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Tyre Industry

Khubaib Bilal

Over view of indian tyre industry


Financial Year 2009-2010 (Est.) Turnover of Indian Tyre Industry Tyre Production (Tonnage) Tyre Production All Categories (Nos.) Tyre Export from India (Value) : Number of tyre companies: Industry Concentration Radialisation Level - Current (as a % of total tyre production)

Rs. 25,000 Crores 13.50 lakh M.T. 971 Lakh Rs. 3625 crores 36 10 Large tyre companies account for over 95% of total tyre production. Passenger Car tyres: 98% Light Commercial Vehicles: 18% Heavy Vehicles ( Truck & Bus ): 12%

Government Policy Tyre Industry Delicenced since Export (of tyres and tubes) Import (of new tyres and tubes) Import Policy for Used / Retreaded tyres:

1987 Freely allowed Freely allowed. Restricted from April, 2006

Radicalization' in India - Current Status & Future Trends


"Rate of radicalization is actually an index of the status of road development, vehicle engineering and the economy in general". Notwithstanding the problem areas, constraints and limitations, the tyre companies have kept pace with the technological improvements that radicalization signifies and offer state-of-the-art product (tyres), comparable to the best in the world. Radicalization can be aptly classified as the most important innovation in tyre technology. Despite its several advantages (additional mileage; fuel saving; improved driving) radicalization in India earlier did not catch on at a pace that was expected, since its introduction way back in 1978. This could be attributed due to several factors, viz. Indian roads generally not being suitable for ideal plying of radial tyres; (older) vehicles produced in India not having suitable geometry for fitment of radial tyres (and hence the general, and wrong, perception that radial tyres are not required for Indian vehicle; unwillingness of consumer to pay higher price for radial tyres etc. However, the situation has radically changed in recent years, especially for the passenger car tyre segment where radicalization has crossed 98% mark and is expected to reach 100% in two to three years. In the Medium and Heavy Commercial vehicles segment current level of radicalization is up to 12%, and that in the LCV segment is estimated at 18%. A few years back a beginning was made in Radicalization of truck and bus and LCV tyres and this process is gaining momentum

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Future of Radicalization
The future of radicalization will be governed by the following factors:
y y y y y

Cost - Benefit Ratio Road Development Overload Control User Education Retreading Infrastructure.

CURB ON OVER-LOADING OF COMMERCIAL VEHICLES


Supreme Court had in November 2005 passed an Order directing State Governments to ensure that commercial vehicles are loaded only as per norm prescribed under the Central Motor Vehicle Rules.

RETREADING INDUSTRY IN INDIA


In the manufacture of a new tyre, approximately 75%-80% of the manufacturing cost is incurred in tyre body and remaining 20%-25% in the 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, at a cost which is less than 50% of the price of a new tyre. This process is termed as 'tyre retreading'. However, the body of the used tyre must have some desirable level of characteristics to enable retreading. Retreading cannot also be done if the tyre has already been over used to the extent that the fabric is exposed/damaged. Retreading could be done more than once.

Types of Retreading
Retreading can be done by the following two processes: 1. Conventional Process (also known as 'mould cure' or 'hot cure' process) - In this process a un-vulcanized rubber strip is applied on the buffed casing of the tyre. This strip takes the pattern of the mould during the process of vulcanization; 2. Precure Process ( also known as 'cold cure')- in this process a tread strip, where the pattern is already pressed and precure is applied to the casing. It is bonded to the casing by means of a thin layer of specially compounded uncured rubber (known as cushion or bonding gum) which is vulcanized by the application of heat, pressure and time.

The present all India pattern, by type of retreading, is as follows: Precured - 50%, Conventional 50%. Retreading is primarly done in the Truck and Bus trye segment. On an average a Truck/Bus trye is retreaded 1.5 times.

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At present only 3-4 large companies are in the organized sector of tyre retreading .Organized sector is classified as that comprising of companies which operate through the franchisee route.

