported. Tyre includes different components using raw materials that must be
assembled and processed to achieve right balance between factors like grip,
energy,handling,comfort etc..

MARKET SHARES:

Tyre industry involves various companies based on their performance they are divided into
large scale companies and medium and small scale companies .Large scale companies are
APOLLO Intl , APOLLO Tyres , Balkrishna industries, CEAT , Falkon Tyres, Good Year
India, JK Tyres ,MRF, Falson(INDIA) , Falson Industry, TVS etc.. Mesium and small scale
are Dewan Tyres , Dunlop, Modi rubber ,Modi stone, Raam Tyres, Surya INDlA. corb, Tyre
corp(I)etc. The market share is different for different companies based on their performance.

TABLE 5.1 Market Share of top players in Indian Tyre Industry of 2010 and 2011

Company name 2019 2020

APOLLO TYRES 20% 25%
MRF 18% 22%
BALKRISHIND 7.9% 6%
GOODYEAR (I) 3.8% 2.5%
JK TYRE & IN 3.4% 4%
DUNLOP (I) 3.2% 3%
CEAT 2.6% 2.7%
FALCON TYRES 2.4% 3%
TVS SRICHAKR 1.4% 1.6%
MODI RUBBER 1.2% 2%
FIG.5.1: MARKET SHARE OF MAJOR KEY PALYERS OF TYRE INDUSTRY

NATURE OF COMPETITION

Interms of tyre trade in the world,China has become the world largest Tyre export country in
2014. Tyre industry has more demand this leads to more competitors.

Players And Competition

 Most of the players have their respective areas of strength

 HHI indicated diversity in player concentration ratio between segments and industry
 Apollo continued to dominate T&B category
 Apollo surpassed MRF to become leader in car & jeep category
 MRF continued to hold leadership position in LCV category
 MRF dominated two and three wheeler category tyres
 Goodyear remained market leader in tractor tyres
 MRF, CEAT and JK are the market leaders in OTR category

Competition exists between various companies as already given like large scale and small
scale.From 2014 the demand for tyre increases so many companies came with various special
features for tyres from APOLLO tyres company to MODI rubber company
 MARKET SEGMENTATION

These are the major segments where the Indian tyre Industry is categorised :

Vehicle Categories

 Commercial usage
 Personal usage

Markets

 Original Equipment Manufacturers (OEMs)

 Replacement Demand
 Exports

Design

 Cross-ply tyres
 Radial Tyres

Based on present conditions of tyre (demand0 the segments are existed as above given
different types.Segmentation by tyre suppliers place a major role in segmentation criteria .
This can be given as follows

1. Replacement market
2. Original equipment manufacturers.(Vehicle manufacturers)
3. Expert
4. State transport undertaking(STU) i.eprimarily for bus tyres
5. GOVT purchase.

Upto 2004 the tyre industry don’t have present existence demand but after 2004 demand
increases so market share is different for various companies with respect to competition and
market segmentation.
8
MAJOR SALES SEGMENT:

Fig.5.2

8
Capitaline database
SALES SEGMENT Fig.5.3
 S.W.O.T ANALYSIS

Strengths

 Established brand names (key in the replacement market)

 Extensive distribution networks - For example,
 Apollo Tyres has 118 district offices, 12 distribution centres and 4,250 dealers
 Good R&D initiatives by top players

Weaknesses

 Cost Pressures - The profitability of the industry has high correlation with the prices
of key raw materials such as rubber and crude oil, as they account for more than 70%
of the total costs
 Pricing Pressures- The huge raw material costs have resulted in pressure on the
realisations and hence, the players have been vouching to increase the prices,
although,
 Due to competitive pressures, they have not been able to pass on the entire increase to
the customer
 Highly capital intensive - It requires about Rs 4 billion to set up a radial tyre plant
with a capacity of 1.5 million tyres and around Rs 1.5-2 billion, for a cross-ply tyre
plant of a 1.5 million tyre-manufacturing capacity

