Reort On Tyre Industry
Slowing down growth levels in automobile sales will strain OEM demand to some extent; replacement demand to provide cushion for tyre industry
Domestic tyre industry has witnessed a remarkable recovery in FY10 and FY11, 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. The concerns about slowdown in the growth levels in new automobile sales would dampen the demand from OEMs in the short term. However, strong growth in automobile sales in last 7-8 years barring the slowdown of FY09, have resulted in significant expansion of vehicle population that would transform in healthy replacement demand for tyres in medium to long term period. http://www.bharatbook.com/market-research-reports/tyre-tire-market-research-report/indian-tyre-industry.html
The tyre industry is on a brink of a major structural change. T&B which is a dominant segment in terms of tonnage is witnessing a gradual rise in the proportion of radial tyres. Going by the global trend it seems that the radial tyre demand in India is at inflection point and with almost 98 per cent of the passenger car tyre production has been radialised, T&B tyre category is the next major category to witness spurt in the demand for radial tyres. And with improvement in road infrastructure and better cost economics the proportion of radial tyres in T&B category is expected to expand by around seven times from the current levels. Sighting this opportunity, almost all the expansion plans for T&B category tyres are for radial category tyres. Tyre Industry
In FY11, almost all the manufacturers reported healthy rise in their top-line, driven by growth in both volumes and realisation. However, sharp rise in input cost due to increase in global demand combined with adverse climate conditions in major rubber producing countries like Indonesia and Thailand coupled with spiraling interest cost pulled down industry’s bottom line considerably in FY11. Going forward it is expected that, softening in input prices owing to cooling down global demand combined with stability in interest rates scenario will benefit tyre manufacturer’s bottom line.
CARE Research has developed detailed model for forecasting OEMs as well as replacement demand for all the tyre categories like Truck and Bus (T&B), passenger vehicles, two-wheelers, three-wheelers, tractors and light commercial vehicles (LCV). Strong understanding of automobile as well as tyre sector is percolated down to the auto component sector and thus the demand for tyres is forecasted as well on the basis of projected automobile sales and population.
EXECUTIVE SUMMARY
Domestic market to grow at a CAGR of 11 – 12 per cent till FY16
Healthy replacement market to support industry growth
Radial tyres penetration to increase sharply in T&B segment
Exports initiatives to increase from all key players, however domestic market to remain the primary preference
Investment of around Rs. 7,000- 8,000 crore expected in next 2-3 years
EBITDA margins to remain under strain in FY12; but gradually recover in FY13
SECTION I: INDUSTRY OUTLOOK
OUTLOOK ON DOMESTIC MARKET
Domestic market to grow at a CAGR of 11-12 per cent till FY16
OEM demand to grow at a CAGR of 10-11 per cent
T&B and passenger car segment tyre to drive OEM demand
Replacement demand is expected to grow at a CAGR of 12 per cent
Dominant T&B category to witness lower growth than the overall replacement demand
MAV operator can save around Rs.1.3 per km by switching over to radial tyres
Radial tyres penetration
Aggressive expansion lined up in T&B radial tyre category
Imports are expected to rise sharply in near term; but moderate in medium to long term
Exports to take backseat due to strong growth in domestic demand
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