TYRE INDUSTRY

Overview and Analysis

BRIJESH. K. NAIR GOVIND. M JAISON GEORGE

Industry overview
y y y y

$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
Indian
MRF APOLLO JK TYRE CEAT BIRLA GOODYEAR 22.0% 20.0% 19.0% 16.0% 7.0% 6.0%

International
MICHELIN y BRIDGESTONE y GOODYEAR
y

20.1% 18.4% 16.9%

Outlook on Demand & Supply: India

y

Drivers of demand Industrial & freight activity - Personal purchasing power - Economic growth Three avenues of demand Original Equipment Replacement Demand Export Demand Supply can be met by domestic players Face competition from imported tyres

40% 53% 7%

y y

Market drivers : India

y y y

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

y y

Market challenges: India

y

The Radialisation challenge- Radial vs. Cross ply Tyres India -2% Negatives
Comparatively Higher Cost Marginally poorer overloading

Global average- 65% Why use Radial tyres? Positives

Longer life -100,000 kms Better fuel efficiency 5 to 8% Lower aspect ratio- Better control
y

Other challenges Poor roads Misperception that they are unsuited for India Difficulty to integrate in old vehicles Lack of radial manufacturing capabilities

Market challenges: India

y

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

y

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

y y

Industry poised for a very good growth rate More J.Vs 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

y New and uncharted territories as export markets. Scope and challenges

y y y

Increasing productivity both labour and machinery Competition from other developing markets Increasing raw material costs will effect OPM

Contd .

Thank you