Opportunities

 Growing Economy - Growing Automobile Industry

 Increasing OEM demand - Subsequent rise in replacement demand
 With continued emphasis being placed by the Central
 Government on development of infrastructure, particularly roads, agricultural and
manufacturing sectors, the Indian economy and the automobile sector/ tyre industry
are poised for an impressive growth. Creation of road infrastructure has given, and
would increasingly give, a tremendous fillip to road transportation, in the coming
years. The Tyre industry would play an important role in this changing road
transportation dynamics
 Access to global sources for raw materials at competitive prices, due to economies of
scale
 Steady increase in radial Tyres for MHCV, LCV
Threats

 Continuous increase in prices of natural rubber, which accounts for nearly one third of
total raw material costs
 Cheaper imports of Tyres, especially from China, selling at very low prices, have
been posing a challenge. The landed price is approximately 25% lower than that of
the corresponding Indian Truck/ LCV tyres. Imports from
 China now constitute around 5% of market share
 PEST ANALYSIS

POLITICAL:

At government level, it seems that some ambiguity exists. It also seems that measures to
regulate the waste - including post-consumer tires - are the main one being set up as "reflex"
reactions, and with an eye toward securing political capital. This means that awareness and
ways to tackle a simple waste question will be preferred solutions' low-key, and perhaps more
effective. Once in service, plants or processes such as these may well be kept running to a
"net deficit of the environment "to avoid political embarrassment - even if this results in the
"poaching" of raw materials from the waste conversion options ahead of the hierarchy. The
goal now seems to be much on reducing vehicle use, as opposed to the optimal use of scarce
resources. Producer responsibility has so far ignored the tire industry, which is treated as a
part of automobile manufacturing as a whole. However, it moves to incorporate this fact
concept in legislation, safeguards should be established for "blocks" the proportion of
discarded casings for retreading - and also how these would be shared between the
manufacturer's own tire retreading operations in-house and independent retreading facilities.

ECONOMIC:

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.
9
TABLE 3.1:INDIAN TYRE INDUSTRY PROFILE

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

9
ATMA
TABLE 3.2:CATEGORIES OF TYRES

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 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
SOCIAL:

In terms of procurement, corporate fleet and transport managers are very low in
organizational hierarchy. There is now a "blame culture" which tends to mitigate against any
risks. So in terms of "packaging", supported by the financial benefits adherence to proven
safety standards and quality would be required to overcome resistance. Although private
consumption is more sensitive to environmental issues than ever only a small minority will
actually make purchasing decisions based entirely on these criteria. However, "the image of
the environment" could provide a justification for the purchase, if supported by safety and
appropriate quality assurance standard. In a twist of others on the same topic, consumers - as
residents and special interest groups - are more willing to get involved in environmental
issues to a policy level.

TECHNOLOGY:

R&D: Most of the major players do not engage in basic research due to the high costs
involved. The source of technology for the domestic firms has been through reverse
engineering, joint ventures and collaborations. The emphasis given by Indian tyre companies
to applied research and the setting up of well-equipped in-house R&D centers by the
companies, which are manned by experts and experienced professionals, have also helped in
technology upgradation. Indian tyre technology has exhibited versatility in maintaining
inflow of technology through foreign collaborations and tailoring the same to Indian needs.
R&D is essentially business or market driven. The emphasis given by Indian tyre companies
to applied research, the setting up of well-equipped in house R&D centres by large tyre
companies, manned by experts and experienced professionals have also helped in technology
upgradation. Indian tyre technology has exhibited versatility in maintaining inflow of
technology through foreign collaborations and tailoring the same to Indian needs.

Automation: The production system in the Indian tyre industry has been traditionally very
labour intensive. The firms have been resorting to automation in order to tackle problems
related to labour unionization and indiscipline in the sector. The rationale provided by the
firms for the increasing drive towards automation of the manufacturing facilities has been
that high quality and uniformity of the final product usually cannot be guaranteed with a
labour intensive process.

