c


 

c 
Established brand names (key in the replacement market)
Extensive distribution networks - For example, Apollo Tyres has more than 118
district offices, 12 distribution centres and 4,250 dealers.
Good R&D initiatives by top players.

  
1 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.
2 Pricing Pressures ʹ The huge raw material costs have resulted in pressure on the realizations 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.
3 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.



1 Growing Economy leads to Growing Automobile Industry leads to Increasing OEM
demand that in turn leads to Subsequent rise in replacement demand.

2 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.

4 Steady increase in radial Tyres for MHCV¶s and LCV¶s.

Ê 

1 Continuous increase in prices of natural rubber, which accounts for nearly one third of total raw
material costs.
2 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.
± With crude prices scaling upwards, added pressure on raw material prices is expected
4 Ban on Overloading, leading to lesser wear and tear of tyres and subsequent
slowdown in demand. However, this would only be a short-term negative.
5 Cyclical nature of automobile industry