Tyre Industry Analysis

By :
Gagan Pareek
Economic growth drivers….
 GDP growth as per RBI is 8.5% .
 Robust industrial growth backed by
improvement in consumption demand
 Increase in infrastructure spending.
 Substantial improvement in domestic
demand.
 Increased thrust of the government on
infrastructure projects.
 All time high sales growth of few major
automobile companies
 eg: Maruti Suzuki India Limited sold a total
of 10,18,365 vehicles in 2009-10.
 Indian tyre Industry
Indian tyre industry

Commercial vehicles Others

Passenger vehicles

MHCV HCV LCV Farm Vehicle OTR Industrial vehic

Cars Motor Cycles scooters

AN OVERVIEW OF
INDIAN TYRE INDUSTRY
 Financial Year 2009-2010
 Turnover of Indian Tyre Industry Rs. 25,000Crores
 Tyre Production (Tonnage) 13.50 lakh M.T.
 Tyre Production – All Categories (Nos.) 971
LakhTyre Export from India (Value) :Rs. 3000
crores
 Number of tyre companies: 36
 Industry Concentration 10 Large tyre companies
account for over 95% of total tyre production.
Raw Materials of  Tyre
Industry - Overview    
 Tyre Industry is highly raw-material intensive. Raw materials cost accounts
for approx. 63% of tyre industry turnover and 72% of production cost.


 62% of total Natural Rubber consumption is by the Tyre Sector, balance by

rubber based non-tyre industries.


 Total weight of raw-materials consumed by tyre industry – 15.50 Lakh M.T.



 Total Cost of Raw Materials consumed by tyre industry – Rs.16,000 Crores


 Raw Material Availability  
 No domestic Production of Butyl Rubber and Styrene Butadiene Rubber of
tyre grades, i.e., 1502 and 1712.
 Production of Nylon Tyre Cord Fabric, Polybutadiene Rubber, Rubber
Chemicals, Steal Tyre Cord, Polyester Tyre Cord insufficient to meet
domestic demand.
 Tyre industry imports raw materials on account of the following factors:


Demand Cycle
 Indian Auto Industry
Fa ct s
Second Largest two wheeler manufacturer in the world
Largest tractor and three wheeler manufacturers in the world
Fourth largest Commercial vehicle market in the world
Eleventh largest passenger car market in the world
•
•

Trends Growth Potential

Growth ofCan become
exports World’s
of 22.30 third largest automobile market in 2030.
FY 2009-10.

By 2016,
The Commercial Automotive
Vehicles sector
segment grew can%.
at 4.07 DOUBLE its percentage contribution to GDP from current levels of 5
•
•
Light Commercial Vehicles recorded a growth of 12.29 percent.
•
• 
•
The Growth Journey
Pre 1983 1983-1993 1993-2007
Closed market Japanisation - GOI- Suzuki Delicensing of sector in
joint venture to form Maruti 1993
• Growth of market Udyog • Global major OEMs
start assembly in India
limited by supply • Joint ventures with (Toyota, GM, Ford,
• Outdated models companies in commercial Honda, Hyundai)
Era of globalisation
Players vehicles and components • Imports allowed from and
• Hindustan Motors Players April 2001; alignment of evolution of India as
• Premier • Maruti Udyog duty on components and a global
• Telco • Hindustan Motors parts to ASEAN levels manufacturing hub
• Ashok Leyland • Premier • Implementation of VAT
• Mahindra & • Telco
Mahindra • Ashok Leyland
• Mahindra & Mahindra
Category wise numbers

Dominated by Motorcycles 80% , Scooters 14% Mopeds 6%

Two Wheeler Domestic - 7.25mn units . Hero Honda 42% & Bajaj 27% share CAGR – 9.5%
Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17% share CAGR – 41%

Dominated by Cars 78% , MUV/SUV 22%

Domestic – 1.5mn units Maruti-46% Tata-15% Hyundai 14% CAGR -14.8%
Passenger Vehicles
Exports - 217000 units (07-08) Maruti 66% Hyundai 24% CAGR – 26%

Dominated by M&HCV – Goods 48% Passenger 38% , Rest by LCV -14%

Domestic – 487 thousand units , Tata-62% Ashok Leyland -15% CAGR- 22%
Commercial Vehicles
Exports – 59 thousand units, Tata 67% Ashok Leyland 12% CAGR -30.6%