New Policy Initiatives

 No WTO bound rates for Tyres and Tubes

 No restrictions on the import of all raw materials required for tyre manufacture except
carbon black, which has been placed in the restricted list
 Increasing thrust on development of road infrastructure
Rate of Technological Change:

The Indian Tyre industry is expected to show a healthy growth rate of 9-10% over the next
five years, according to a study by Credit Analysis and Research Limited. While the truck
and bus tyres are set to register a compounded annual growth rate (CAGR) of 8%, the light
commercial vehicles (LCV) segment is expected to show a CAGR of about 14 %. However,
we have to also take account of the effect of the global recession on the sector in making
these assessments. The growth of the sector is closely linked to the expansion plans of the
automobile companies, the government’s thrust on development of road infrastructure and the
sourcing of auto parts by the global Original Equipment Manufacturers (OEMs).
 MERGER AND ACQUISITION

 Ceat Industry will open its acquisition in European, African, and Latin American
countries.
 JK Indus. Recent acquisition in Mexico
 Ceat Industry of Sri Lanka plans to expand the production to 20 percent.
 Apollo tyres signs supplementary MOU foe Chennai radial tyres.
 Apollo tyres has laid the foundation stone of OTR plant at Limda (Gujarat).
 Ceat plans to setup a 36 lakh radial tyre facility.
 Apollo, Ceat, MRF, and JK Indus. Plan to expand the capacity to compete
Internationally.
 MRF reopened its Thiruvottiur facility.
 JK Indus. Of Mysore truck and bus radial expansion project to commence production
by June 2011.
 Apollo tyre ties up with RahimaFrooz group to enter Bangladesh market.

INTERNATIONAL EXPOSURE (EXPORT & IMPORT)

 Indian tyres have good acceptance in global markets

 Compounded Average Growth Rate (CAGR) of tyre exports in the last one decade
has been 8%
 Exports to over 65 countries worldwide.
 17% export to highly quality conscious US market. Other major export markets are -
(countries in) Latin America UAE, Bangladesh, Iran, Philippines, Vietnam, etc.
 Over 20% of truck and bus tyres (bias) produced domestically are exported. Emphasis
now is on export of radial tyres, including Passenger Car radial tyres.
 All large tyre companies are exporting as a long term commitment.
 Truck and bus tyres account for over 65% of tyre industry turnover in India (in terms
of value and tonnage). Hence, demand for truck and bus tyres is a true indicator of the
performance of Indian economy in general and also the tyre industry in India.

The exports from the country clocked a CAGR of 13% in unit terms and 18% in value terms
in the period FY 02ª07. Most of these tyres that are exported are of cross ply design. With
radialisation catching up in some of these markets, the manufacturers will need to graduate to
radial tyres so as to protect their share in the export market. Radialisation of tyres is still
minimal in India. Only the car tyre market has moved to radial tyres (95%) but in all other
categories cross ply tyres are still preferred. Poor road conditions, overloading in trucks,
higher initial cost of radial tyres and poor awareness levels in tyre users are the main reasons
for the non transition of the domestic market to radial tyres. However, going ahead,
radialisation in truck & bus tyres may increase due to government’s focus on infrastructure
development.
During the first six months of its current financial year, India produced some 28 per cent
more tyres than a year earlier. Data from national industry organisation the Automotive Tyre
Manufacturers Association (produced using information supplied by its eight member
companies, who account for around 90 per cent of the country’s tyre production) states that
9.53 million tyres rolled out of ATMA member factories in India between April 1 and
September 30 this year; in the same months of 2009 just 7.44 million tyres were produced.
According to ATMA, production increased across all tyre market segments, the largest
expansion being seen in the motor scooter segment, where production grew 67 per cent year-
on-year. Passenger car tyre production in India increased 41 per cent to 2.09 million, while
light commercial vehicle and truck/bus tyre production grew two and five per cent
respectively. A total of 1.27 million truck/bus tyres were produced in the April to September
period.

