View stunning SlideShares in full-screen with the new iOS app!Introducing SlideShare for AndroidExplore all your favorite topics in the SlideShare appGet the SlideShare app to Save for Later — even offline
View stunning SlideShares in full-screen with the new Android app!View stunning SlideShares in full-screen with the new iOS app!
India, Science and Technology: 2008S&T and IndustryTyre Industry in IndiaParvathi K. Iyer & Vrajendra UpadhyayTechnology generation in the Indian tyre industry has witnessed a fair amount ofexpertise and versatility to absorb, adapt and modify international technology tosuit Indian conditions. This is reflected in the swift technology progression fromcotton (reinforcement) carcass to high-performance radial tyres in a span of fourdecades. Globalization has led to the linking of the economies of all the nations andtherefore major Indian players in the tyre industry are pursuing global strategies toenhance their competitiveness in world markets. The present section broadlyundertakes an overview of the Indian tyre industry through an examination of itsgrowth trends with respect to production, exports and acquisition of technologicalcapabilities.
Key Features At present there are 40 listed companies in the tyre sector in India. Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for63 per cent of the organized tyre market. The other key players include ModiRubber, Kesoram Industries and Goodyear India, with 11 per cent, 7 per centand 6 per cent share respectively. Dunlop, Falcon, Tyre Corporation of IndiaLimited (TCIL), TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some ofthe other significant players in the industry. While the tyre industry is largely dominated by the organized sector, theunorganized sector is predominant with respect to bicycle tyres. The industry is a major consumer of the domestic rubber market. Naturalrubber constitutes 80% while synthetic rubber constitutes only 20% of thematerial content in Indian tyres. Interestingly, world-wide, the proportion ofnatural to synthetic rubber in tyres is 30:70 The sector is raw-material intensive, with raw material accounting for 70% ofthe total costs of production Total production figures in tonnage: 11.35 lakh MT & total production of tyresin all categories: 811 lakh (2007-08) Current level of radialization includes 95% for all passenger car tyres, 12%for light commercial vehicles and 3% for heavy vehicles (truck and bus) Restrictions were placed on import of used /retreaded tyres since April 2006 Import of new tyres & tubes is freely allowed, except for radial tyres in thetruck/bus segment which has been placed in the restricted list sinceNovember 2008 Total value of tyre exports form India is approximately Rs 3000 crore (2007-08) The major factors affecting the demand for tyres include the level ofindustrial activity, availability and cost of credit, transportation volumes andnetwork of roads, execution of vehicle loading rules, radialization, retreadingand exports.Source: ATMA & CMIE
Evolutionary Phases of Tyre manufacturing in IndiaTable 1: Evolutionary phases of the Tyre industry in IndiaPhase Period Characteristics Policy RegimePhaseI1920-35No domestic production. Demandmet through imports. Key playersincluded Dunlop (U.K), Firestone &Goodyear (USA)Liberal importsPhaseII1936-60Domestic production begins byerstwhile trading companies:Dunlop, Firestone, Goodyear andIndia Tyre & Rubber CompanyImposition of tariff &non-tariff barrierson importsPhaseIII1961-74Indian companies-MRF, Premier &Incheck- enter manufacturingsector with foreign technology;licensing of additional productioncapacityRegulation oncapacity expansionand repatriationof profits of foreigncompanies;enforcement ofexport obligation onMNC; protectionfrom externalcompetitionPhaseIV1975-91Entry of large Indian businesshouses like Singhania & Modi &technical collaborations with MNCs,introduction of radial tyres, verticalintegration and exponential growthDelicensing ofproduction, placingof imports underOGL with tariff &non-tariff barriers
in tyre production & exportsPhaseV1992onwardsExternal trade liberalization &reduction in import duty; re-entryof MNCs either independently or incollaboration with Indian capitalProgressivereduction in importduty; liberalizedimportsSource: Mohanakumar & Tharian (2001)ProductionFig 1: Category-wise tyre production in India for 2007-08 & 2008-09 withpercentage of change
Source: Automotive Tyre Manufacturers’ Association (ATMA). Data available only for two yearsFigure 1 displays production figures for different categories of tyres in the year2007-08 and 2008-09 (April-September). It shows a relatively significant increasein percentage of production of tyres in the segments related to passenger cars,tractors, light commercial vehicles and motorcycles. On the other hand, productionof tyres for scooters and mopeds declined by nearly 8 per cent.EXPORTS
Fig 2: Segment-wise exports in different categories for the year 2007-08 & 2008-09Source: Automotive Tyre Manufacturer’s Association (ATMA). Data available only fortwo yearsFigure 2 shows the tyre export figures in different categories for the year 2007-08and 2008-09. The figure shows a significant decline in exports in the truck and bus,tractor, ADV and industrial tyre categories. On the other hand, the figure shows asignificant increase in exports in the tyre categories of jeeps and trailers.SALES
Fig 3: Supply of key tyre categories to various segments like replacement market,original equipment market (vehicle manufacturers) and export market for the year2007-08Source: Automotive Tyre Manufacturer’s Association (ATMA). Data available only fortwo yearsTyre supplies are targeted and marketed primarily to the following categories:Replacement market, Original Equipment Manufacturers’, Export, GovernmentSupplies and State Transport Undertakings. The replacement market is significantfor manufacturers of tyres in the category of motor cycles, scooters/mopeds andtractors, while the OEM segment is significant for the category of passenger carsand jeeps.Acquisition of Technological capabilitiesRadialisation has been a significant dimension in the acquisition of technologicalcapability in the Indian tyre industry. The degree of radialisation is a clear indicatorof the status of road development, vehicle engineering and the economy in general.Inspite of some constraints and limitations, the tyre companies in India have keptpace with the technological improvements that radialisation signifies and offeredstate-of-the-art products, comparable to the best in the world. Radialisation islinked to factors such as road development, overload control and retreadinginfrastructure. Some of the advantages of radialisation are additional mileage, fuelsaving and improved driving. However, attempts towards radialisation have nottaken off at the expected pace due to factors like lack of suitability of Indian roadsfor plying of radial tyres, older vehicles not possessing suitable geometry in termsof fitment, unwillingness of the Indian consumer to pay higher prices for radialtyres etc. Nevertheless, the scenario is radically different for the passenger car tyresegment, where radialisation has crossed 95%. In the medium and heavy
