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Indian tyre industry Growth expected at a CAGR of 8.21% till FY13

Indian tyre industry Growth expected at a CAGR of 8.21% till FY13
 
The Indian Tyre Industry Report gives current status and emerging trends in the industry. The industry was on a smooth ride till FY08. The tonnage production registered a 5-year Compounded Annual Growth Rate (CAGR) of 8.02 per cent between FY03-08. The largest category of Truck & Bus (T&B) tyres recorded a 5-year CAGR of 5.90 per cent while Light Commercial Vehicle (LCV), motorcycle and car tyre categories grew at 13.34 per cent, 12.27 per cent and 13.98 per cent, respectively in this period.
  
However, as the economy in general and automobile industry in specific slowed down in FY09, the tyre demand too came under pressure. In the first nine months of FY09, the industry managed a tonnage growth of only 2.19 per cent against a growth of 7.38 per cent in the same period last year. The tyre off-take to the Original Equipment Manufacturers (OEMs) declined by 6.17 per cent during this period. The T&B tyre category was the worst affected with the total off-take of these tyres declining by 0.01 per cent in the first nine months. Also, in the face of global slowdown and stiff Chinese competition, the export market off-take declined by 9.82 per cent during this period.
 
On the face of these demand-side pressures, the tyre industry saw production adjustments from all the major players in the last couple of months. The government too tried to provide external stimulus by effecting 6 per cent excise duty cut across industries (the excise duty for tyres was brought down from 14 per cent to 10 per cent w.e.f. December 7, 2008, and then further reduced to 8 per cent w.e.f. February 25, 2009.
 
In all the gloom, one silver lining for the industry has been the easing of raw material prices from September 2008 onwards. However, the impact of the fall in commodity prices was not visible in the nine months results of companies, as companies were laden with high-price inventories. The benefits of the sublime raw material prices will become visible only in the last quarter of FY09 provided, the demand too supports the top line.
 
The tyre industry faces competition from China in the domestic market. Imports as a percentage of total T&B tyre production stood at 10 per cent in FY08, with more than 90 per cent of these imports coming from China. While the anti-dumping duty is levied on the import of Chinese T&B bias tyres, the industry now wants it to be extended to Chinese T&B radial tyres to alleviate the import threat. In addition, the industry is also keen on customs duty relief on raw materials not produced/ manufactured in the country so as to compete with the Chinese tyres.
 
Radialisation though in its infancy in T&B, tyre category is making inroads. Most manufacturers have capex plans for radial T&B tyres with no new capacity being added for bias tyres. This indicates that the industry foresees radialisation to take further hold in the T&B tyre category. In the passenger car segment, radialisation has reached 97 per cent, up from 95 per cent a year ago. The industry is also banking on customized Off-the- Road (OTR) tyres and adding capacity in this category.
 
The Indian manufacturers are looking at increasing their global footprints. Apollo is undertaking an expansion plan at its Dunlop plant in South Africa. Similarly, JK Tyres & Industries has acquired a Mexican company Tornel. It has also entered into a manufacturing agreement with Chinese manufacturers to sell
JK-brand tyres in export markets.

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