Export quantities also rose during the half-year. ATMA figures indicate an 18 per cent year-
on-year increase in overall tyre exports between April and September, although exports of
light commercial vehicle and truck/bus and tractor tyres were lower than a year earlier, the
two segments declining five per cent and 16 per cent respectively. On the other hand, exports
of Indian industrial tyres shot up 1,956 per cent, with 9,156 tyres exported in the first half of
the financial year, as opposed to merely 445 tyres a year earlier. Two-wheeler/moped tyre
exports increased 456 per cent to 3,100, while passenger car tyre exports grew 26 per cent.

Exports likely to grow10

Tyre exports are increasing consistently, with tyres being exported to over 65 countries
worldwide. Tyre exports grew at a CAGR of 11%, over FY1994 to FY2006. With the
government providing various export incentives and with good demand overseas, we expect
exports to add to the growth of the tyre companies.

In 2004-05, exports witnessed a growth of 26%; however, the estimate for 2009-10 is a
growth of 19%, which is a little slowdown from the last 3 years growth rates.

Imports of tyres

Cheaper imports of tyres, especially from China, South Korea, Japan, Thailand and
Indonesia, which sell at very low prices, have been posing a challenge to the industry. India’s
signing of the Bangkok agreement with ASEAN countries, in October 2003, intensified the
import threat, as this agreement provided for preferential customs duty of 15% for imports
from China and South Korea, along with Sri Lanka and Bangladesh, asagainst the standard
rate of 20%. This led to a gush of imported tyres from these countries. The landed price is
approximately 25% lower than that of the corresponding Indian Truck/LCV tyres. Imports
from China now constitute around 5% of the market share.

10
www.careratings.com/content/ResourceCenter/reports/TOC-Tyre.pdf
 TYRE TECHNOLOGY

From the end of 19th century to till now there is drastic change in types of tyre. Each type of
tyre consists of different type unique features, technology and different type of strength
holding capacity.

Types of tyres and technology used for it, is as follows:

1. Tyre with cotton (reinforcement) Carcass:

This is 1st popular type of tyres used worldwide in starting phase of proper bias and
cross ply tyres. Cotton plies were used as main reinforcing material. Cotton
reinforcing material had inherent problems of low strength and high moisture re
gainer. Leading to large number of plies to get the requisite casing strength for the
tyre weight of the tyre and poor heat dissipation. This gave adverse impact on tyre
weight and buck rendering poor performance.

2. Tyre with Rayon (reinforcement) Carcass:

To overcome with the problem of poor performance of the cotton reinforcement tyres,
new type of tyre became more popular in which development of Viscose and Rayon
are used which give much better strength to tyres. Since less number of piles were
needed to match cotton strength, concept of ply rating developed. It is also possible to
have higher ply ratings now.

3. Tyre with Nylon (reinforcement) Carcass:

In this type of tyres reduction of number of piles is done with development and
introduction of Polymide i.e. nylon for strength and flexibility. This development
substantially improved the heat and impact resistance of the carcass leading to better
tyre performance and higher durability. Nylon casing gave a boost to retreadability.
Thus effective cost of the tyre in operation became much more economical.

Development of Tyre Technology due to change in Reinforcing material is basically

in the case of Cross Ply or Bias Tyres. Bias tyre has cotton, Rayon or Nylon Cords,
bound as plies and each ply (i.e. Cords) cross each other at a definite angle anchoring
at the bead.

4. Radial (Construction) Tyre- Textile/ Textile Belt (Rayon/Nylon/Polyester)

Bias tyre technology has major disadvantages like tyre with bias technology have
inherent problem of high heat development and poor life.

Radial technology came into the existence in 1950’s. In this type, piles were made
highly flexible by keeping the cords at 90 degrees and in order to improve tyre life,
inextensible (stiff) belts were placed on the top the carcass under thread. This led to
stiffer tread portion, leading to higher Tread life (Mileage) and much more
 comfortable ride due to flexible carcass. This was the beginning of 'Revolution' in tyre
technology.

Initially these types of tyres were introduced with casing piles as well as belt material
of textiles.

5. Radial (Construction) Tyre - Textile/Steel belts:

Once steel tyre got developed it found its immediate application in Belt material,
keeping casing plies of Textile, to further improve durability.