International vs. Indian Experience in Tyre Retreading : Similarities & Differences Similarities
As is the experience in other parts of the world, tyre retreading in India has gained greater acceptance in the commercial segment, especially truck/bus and light commercial vehicle (LCV) tyres, due to operational savings. The share of passenger car tyre retreading is on the decline due to several factors, viz. fitment of radial tyres as OE fitment giving increased mileage (encouraging owners to go in for new radial tyres at the time of replacement, strong preference of improved aesthetics of new generation of passenger cars (and hence new tyres) and above all, a growing concern for safety (due to driving at increased speeds.

Differences
In the developed countries retreading, by and large, is only through precured methods, whereas the share of hot/conventional retreading in India is high 50%, with the share of hot/conventional retreading in select segments, like farm tyres, being considerably higher.

Expected Future Trends in Tyre Retreading in India


Tyre retreading in the commercial vehicle segment is poised for growth in the future. This growth will be aided by the following favourable factors and major developments taking place:

Increased level of Radialization in the commercial vehicle segment (due to reduced incidence of overloading of commercial vehicles); Growth in and increased share of multi-axle trucks (with the catching up of the concept of 'hub & spoke' transportation, long distance movement of road freight will be by multiaxle trucks whereas distances within and around the cities will be catered by smaller commercial vehicales); 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, higher level retreading will offer added financial benefits)

Tyre Industry

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Total tube production in india


CATEGORY Truck & Bus Passenger Car Jeep Light Comm. Veh. (L.C.V.) Tractor A.D.V. Scooter Motor Cycle Moped Industrial O.T.R. Aero TOTAL 2003 04 8851 5331 1056 2633 907 187 5624 15415 270 50 19 0 40342 2004 - 05 9439 5947 1040 3100 1053 140 6439 18671 347 71 26 0 46273 2005 - 06 10522 6990 1066 3775 1232 165 7044 22263 227 99 38 0 53421 2006 - 07 11257 8509 1132 4156 1425 213 7461 28067 0* 108 48 0 62376 2007 - 08 12016 11490 1416 4147 1443 181 9128 30817 0* 112 60 0 70810 2008 09 11911 10773 1411 4213 1334 184 8242 31526 0 79 60 0 69733 2009 10 14142 9922 1430 4912 1970 235 116100 37095 0 64 68 0 81448

Categorywise Tyre Production in India Financial Year 2009-10 - 2010-11 ( April-September) (In Lakh Nos.) Tyres for: Truck & Bus Passenger Car Jeep Light Commercial Vehicle Tractor Front Tractor Rear Tractor Trailer Animal Drawn Vehicle Scooter / Moped Motor Cycle Industrial 2009-10 72.79 88.84 6.42 27.91 11.43 8.20 4.25 1.17 57.75 164.37 2.48 2010-11 76.08 125.46 7.63 28.40 13.88 9.18 4.64 1.30 91.61 209.91 3.0 % Change 5 41 19 2 21 12 9 11 59 28 21

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Off the Road (OTR) Total

0.73 446.34

0.91 572.0

25 28

Categorywise Export of Tyres Financial Year 2009-10 - 2010-11 ( April-September) (in Nos.) Category Truck & Bus Passenger Car Jeep Light Commercial Vehicle Tractor Front Tractor Rear Tractor Trailer Motor Cycle Scooter(2/3 wheeler) Implements Industrial OTR Total 2009-10 1040451 412909 4431 682250 5444 22267 2736 124642 162880 6332 2672 14513 2481527 2010-11 875496 521491 43857 646955 4119 17349 850 370622 279909 47607 54903 56483 2919641 % Change -16 26 890 -5 -24 -22 -69 197 72 652 1955 289 18

Tyre Industry

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Export Realisation/Value
Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 (April-Sept) Value (Rs./crores) 864 1190 1100 1250 1460 1834 2383 2850 3100 3585 3625 1231 % Change 7 38 (-)8 14 17 26 29 20 9 16 1 15% CAGR

Raw Materials of Tyre Industry - Overview

(FY 2009-10)

Tyre Industry is highly raw-material intensive. Raw materials cost accounts for approx. 63% of tyre industry turnover and 72% of production cost Given below is the composition of raw-materials as a percentage (%) of Total Raw Material Cost: Natural Rubber Nylon Tyre Cord Fabric Carbon Black Rubber Chemicals Butyl Rubber PBR SBR Others 43% 18% 11% 5% 4% 5% 5% 9%

62% of total Natural Rubber consumption is by the Tyre Sector, balance by rubber based nontyre industries.

