Good times ahead for tyre market

October 21, 2009 6:44 am

Good times ahead for tyre market
 
Compared to stagnant markets in most developed countries, the Rs 22,500-crore Indian tyre market has been steadily growing, and it shows there are better times ahead.
The tyre market here has been growing by nearly 10-12 per cent YoY, thanks to the replacement segment, which accounts for roughly 75 per cent of revenues of the industry. In contrast to popular belief, it is the commercial vehicle (CV) category that has provided a much-needed fillip to the tyre industry. Arnab Banerjee, executive director, (sales, marketing & outsourcing) at CEAT, said, “CV tyre sales have a strong correlation with GDP of the country.”
But sales of CV tyres in the replacement category were not really affected by the slowdown because of demand from the mining and infrastructure sectors. And if tyre makers are to be believed, the numbers are slated to grow despite problems in the export market.
There are mainly two reasons: Firstly, the increase in the number of multi-axle vehicles. And secondly, according Banerjee, a drought-like situation this year can cause massive food grain movement. 
This may have prompted tyre makers to speed up new initiatives in the CV space. It’s a crucial segment because sales of CV tyres account for nearly 70-75 per cent of revenues in the replacement segment. For instance, Gurgaon-based tyre maker, Apollo Tyres, has already invested Rs 1,500 crore for its greenfield project in Chennai to manufacture truck radials.
But then the replacement CV tyre category is just a part of the optimism. The aftermarket passenger car and the OEM segment in the tyre industry are also estimated to grow fast. Dragged down by disappointing automobile sales during the slowdown, the OEM segment, which forms around 25 per cent of the total industry revenues, is back on track with resurgent automobile sales. The negative growth in the OEM CV segment is now stabilized. “Also, the passenger car segment in the replacement sector is growing faster than the CV segment at around 10-12 per cent,” says A. S. Mehta, head of marketing at JK Tyres. The only segments that will perhaps be affected by drought in the near future are sales in the two-wheeler and farm tyre market.