6. Radial (Construction) tyres- textile/ grass fibre belts:

Similarly, development of glass fibre which is practically inextensible, led to

application in passenger and Light Commercial Vehicle tyres with Textile Casing,
providing corrosion free radial Tyre belt material.

7. Low Aspect Ratio (Cross Ply or Bias) Tyre:

A new concept of low aspect ratio (ratio between section height and section width) of
the tyre in cross ply construction was introduced for higher speed and better
performance.

8. Tubeless Tyre (Cross Ply):

Concept of tubeless tyre in cross ply construction wherein an inner liner compound
based on chlorobutyl or Halo Butyl which is impermeable to gases, was introduced
eliminating the usage of tubes. This concept could not find sustained application in
India due to bad roads and poor handling/maintenance of Rims other than in OTR
range. However, Tubeless tyres are produced for Export Market.

Gradually this concept will become fully acceptable with the advent of new
generation vehicles and improved service facilities.

9. Radial (Construction) Tyre - Textile/Aramid Belt:

Due to poor roads and inadequate vehicle maintenance, Steel belts had corrosion
problem due to cuts and chips in the tread. This led to trials with Aramid belt (Textile
material with very high strength and Low extensibility).

However, this could not find any sustained use.

10. Radial (Construction) Tyre - All Steel:

In developed countries, Radial Truck/Bus tyres use steel wires in casing as well as in
Belts to achieve the optimum advantage of radial construction. In India also this
construction was tried since late 1970s by Indian Companies using tyres of
collaborators. This could not succeed.
 Indian companies started experimentally since late 1980s (themselves or with
collaborators) which continues and the product has found gradual entry into low load
application.

11. Tubeless Tyre - Radial Construction:

As in the case of Bias Tyres, the concept of tubeless tyre was extended to radial
construction and introduced in later half of the century in Developed countries. A
tubeless tyre not only has tube eliminated but provides for smoother ride and vehicle
handling. This is slowly entering into the Indian market with the advent of new
generation vehicles.

12. Low Aspect Ratio - Radial (Construction) Tyres:

The concept of low aspect ratio tyre, after gaining the experience from cross ply
construction, was introduced in Radial construction also. The present trend of tyre
development for high speed tyre is being pursued in this direction. Tyres with aspect
ratio upto 0.65 are being manufactured today enabling Indian Industry to adopt high
speed rating e.g. 190 kmph, 210 kmph etc.

13. High Performance Passenger Car Radial Tyre:

High Performance Passenger Car radial tyres not only have very low aspect ratio
(0.65 - 0.35) but also have substantial changes in construction. Very low aspect ratio
enables use of large diameter wheels which, in turn, allows better stability at high
speeds. The tyre contour is based on the cross section of a fully loaded tyre and this
reduces the energy losses within the tyre and reduced dynamic fatigue. High
performance Passenger tyres are made with speedy rating upto ZR indicating speed
capability in excess of 240 kmph. In India, this concept has not yet been found
popular though customers are demanding tyres upto 220 kmph (V Rating).

14. Run Flat (Puncture Proof) Tyre - New Concept:

A new concept of running flat tyre (puncture proof) was introduced by Continental in
early 1980s wherein the basic construction of the rim and bead was changed by which
on loosing air the tyre tread sits on the rim thus enabling one to drive at a reasonable
speed for a long distance till the flat tyre could be attended to.

This revolutionises the OE need for a new vehicle as the Stepney tyre can also be
dispensed off. However, there is very slow progress of this concept. This has not been
tried in India so far.

15. Fuel economy/low rolling resistance tyre - special compound:

Tremendous work is being carried out towards the development of tyres with
modified special compounds, besides tyre construction aspect, to reduce rolling
resistance thus gaining in fuel consumption. However, the ultimate advantage is
 obtained by Radial Construction which is gradually finding its well-deserved place in
Indian Industry.

16. Green Tyre (Environment Friendly):

This is the latest development in Passenger Radial tyres. These tyres have a rolling
resistance appreciably lower than normal tyres. These tyres have high proportion of
non petroleum based material used in their construction and are called environment
friendly 'green tyres'.