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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: a. duty-free imports permitted against export of tyres;domestic demand not sufficient to meet complete requirement;technical and commercial considerations; b. business strategy to have multiple sources of supply.

Consumption Pattern of Major Raw Materials(2009-10) (Est.) Raw Materials Natural Rubber SBR PBR Carbon Black Nylon Tyre Cord Rubber Chemicals Steel Tyre Cord Butyl Rubber Total Cons. Tyre Sector Cons. 930565 138660 105060 317000* 115000* 44000 25000* 36000* 62% 73% 86% Non Tyre Sector Cons. 38% 27% 14% Total Import 170679 125510 39280 36500* 48000* 4000* 15000* 36000* Tyre Sector Imports* 86% 83% 86% (in Tonnes) Non Tyre Sector Imports 14% 17% 14% -

* Tyre Sector Consumption / Import

Tyre Industry

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Production, Consumption & Imports of Natural Rubber Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Production 749660 802625 852895 825345 864500 831400 406220 442921 462081 495577 508121 576799 Consumption Tyre Sector 54% 55% 56% 58% 58% 62% Non Tyre Sector 349170 358189 358224 365878 363599 353766 46% 45% 44% 42% 42% 38% Total Cons. 755400 801110 820305 861455 871720 930565 (in Tonnes) Imports Total 68700 45285 89799 86394 77616 170679

Segmentwise Tyre Supplies 2010 - 11 (April - September)


Tyre supplies are broadly to the following segments:
y y y y y

Replacement Market (aftermarket) Original Equipment Manufacturers (OEMs), i.e. vehicle manufacturers Export State Transport Undertakings (STUs) (primarily for Bus tyres) Government Purchases

Estimated supplies of key tyre categories to various segments are given in the following table: Production (Nos.) 2010-11 (April-Sept) 7608145 13309377 2839757 1388271 917825 9160925 20991306 Segmentwise Percentage supply (as % of Total Production) Replacement Market 68 43 42 64 44 44 50 OEMs 19 52 36 36 54 53 49 Export 12 4 23 0.3 2 3 2

Category

Truck/Bus Passenger Car / Jeep LCV Tractor Front Tractor Rear Scooter / Moped Motor Cycle

Tyre Industry

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Dealers
Dealers : Multi Brand (different companies); Single Brand; Company owned exclusive showrooms. Dealers of commercial vehicle tyres and passenger segment tyres are different, though some overlap does exist. Dealers of commercial vehicle tyres also financing purchase of tyres for commercial vehicles and agricultural tyres. Dealers are also an important link between the tyre companies and the end consumers and replacement / warranty schemes are implemented by the companies through the dealers.

Distribution
The distribution system consists of distributors, followed by large dealers and also small/sub dealers. Some tyre companies also follow a system of appointing C&F agents, in place of distributors. Replacement Market: Tyre companies sell tyres through widespread dealer distribution network ( over 5000 in the country ), either through exclusive dealer of the companies or through multi-company dealers. OEM: Direct supply by tyre companies through negotiations. STU: Direct supply by tyre companies through tender system. Government: Direct supply by tyre companies through tender system. Export: Through dealers in the exporting countries. Import: Some tyre companies also import tyres for the domestic market. Such imports are generally from the principal company overseas or from technical collaborator or from tyre companies with which it has an alliance for a particular line of tyres, for example, passenger car tubeless tyres; With tyre import freely allowed (except Truck / Bus (Radial Tyres)) import of various categories of tyres is also taking place. Tyres are imported by importing agents and then marketed through the dealers who are marketing Indian tyres also.

