Apollo Tyres Case Study

July 27,2009
1
6%
19%
18%
4%
49%
4%
Demand for Tyres
LCV Type Tyre
Bus Truck Car Type
Passenger
Tractor
Two Wheelers
Others
Tyre Industry Fact Sheet
Apollo Tyres Case Study
Indian Market
India has 2.61 lakh villages connected by 6.23 lakh Kms of metalled
roads & 9.81 lakh Kms of Unmetalled roads.
Daily traffic of over 4.12 lakh trucks, 1.27 lakh buses, 7.23 lakh cars &
thousands of taxis, two wheelers, three wheelers & tractors.
Indian Tyre industry is Rs. 13,000 crore industry & still growing.

Demand for Tyres Segment Wise
Source: ATMA, ICRA
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12%
33%
4%
12%
16%
11%
2%
10%
Sales
J K Inds.
MRF
Goodyear India
Apollo Tyres
CEAT
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Tyre Industry Key Players in Indian Market
Sales of Tyres company Wise
Key Facts about Indian Tyre Industry
Tyre Industry is highly raw-material intensive with raw material cost
accounting for 70% of the cost of production.
The tyre industry consumes nearly 50% of the natural rubber produced
in the country.
Tyre Industry growing at the
rate of 9% CAGR.
two Wheeler and Passenger
are two segments driving the
growth with 9% and 15% CAGR.
0
100
200
300
400
500
600
1996 1998 2000 2002 2004
Total Tyre Demand LCV Bus Truck Car
Passenger Two Wheelers Tractors
Tyre Industry Growth by Segment
Key Takeaways
Source: ATMA, ICRA
Apollo Tyres Case Study
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0
0

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Dominant Leadership in the
dominant industry segment
of truck & bus tyres.
Extensive Distribution
network.
Global quality standards &
international process &
system certification.
Economies of transportation
cost on account of closeness
to natural rubber growing
belt.
Strong Brand recall value.

Apollo Tyres SWOT Analysis
No presence in two & three
wheeler segment.
Low profit margins due to raw
material cost push.
Inability to pass on the higher
cost to consumers.
Apollo Tyres Case Study
Strengths Weakness
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Friday, August 29, 2014
Apollo Tyres SWOT Analysis
Positive growth in vehicle
production in the immediate
future, is expected to lead to
growing demand.
Continuous thrust in road
infrastructure and
construction of expressways
and national highways.
Apollos leadership position
in the commercial vehicle
segment will enable the
company to leverage new
and related business
opportunities.
There is a need to prepare
for imports from
neighbouring countries at
competitive prices, which
have been rising in the recent
past.
Ever present challenge of
raw material price volatility.
Opportunities Threats
Apollo Tyres Case Study
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Friday, August 29, 2014
Liberalized Tax Regime adopted for Imports of Tyres.
Efforts to bring in more Foreign Investments in the Industry.
Emphasis laid on signing more Free Trade Pacts with neighboring
countries thus bringing in more Competitors into the industry and
at the same time increasing the number of buyers by bring in more
automobile companies.
No restriction on Export of Tyres thus encouraging exports by carrot
and stick approach. Volume of imports directly pegged with the
value of exports.
Raw Material required for Tyres can be imported freely.
PESTAL Analysis - Political
Apollo Tyres Case Study
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Friday, August 29, 2014
The level of economic activity, performance of domestic
automotive industry, and the faring of the transport sector directly
influence the performance of the tyre industry in India.
GDP Growth rate averaging 6.5% for the last years.
Prospects of Tyre Exports look healthy and favorable with all major
plants situated close two ports (in Gujrat), thus lowering the
logistics cost.
Strong future growth prospects for automobile points towards
equally increased demand for complement products such as Tyres
and with prevailing low interest rates, manufactures can augment
the production capacity.


PESTAL Analysis - Economic
Apollo Tyres Case Study
OEM
Replacement
Exports
Government and STU
58.9
34.2
6.5
Demand for Tyres Segment Wise
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Friday, August 29, 2014
With strong growth, consumer sensitivity is decreasing towards cost
or price, thus leading to increased demand for (comfortable and
comparatively expensive) Radial Tyres.
High % of replacement markets (63% in passenger car segment)
leads towards greater dependence towards retail sales, thus
company needs to strengthen the retail distribution channel.
Increasing Brand Consciousness among ballooning middle class
consumers (yearly income between 60,000 and 2,15,000) calls for
investments towards brand building and brand visibility.
At 26.3 years of Median age and increasing share of services sector
in GDP coupled with Two wheeler tyres constituting a largest
segment (38% share) of tyres demand demands increased
concentration on youth and designing products to meet their
needs.
Apollo Tyres Case Study
PESTAL Analysis Socio-Cultural
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Friday, August 29, 2014
Radialisation of tyres is likely to result in lower replacement
demand.
According to ATMA, even if only 25% of the truck and bus segment
is radialised, the savings in fuel costs would be around Rs. 7,500
million.
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.
New Methods (Cold Retreading) introduced in treading technology
increase the efficiency of tyre retreading.
At present only 3-4 large companies are in the organized sector of
tyre retreading thus opening an opportunity for commercial
profitable re treading.

PESTAL Analysis Technological
Apollo Tyres Case Study
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Friday, August 29, 2014
Increased consumer consciousness towards environmental calls for
greener products and green tyres.
Demand shall increase for more efficient and long lasting tyres.
Use of Increased proportion of Non petroleum content in tyre shall
increase.

Stringent standards being introduced for various categories of tyres.
Harsh measures and penalties introduced by Supreme Court of
India on Overloading of Commercial Vehicles thus resulting in
increased life for tyres.

PESTAL Analysis Environmental and Legal
Environmental
Legal
Apollo Tyres Case Study
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Future Directions
Low growth of radialized tyres in Truck and Bus segments calls for
greater focus towards this trend. Adequate emphasis on customer
education and marketing radialized tyres as service better quality
and longer life shall help improve company sales in this segment.


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 shall involve higher level retreading and thus offer
added financial benefits.


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Apollo Tyres Case Study
Radial Tyres for Truck and Bus segments
Increased Emphasis on Re Treading
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Future Directions
Large Part of demand pie chart is occupied by two wheeler & three
wheeler market; company should focus on this segment & try to
create the niche for its brand in this segment also.



Correlation with agriculture is found negative as per research data
from BCG group thus there should be definite change in the
Marketing strategies as agriculture is not affecting the sales of
Tyres.

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Apollo Tyres Case Study
Focus on two & three wheeler segment
Agriculture not the focal point anymore
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Thank You