This concept is well perceived and will gradually find its application world over,
including India.

MARKETING INITIATIVES

All key players in tyre industry do their marketing with respect of the categorization they
have done for Indian market.

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

They also very much concerned about their advertising with respect to their product line and
production ability. For example, MRF company is major in tyre industry advertise their
whole product line giving the stress on mostly the passenger car segment from where they
earn maximum. For whole Tyre Industry the dealers network is also active in India. Dealers
are again categorized as:

Dealers: Multi Brand (different companies); Single Brand; Company owned exclusive
showrooms.

Dealers of commercial vehicle tyres and passenger segment tyres are different, though some
overlap does exist.

Dealers of commercial vehicle tyres 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.
Distribution Channels used in tyre Industry...

The distribution system consists of distributors, followed by large dealers and also small/sub
dealers. Some tyre companies also follow a system of appointing C&F 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.

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.
 FUTURE OUTLOOK

On the positive side, it is estimated that there would be a volume growth of 12-14% in 2009-
10. The performance of the tyre industry is linked to the automobile and infrastructure
sectors, the growth of which is dependent on the performance of the economy. The current
estimated economic growth is over 8%. The continuous thrust being placed by the
Government on the development of infrastructure, particularly roads, agriculture and
manufacturing sectors, would lead to an impressive acceleration in the automobile/ tyre
sector, generating more demand for tyres. However, tyre companies face immense
competition together with price and cost pressures.

Pricing pressures, from OEMs because of their high bargaining power and in the replacement
market due to huge competition, are existent dampeners. Companies are now giving emphasis
to innovation in product and process technology and operational efficiencies. However, the
continuously rising trend witnessed in the prices of raw materials remains an area of concern.
Though rubber prices have come down from their peaks of Rs 115, to Rs 82; currently, the
trend is very volatile. Tyre companies would definitely show improvement in the margins
sequentially, and if prices remain at these levels, profitability would improve. But then, it
would be highly dependent on prices of major raw materials like Rubber, Carbon Black, NTC
Fabric, SBR and PBR, which are highly volatile.

Tyre Industry Forecast 2014

Tyre industry production grew dramatically during FY10 as compared to previous fiscals due
to improving demand and expanding production capacity. The industry saw marginal growth
of just 1% during FY09 due to the impact of economic recession and decline of OEM
production. The industry produced close to 97 Million tyres across various segments during
FY10 as compared to 82 Million tyres during FY09. The replacement segment, which
constitutes more than 60% of the industry and is a key focus area for tyre manufacturers, due
to the higher margins it offers, is expected to continue its rapid growth, due, in part, to the
high growth in vehicle sales over the last few years. (According to Research, the Indian tyre
industry will continue its growth trajectory and is expected to witness a turnover growth of
more than 10% CAGR during the period between FY11 and FY14. The increasing level of
investments to increase production capacity should drive the Indian tyre industry in the
coming years. The industry is expected to witness the increasing penetration of radial tyres in
production and as well as in the end market. Research expects that the commercial vehicle
segment will have an improved degree of radialization in coming years.
The Indian Tyre Industry Forecast 2014 discusses the following issues related to Indian tyre
industry:

 Tyre industry production by segment

 Industry sales by value & volume
 Production & Raw material Cost
 Ongoing market trends
 Competitive Landscape

The Indian Tyre Industry Forecast 2014 gives a detailed and unbiased overview on the tyre
market in India. This report helps readers to identify ongoing trends in the industry and
expected growth in the coming years, as a consequence of changing industry dynamics in the
coming years.

Global Market Review of Automotive Tyres - Forecasts to 2017

The increasing segmentation of the car market has led directly to a more complex tyre
market. Over the last 20 years, the popularity of sport utility vehicles, minivans and crossover
vehicles has steadily increased, prompting manufacturers to redesign their tyres. In response,
manufacturers have focused on ways in which to improve tyre dimensions, weight, rolling
resistance, noise and fuel efficiency.