Tyre Industry

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Technology Ladder

1. Tyre with Cotton (reinforcement) Carcass : In the starting phase of proper Bias or Cross ply tyre, cotton plies were used as main reinforcing material (end of 19th and early 20th Century). Cotton reinforcing material had inherent problems of low strength and high moisture regainer. Leading to large number of plies to get the requisite casing strength for the tyre weight of the tyre and poor heat dissipation. This, in turn, gave an adverse impact on Tyre weight and buck rendering poor performance.

Tyre Industry

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2. Tyre with Rayon (reinforcement) Carcass : With the development of viscose and rayon the strength of reinforcing material went up and found application in tyres in early 20th Century. Due to higher strength of rayon it was possible to reduce number of plies and weight of the tyre. Since less number of plies were needed to match cotton strength, concept of ply rating developed. It was also possible to have higher ply ratings now. 3. Tyre with Nylon (reinforcement) Carcass : Persuent to development and introduction of Polymide (Nylon) the strength and flexing behavior of reinforcing materials improved substantially resulting in further reduction of number of plies, consequently the weight of the tyres. This development substantially improved the heat and impact resistance of the carcass leading to better tyre performance and higher durability. Nylon casing gave a boost to retreadability. Thus effective cost of the tyre in operation became much more economical.

4. Radial (Construction) Tyre - Textile/Textile belt (Rayon/Nylon/Polyester) : Inspite of continuos development in Bias Tyre Technology, inherent problem of high heat development and poor life remains a continuos challenge. In early 1950s new concept of Tyre design was developed namely "RADIAL" wherein plies were made highly flexible by keeping the cords at 90 and in order to improve tyre life, inextensible (stiff) belts were placed on the top of the Carcass under the tread. This led to stiffer tread portion, leading to higher Tread life (Mileage) and much more comfortable ride due to flexible carcass. This was the beginning of 'Revolution' in tyre technology. Initially Radial tyres were introduced with Casing Plies as well as belt material of textiles.

5. Radial (Construction) Tyre - Textile/Steel belts : Once Steel Tyre cord got developed it found its immediate application in Belt material, keeping casing plies of Textile, to further improve durability. 6. Radial (Construction) Tyre - Textile/Glass Fibre Belt : Similarly, development of glass fibre which is practically inextensible, led to application in passenger and Light Commercial Vehicle tyres with Textile Casing, providing corrosion free radial Tyre belt material. 7. Low Aspect Ratio (Cross Ply or Bias) Tyre : A new concept of low aspect ratio (ratio between section height and section width) of the tyre in cross ply construction was introduced for higher speed and better performance.

Tyre Industry

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8. Tubeless Tyre (Cross Ply) : Concept of tubeless tyre in cross ply construction wherein an inner liner compound based on chlorobutyl or Halo Butyl which is impermeable to gases, was introduced eliminating the usage of tubes. Tubeless tyres are produced for Export Market.

9. Radial (Construction) Tyre - Textile/Aramid Belt : Due to poor roads and inadequate vehicle maintenance, Steel belts had corrosion problem due to cuts and chips in the tread. This led to trials with Aramid belt (Textile material with very high strength and Low extensibility). However, this could not find any sustained use. 10. Radial (Construction) Tyre - All Steel : In developed countries, Radial Truck/Bus tyres use steel wires in casing as well as in Belts to achieve the optimum advantage of radial construction. In India also this construction was tried since late 1970s by Indian Companies using tyres of collaborators. This could not succeed. Indian companies started experimentally since late 1980s (themselves or with collaborators) which continues and the product has found gradual entry into low load application. 11. Tubeless Tyre - Radial Construction : As in the case of Bias Tyres, the concept of tubless tyre was extended to radial construction and introduced in later half of the century in Developed countries. A tubless tyre not only has tube eliminated but provides for smoother ride and vehicle handling. This is slowly entering into the Indian market with the advent of new generation vehicles. 12. Low Aspect Ratio - Radial (Construction) Tyres : The concept of low aspect ratio tyre, after gaining the experience from cross ply construction, was introduced in Radial construction also. The present trend of tyre development for high speed tyre is being pursued in this direction. Tyres with aspect ratio upto 0.65 are being manufactured today enabling Indian Industry to adopt high speed rating e.g. 190 kmph, 210 kmph etc. 13. High Performance Passenger Car Radial Tyre : High Performance Passenger Car radial tyres not only have very low aspect ratio (0.65 0.35) but also have substantial changes in construction. Very low aspect ratio enables use of large diameter wheels which, in turn, allows better stability at high speeds. The tyre contour is based on the cross section of a fully loaded tyre and this reduces the energy losses within the tyre and reduced dynamic fatigue. High performance Passenger tyres are made with speed rating upto ZR indicating speed capability in excess of 240 kmph. In India, this concept has not yet been found popular though customers are demanding tyres upto 220