Dominated by Passenger Carriers with 64% share , Goods Carrier -36%

Domestic – 365 thousand units , Bajaj -42% Piaggio-41% CAGR- 10.5%
Three Wheeler Export – 141 thousand units , Bajaj -97% CAGR -44.5%
Automotive Companies in India
Major Indian Companies Major Multi-national companies
India : A Developing Hub for Compact Cars
ØCompact cars account for 70% of the total car market.
ØCompact car sales increasing at about 20% each year
ØExcise duty on small cars slashed from 24% to 12% in last three years

ØMaruti Suzuki :
• New car plant to make 250,000 cars ØTata Motors :
per Tata Nano became a big success gaining worldwide
popularity with Tata planning to increase capacity
annum (total 800,000 cars/annum)
• 10 new Component JVs to support new ØToyota :
Diesel Engine Plant. • Toyota Kirloskarmotors planning to
ØHyundai : launch its own small car in India by 2011
§Already a big player in the small car
segment 
• Increase capacity to 600,000 cars per ØGeneral Motors :
annum over next 1 year. • New Capacity to manufacture small cars at
ØNissan : its Talegaon, Maharashtra plant with 80%
• Micra, UK  India local inputs.
§Brought in Spark small car in 2007
–Four more models in India, involving a ØNissan-Renault :
total investment of over Rs 2,000 crore. § 50:50 JV, to make 400,000 cars a year
with an investment of over US $ 1 billion.
ØFord : §Coming up with the $2500 car to compete
• Plans to unveil its small car with 1.2 with Tata Nano in 2011
ltr engine by 2010 §
ØHonda : ØVW :
§Investing US $ 250 million in a new plant
in • Investing 400 million euro in a new
Rajasthan with capacity of 60,000 car per plant in
year (First car to roll out in 2009). Pune. Operations are to start in second
half of 2009.
Key Growth Drivers
Growth Drivers of Indian Automobile
Market

 Rising industrial and agricultural output

 Rising per capita income
 Favourable demographic distribution with rising
working population and middle class
Urbanisation
 Increasing disposable incomes in rural agri-
sector
 Availability of a variety of vehicle models
meeting diverse needs and preferences
 Greater affordability of vehicles
 Easy finance schemes
 Favourable government policies
 Robust production

Enviorment Analysis
 Socio Cultural
 Environment
 Explosion in the number of nuclear families
 As the joint-family system crumbles and the number of nuclear families explode, more
small families seem to be demanding a two/four wheeler for themselves. This has
directly resulted in higher sales of tyres in the past decade.
 Higher car density per family
 The number of upper-class and upper-middle class families with more than one car per
family seems to be increasing exponentially. This is especially true in cities where
Brand Strategy Analysis working couples find it difficult to survive without more than
one car for transportation. With higher disposable incomes, these families are finally
able to afford this need.
 Shifting away from Savings, to EMI culture
 Another notable trend that seems to be fuelling car sales (and therefore tryre sales) is the
shift in the middle-class consumers saving habits. The Indian middle-class family has
long been known for its savings frenzy. But with a younger workforce, higher
disposable incomes, lower unemployment and the influence of globalization, the
average Indian middle-class family is slowly warming up to the idea of EMI and
 buying on credit. This has helped in furthering the sales of passenger cars significantly.

SWOT
Leading Market Players
 MRF
 Market leader among tyre manufacturers in India, with a 24% share in terms of revenues.
 Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price-maker
status.
 MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands
 around 19% market share in the segment.
 The Company has a distribution network of 2,500 outlets within India and exports to over 65 countries
worldwide.

 Apollo Tyres (ATL)
 Apollo Tyres is the second largest player in the Indian tyre industry, with a market share of 22%, in terms of
 revenues, and the largest player in the T&B segment, with around 22% market share and 82% of its product
mix
 coming from this segment.
 It also enjoys a strong brand recall. ATL derives 80% of its revenues from the replacement market, where the
EBITDA margins are higher; hence, at operating levels, Apollo Tyres has better

JK Industries
 JK Industries has a 17% market share, in terms of revenue, making it the third largest player in the industry.
The
 Company ranks first in the MHCV and Passenger Car tyre segments, with 79% and 7% of its product mix
coming
 from these segments, respectively. Exports account for approximately 17% of its gross sales.
CEAT

 CEAT has a 14% market share, in terms of revenues, and is an average player across categories. 68% of its
 product mix comes from the MHCV segment.
 In terms of profitability, CEAT has lower margins compared to its peers, in spite of deriving 60% of its
revenues from the replacement market
Analysis : Five Forces
Value Chain
Current Trends
Plans
 - Radial Tyre to Replace Cross – Plys
- Margins in Radial higher by 25% than Cross
– Plys
- 9% margin in Cross –Ply
- 25% plus margin in Radial Tyres
- Higher capital required to protect margins
-
 Thank
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