Tomorrow’s tyre market is expected to be led by ultra high-performance (UHP) tyres which
offer enhanced driving control, run-flat tyres which ensure safe driving even in the event of a
flat tyre, and ultra fuel-efficient tyres. In particular, with the rapid growth of the hybrid
vehicle market, the tyre industry has recently been concentrating on developing fuel-efficient
products.

COMPARISON OF TYRE INDUSTRY

Global and China Automotive Tire Industry Report, 2009-2010 (Chinese Version)

In 2008, the tire industry was in depression, companies suffered big drop or even loss of
profit due to the natural rubber price inflation, and both the OE market and the RT
replacement market plummeted due to the worldwide economy downturn in the second half
of 2008. The situation was improved in 2009. The natural rubber prices continued to drop
while there was just a slight, or even no fall in tire prices. As a result, companies doubled
their profits, but still witnessed decline in revenue since the demand had not been recovered
to the peak level in 2008.

In the second half of 2009, the price of natural rubber, as well as carbon black, kept rising. By
April 2010, it had more than doubled the level of early 2009. Tire companies had raised
prices to address the price hike in raw materials. In 2010, the natural rubber supply and
demand were nearly in balance, and the price was relatively stabilized at a high level.
Although there is still no clear sign of economic recovery, the prices of bulk commodities
will not suffer sharp decline as in 2008.

Tire companies will see revenue growth, but profit fall in 2010.

In 2009, Bridgestone still held the first place in the world, and widened the gap with
Michelin, the runner-up. In addition, Bridgestone’s joint ventures in North Europe, Russia,
India and Turkey had delivered excellent performance in 2009. Although Michelin didn’t
invest enough in these emerging markets, its operating profit margin was two times higher
than Bridgestone’s. Although Michelin didn’t perform well in the OE market, it delivered an
increasingly better performance in China’s after-sale replacement market, and got high profit
for its outstanding reputation.

Stranded in the North American market, Goodyear suffered decline in both revenue and
operating profit margin since the operating expense increased. Furthermore, it achieved little
growth in China’s market, but still stayed far ahead of the fourth place.

Continental, dominating the high-end market all along, delivered roughly the same
performance as in 2008. Its OE ratio was 25%, a little higher than in 2008. Being a key tire
supplier for Benz, Audi and BMW, Continental was among the few manufacturers with
revenue growth benefiting from the huge demand for luxurious cars in China’s market.
Moreover, it has put its Hefei base into production, and is expected to grab a larger market
share in the future.

Pirelli, an Italian company, is a key tire supplier for well-known luxurious cars including
Bentley, Ferrari, Porsche, Lamborghini, Bugatti, Land Rover, Volvo, Jaguar, and Maybach,
all of which have robust demand from China’s market, with small quantities but high prices.
In the meantime, being the most important tire supplier in South America market, Pirelli has
dominated the market there for years with stable sales.

Sumitomo, i.e. the Dunlop acquired by Sumitomo Rubber Industries, is a key tire supplier for
SUVs, especially luxury SUVs, as well as Japan’s high-end vehicles like Crown, Lexus,
Teana and Acura. Benefiting from strong demand in China’s market, Sumitomo had achieved
the rapidest growth in revenue and high growth in after-sales market. Meanwhile, it also has
increased investment in China’s market.

Also profiting from China’s market, Yokohama achieved growth in revenue. It even got a
Chinese name to show its recognition of China’s market and carried out a series of
advertising and promotional campaigns. In the meantime, it is the main tire supplier for high-
end vehicles such as Mitsubishi, Honda, Toyota, Nissan, Mazda, Subaru, Porsche, Mercedes-
Benz C-class and G-class, Acura, Aston Martin in OE market.

Japanese manufacturers, being known as conservative, have increased their efforts in China’s
market, and substantially expanded the output capacity of their Chinese bases in late 2009
and the first half of 2010. Even Toyo Tires, the smallest one of them, established a plant in
China. Apart from the OE market, Japanese manufacturers have also expanded the
replacement market. For example, Dunlop planned to surpass Michelin by expanding its
lineup of retail stores to 4,000. It can be said that Japanese manufacturers have benefited the
most from China’s tire market, and they all have accelerated the expansion.