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kmph (V Rating). 14. Run Flat (Puncture Proof) Tyre - New Concept : This revolutionises the OE need for a new vehicle as the Stepney tyre can also be dispensed off. However, there is very slow progress of this concept. This has not been tried in India so far. 15. Fuel economy/low rolling resistance tyre - special compound : Tremendous work is being carried out towards the development of tyres with modified special compounds, besides tyre construction aspect, to reduce rolling resistance thus gaining in fuel consumption. 16. Green Tyre (Environment Friendly) : This is the latest development in Passenger Radial tyres. These tyres have a rolling resistance appreciably lower than normal tyres. These tyres have high proportion of non petroleum based material used in their construction and are called environment friendly or 'green tyres'.

1. PRODUCT STANDARD BUREAU OF INDIAN STANDARDS (BIS) had decades back prescribed Standards for various categories of tyres. However, the Standards were voluntary in nature, i.e., it was optional for tyre companies to take BIS certification and emboss BIS mark on tyres. 2. SAFETY STANDARD In line with the Safety Standards for tyres in some of the developed countries, Government of India decided to formulate AUTOMOTIVE INDUSTRY STANDARDS (AIS) which would be mandatory in nature. Government of India also decided to merge AIS with BIS. Cuurently, there is a unified standard for tyres of Commercial Vehicles (Bias and Radial), Passenger Cars/Jeeps (Bias and Radial) and Two-Three wheeler tyres. At present AIS/BIS standards are not evolved/notified for other categories of tyres, viz. tractor/farm, industrial, OTR etc. The merged Standard, expected to be published in the near future for mandatory application, would be applicable to all tyres produced domestically and imported. However, as exported tyres are subject to the standards of importing countries, the above Standard would not be mandatory on tyres exported from India.

Tyre Industry

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PEST ANALYSIS OF TIRE INDUSTRY


Tire Market in India is growing strongly and their production increasing from every year. In 2005, there were 40 tire manufacturing companies working in India which was consisted of major big brands in tire industry such as Good year, MRF, Falcon Tires and Bridge stones etc. we apply pest analysis on this market to check at what extent political, economical, technological and social factors are affecting this tire industry in India.

POLITICAL
The government policy is much favored too local manufactures as said by the managing director of Goodyear India in 2005 that the tire market in India was almost exclusively dominated by local players and 90% of all tires on the Indian market were made and sold by the local Indian companies so Big companies like Good year, Michelin etc are hardly visible in India

Tire Industry Indianized (Do Global act local):


Government is providing more leverage to the local market that the foreign tire companies coming towards India. In 1926, when big giants in tire manufacturing like Dunlop, American firestone, Goodyear and Italian Ceat had much capital started their production plant in India than this had been a big treat for the local tire market. So Indian Government Immediately took an action and made a policy that if any foreign tire manufacturing company wanted to start their tire business in India than they had to act as locally and their names also seemed like locally such as Dunlop changed into Dunlop India and from Goodyear to Goodyear India. This Indianized process speeded up with the acquisition of most of the subsidiaries of foreign companies that operated in India: Firestone was bought by Modis in the early 1980s and Ceat and Dunlop were taken oven by RPG.

