TYRE INDUSTRYOverview and Analysis

BRIJESH. K. NAIRGOVIND. MJAISON GEORGE

Industry overview

• $85.0 billion industry globally

• Indian industry worth $3 billion (4%)

• Tyre off take @ 6.9% over the past 5 years

• Projected CAGR of 8.9% over the next 5 years

Market Segments

Historical and Projected Growth Rate

Market players

• MICHELIN 20.1%• BRIDGESTONE 18.4%• GOODYEAR 16.9%

• MRF 22.0%• APOLLO

20.0%• JK TYRE 19.0%

• CEAT 16.0%• BIRLA

7.0%• GOODYEAR 6.0%

Indian International

Outlook on Demand & Supply: India

• Drivers of demand – Industrial & freight activity - Personal purchasing power - Economic growth

• Three avenues of demandOriginal Equipment 40%Replacement Demand 53%Export Demand 7%

• Supply can be met by domestic players

• Face competition from imported tyres

Market drivers : India

• Robust growth rate in all vehicular segments over last 5 years

• Improved capacity utilization by all major manufacturers(>80%)

• Decrease in custom and excise duties to nullify increase in raw material costs and increases OPM

• Low labour cost : partially offset by low productivity

• Improved credit profile and loan serviceability

Market challenges: India

• The Radialisation challenge- Radial vs. Cross ply Tyres

Global average- 65% India -2% Why use Radial tyres?

Positives Negatives

Longer life -100,000 kms Comparatively Higher Cost

Better fuel efficiency – 5 to 8% Marginally poorer overloading

Lower aspect ratio- Better control

• Other challenges –Poor roads Misperception that they are unsuited for

IndiaDifficulty to integrate in old vehiclesLack of radial manufacturing capabilities

Market challenges: India

• Tubeless tyres in India

Good puncture resistance and much better safety

Account for only 10% of passenger car tyre sales

Primarily affected by a) Poor roads leading to rim damage

b) Lack of automatic machines for mounting and unmounting c) Poor quality service leading to leakages and poor life

Market challenges: India

• Over dependence on the commercial vehicle segment

Globally-Passenger transport accounts for 33% of product mix

India- 81% of tyre market is for commercial vehicles

• Export issues

Low radial tyre production capability hampers export potential

• Hurdles in becoming global player

Scope and challenges• Industry poised for a very good growth rate

• More J.V’s with world market leaders- better technical know-how and quality

• Growth in automobile sector – cumulative effect on tyre industry

• Increasing trend in capacity utilization – better output

• New and uncharted territories as export markets.

Contd….• Increasing productivity – both labour and machinery

• Competition from other developing markets

• Increasing raw material costs – will effect OPM

Thank you