Supported by Beijing Hyundai, FAW Volkswagen and Shanghai Volkswagen, the main force
in China’s auto market, Hankook witnessed great growth in profit despite a decline in
revenue. Kumho, relying on the strategy of low price, suffered sales drop in 2009. Although
it ranks the first place in China’s OE market, it fails to succeed in the replacement market.
Low price, low profit and high debt have made its operation difficult, and it has begun
division reorganization and debt restructuring in 2010.

Totally immune from the Special Protectionist Tariff on Tire case, the majority of Chinese
manufacturers had achieved revenue growth, and maintained significant export, only with a
slight drop in the export to the United States. Now, Chinese tire manufacturers' dependence
on foreign trade is still above 40%, which certainly will lead to trade disputes. Although they
have been trying to develop the OE market, they can only enter the microbus market, and
little progress has been made in the car market, since even Chery and BYD prefer tires of
Kumho, Giti and Cheng Shin. However, Chinese tire manufacturers have monopolized
heavy-duty truck, bus, commercial vehicle, and off-the-road (OTR) tire markets. In 2009, the
massive infrastructure investment and the campaign of ?bringing autos to the countryside?
had boosted up van sales. Cheng Shin ranked among the world’s top ten in terms of revenue,
and Hangzhou Zhongce Rubber announced that its sales were up to RMB16.8 billion, ranking
the 11th place in the world.

4. CONCLUSION
Amongst the Indian Tyre Manufacturers, Apollo tyres and Ceat Tyres Ltd. are undervalued
whereas MRF Tyres Ltd. is overvalued. The biggest threat, however, is yet to fully
materialise. It will be from global majors like Bridgestone and Michelin, which control 36 per
cent of the global tyre market. These players have set up their bases in Southeast Asia and the
slump of the markets in this region, coupled with the vast growth potential of the Indian
market, is beckoning them towards India.
Two years ago, the industry estimated the growth in the passenger car radial demand at 20per
cent per annum. However, the auto recession has hit them badly.
Another threat to the industry is the price of its raw materials, most of which are petroleum
byproducts. Carbon, synthetic rubber and nylon tyre cord are offshoots of petrochemicals.
Thus, the future of the industry will swing with the supply of crude oil.

The industry is definitely set to grow, with an estimated volume growth of 12-14% in 2009-
10. Both, OEM and Replacement demand would drive growth, with exports also adding-in.
The growing economy and the infrastructure sectors provide the much-needed impetus.
However, tyre companies face immense competition, together with price and cost pressures.
Pricing pressure, from OEMs because of their high bargaining power and in the replacement
market due to huge competition, is a substantial dampener. Companies are now giving
emphasis to innovation in product and process technology and to operational efficiencies.
However, the continuously rising trend witnessed in the prices of raw materials remains an
area of concern.

If we view the financial performance of various tyre-manufacturing companies, most of them

are operating at wafer-thin margins and any substantial increase in costs would hurt the
business adversely. Also, reviewing the balance sheet, the ROCE and RONW are at very low
levels. The industry leader, MRF, has an ROCE of 6.7% and an RONW of 5.5%. Apollo is a
little better off, with ROCE and RONW at 12.8% and 14.8%, respectively. Hence, we do not
find tyre stocks attractive, from an investment perspective.

The industry is definitely set to grow, but the huge competition, huge buyer power, pricing
inflexibility and cost pressures prove as detriments. Tyre companies are operating at very thin
margins and their return ratios are also not attractive. One can look at tyre stocks but only
from a trading perspective.
5.REFERENCES

ATMA Tyre Manual

www.atmaindia.org

www.way2wealth.com

www.timesofindia.com

www.ceattyres.com

www.mrftyres.com

www.jktyres.com

www.apollotyres.com

www.business-beacon.com

Economic and Political Weekly

Business Line

www.capitaline.com

www.marketresearch.com/product/display.

www.rapra.net/download-files/pdf/sr-tyre-testing.pdf

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