Agreements with other foreign companies:


There are many contracts and agreement of Indian companies with other foreigner companies which are as follows: Under the Bangkok agreement, car and two wheelers tires were imported from china and South Korea at 10 percent custom duty. These imported tires had an average price 30

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percent lower than tires sold by Indian companies. Some Indian companies like Apollo and JK tires tried to collaborate with Chinese companies in order to jointly produce cross ply tires. In 1984, there was an agreement between the Indian and Japanese companies to get the model of Maruti 800 from Japanese company. Ford and Dacia Logan are soon to be manufacture under the agreement by the Indian company with the foreign companies.

ECONOMICAL Growth of tire industry:


The tire industry is growing in India day by day. In 1926, first tires were made by British company Dunlop. This gave rise to flourish of tire industry in India. When Cross ply tires were first introduced than 65 % of tire sales in India were covered by cross ply tires. But with the introduction of radial tire, radial tires represented 85% of car tire sales by volume. All the tire manufacturing companies are increasing their shares because tire industry in India is grooming with every year. In 2005, MRF, Apollo and JK tires had a tough competition and had a tough competition between them.

Increases price of raw material:


The prices of natural rubber and petroleum, which are essential components for the manufacturing of tires, becoming higher and higher which is badly effecting the tire manufacturing industry because of this high price raw material than tire manufacturing companies were also offering high prices

Cross Ply, Radial and Tubeless Tires Providing High Profits:


Many foreign and local companies which are dealing in cross ply, radial and tubeless tires are gaining high profits. When in 1950, when first cross ply tires technology was introduced than the company which adopted the technology at first gained a lot of profit and same is the case with radial tires and vice versa. Also automobiles companies are gaining a lot of profits from the Indian market and they are generating more sales every year. Cross ply tires are cheaper and are suitable for the Indian in

Tyre Industry

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Trade Policy - Tyres & Raw Materials


y y y y y

All categories of new tyres can be exported freely. All categories of new tyres can be imported freely. No WTO Bound Rates for Tyres & Tubes. All raw materials required for the manufacture of tyres can be imported freely (OGL). The custom duty is 10%

TECHNOLOGY Quality of Roads and technology according to it:


First cross ply tire was created in 1950. In the cross ply technology the textile and metal steel cords are braided diagonally on the external surfaces of the tire. The condition of roads of India was not so good so cross ply tires has a greater capacity for absorption on rough terrain, but it has a poor road holding at high speed and when it is subjected to high torsion or stress, there is a strong risk of it coming off the rim but it is economical in price so it covered 65% of tire sales in India. After than radial technology (created in 1965) introduced in the market in which textile and metal steels cords are braided radially or at 90 degree which provides them better expectancy and better road grip so it represented 85 % of care tire sales but after than tubeless technology introduced and it is economical and good quality.

New Entrants are coming:


Local markets are not good in technology so foreign countries jumped in to Indian market with new innovations and brought new products to gained sales margin than local tire market

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SOCIAL Attraction of city dwellers towards Rickshaw due to a convenient mode of transport:
In India, city dwellers love to take a journey through Rickshaw or Tuks-Tuks because of fuel consumption and a population problem. They used them as a convenient mode of transport as this journey is of low price.

Road conditions of India:


The road conditions of India were not good and not up to the mark. So foreign companies like Michelin and Good year invested in India and came with new technologies and gained a lot of profit with their new products.

PORTER ANALYSIS
Porter analysis help the managers identify the keys to competitiveness in their particular industry. In porter analysis, we check five forces and check whether they are impacting on the specific industry which we want to check or not.

1) Bargaining power of supplier


Bargaining power of suppliers can be segregated in two parts according to the demand of industry.

Rubber
There are two reasons behind this being low first one is most of the tyre firms get150 days credit for buying the rubber from international market which is not the case if they buy it from domestic rubber growers. And the second reason is, this credit is being offered at LIBOR, which is the London Inter-bank Offered Rate. It is the rate of interest at which banks borrow funds from other banks.

Other Petro chemical based material (Carbon black, Nylon tyre cord etc.)
The power of suppliers is high in this category as India is limping back in case of Petro based raw materials like carbon black and chemicals which account low in quantity terms but are high cost generators. Also the price of NTC fluctuates in line with the prices of Caprolactam (a

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petroleum derivative)-its main raw material. The prices of these materials are beyond control of tyre industry. 2) Bargaining power of buyers This can be seggeregated into two parts as follows.

OEM's
The OEMs are always in strong position when the bargaining power of buyers is concerned. The reason behind this is most of them are having contract with their relative tyre manufacturer under which the prices of tyre remains stable for this OEM irrespective of market price. The benefits are given to them as they are buying in bulk and the relation gives the tyre firms some thing called brand association.

Replacement
The scene in replacement segment is quite reverse as the bargaining power for the replacement segment is moderate due to the fact that the buyers are not that strong as compared to OEMs. The demand in buses and truck segment is always high because of Indian poor road conditions apart from this the purchase is made in small units. 3) Threat of substitute It is moderate or as the industry is facing opposition from retreading sector all over the globe. This cheaper option, around 20-25% of the original tyre cost, is present in developed countries since some decade back. And this is heading to wards strong position here in India too. 4) Threat of new entrants The threat of new entrant is moderate or can be described as low because the industry is highly capital intensive and the level of technological expertise required is also highly specific. But if we see from domestic (Indian) industry's point of view, this better can be defined as high. The reason being, global tyre industry is already seeing mergers and acquisitions in order to restructure. And as of now India and China going to be the hub of activities as far as tyre industry is concerned due to low production cost as well as other relevant benefits. So for any of the global big shot Indian company will be a good option to go for.

5) Industry rivalry
High, because gradually the overseas players are expanding their wings over Indian tyre industry and also a limited and every player is moving towards automated technology, like ERP and SCM. Apart from the aforementioned reason, the industry is seeing high competitive scenario at present because of various reasons like rising input costs, low realizations from growing OEM segment

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where the vehicle manufacturers are not ready to share the burden of tyre firms, the portion of replacement pie continuously taken away by the retreading sector which is slowly but firmly rising its head and that to in high realization segment of Bus-Truck tyres and last but not the least the unorganized sector is always there to give head ache to these established players like CEAT, JK, Apollo and MRF etc.

KSF
y y y y y y y Strong distribution network] Technology Market share Inventory management R&D Strong financial position Price competitiveness

Reasoning for selection of Tyre industry:


y Today, due to globalization, every day there is some new innovations in the product. Awareness and huge growth in radical tires strive Indian public to love high quality and new innovative tires. So, Technology innovations will be highly appreciated by Indian market. price war is engaging tire manufacturers towards low price and quality tires. y Indian market is becoming mature day by day. So manufactures should not compromise on poor quality of raw material. They should go for new suppliers. Exports of Indian tires should be increased.their is huge gap in exports of tires. More improvements should be their in distribution networks. y There are many reasons to select the tire industry.because the situation is favorable as the four powers are moderate and one power is high.there for this industry is favorable for us. y The PEST analysis shows us that the condition of the environment is positive as government give the relief and there is a growth in the entire industry. y TI has strong distribution network , which helps us the presence of tire all over the INDIAN MARKET.

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y TI has back of MURGUAPPA GROUP which has 29 companies from which 12 are listed.this group has strong financial position and has capabilitty to support and start tyre business. y TI has technology to make a quality tyre at low cost,they are already in the business of tubes.so we canh say that they have an idea or experience related to this field.

References:
http://www.cci.gov.in/images/media/presentations/16indiantyre_ndelhi10dec04_20080410190119.pdf http://www.buzzle.com/editorials/5-5-2004-53754.asp http://www.essays24.com/print/Porter-Analysis/53303.html

http://www.scribd.com/doc/35539651/Indian-Tyre-Industry