commercial vehicle segment, the level of radialisation is comparatively poor, i.e.merely 4% and in the LCV segment; it is 15%.Technology generationTechnology generation in the Indian tyre industry is essentially geared todevelopment research, involving the change of tread design, reinforcement materialetc. Most of the major players do not engage in basic research due to the high costsinvolved. The source of technology for the domestic firms has been through reverseengineering, joint ventures and collaborations.The emphasis given by Indian tyre companies to applied research and the settingup of well-equipped in-house R&D centers by the companies, which are manned byexperts and experienced professionals, have also helped in technology upgradation.Indian tyre technology has exhibited versatility in maintaining inflow of technologythrough foreign collaborations and tailoring the same to Indian needs. R&D isessentially business or market driven. However, raw material suppliers could alsohelp in conceiving new projects. Compound development and in-process problemshave been the main thrust of in-house R&D in the Indian tyre industry. (Iyer &Upadhyay, 2008)
Fig 4: Comparison of R&D Expenditure, Exports, Sales & Raw Materials Expenditureamong all companies for the period from 2000-07Note: The primary vertical axis depicts expenditure on R&D (at current prices) inRs (crores), while the secondary vertical axis depicts the percentage of exports andraw material expenses in relation to sales.Source: CMIE database (figures generated from the 40 listed companies in thesector)A significant proportion of R&D effort in the tyre sector is carried out by four or fivetop companies. The proportion of raw material expenditure in relation to sales haswitnessed a sharp spurt in 2007. The proportion of exports to total sales continuesto be negligible in the tyre sector and a major portion of the sales revenue isgarnered through the domestic market.
Expenditure on Imported Technology and R&D Intensity: Comparisonbetween Top Ten Firms and All Other Companies in the Tyre industryFig 5: Comparison of expenditure on imported technology (at current prices) andR&D intensity among top ten players and all remaining firms (sectoral aggregate) inthe Indian tyre sector.Note: The primary vertical axis depicts expenditure on imported technology(at current prices) in Rs (crores), while the secondary vertical axis depictsR&D intensity (in percentages).Source: CMIE database
Tyre technology upgradation is an extremely difficult process, particularly in theIndian scenario, due to several factors. First, since tyre technology encompassesvarious disciplines such as polymer, chemical, steel etc. compromises have to bemade in the upgradation of technology because of a) the conflict andcomplimentarity inherent in these disciplines, b) the usage pattern of the tyres andc) the cost factor. Further, a tyre’s performance could be affected due to factorssuch as the weather, loading pattern etc. Despite these bottlenecks technologyupgradation in Indian tyre industry during the last few decades has beensignificant. This has been possible to some extent due to government approvals ofcollaborations with MNCs in this sector. The emphasis given by Indian tyrecompanies to applied research, the setting up of well-equipped in house R&Dcentres by large tyre companies, manned by experts and experienced professionalshave also helped in technology upgradation. Indian tyre technology has exhibitedversatility in maintaining inflow of technology through foreign collaborations andtailoring the same to Indian needs.AutomationTyre production traditionally, is multi-stage, with significant inter-stage differencesin the intensity of labour requirement, and a highly complex process involving theuse of around 37 different materials including rubber, steel, fabrics and vulcanizingmaterials. The production system in the Indian tyre industry has been traditionallyvery labour intensive. The automation of manufacturing processes has increasedgradually, which has slashed the size of the workforce to a considerable degree andhas effected a change in its composition. The degree of automation has beengreater in the area of radial technology, while cross ply technology is still labourintensive. The firms have been resorting to automation in order to tackle problemsrelated to labour unionization and indiscipline in the sector. The rationale provided
by the firms for the increasing drive towards automation of the manufacturingfacilities has been that high quality and uniformity of the final product usuallycannot be guaranteed with a labour intensive process. (Iyer & Upadhyay 2008).New Policy InitiativesThe tyre industry in India has had to grapple with raw material price volatility,rupee appreciation and cheap Chinese imports. In this connection, some of therecent initiatives by the government to facilitate the growth of the sector include: No WTO bound rates for Tyres and Tubes No restrictions on the import of all raw materials required for tyremanufacture except carbon black, which has been placed in the restricted list Increasing thrust on development of road infrastructureFuture prospects of the Indian Tyre industryThe Indian Tyre industry is expected to show a healthy growth rate of 9-10% overthe next five years, according to a study by Credit Analysis and Research Limited(CARE). While the truck and bus tyres are set to register a compounded annualgrowth rate (CAGR) of 8%, the light commercial vehicles (LCV) segment isexpected to show a CAGR of about 14 %. However, we have to also take account ofthe effect of the global recession on the sector in making these assessments. Thegrowth of the sector is closely linked to the expansion plans of the automobilecompanies, the government’s thrust on development of road infrastructure and thesourcing of auto parts by the global Original Equipment Manufacturers (OEMs).Some significant hurdles towards attaining these projected growth rates could beraw material related price volatility, rupee appreciation and the looming threat ofcheap Chinese imports. The Indian tyre companies need to make active efforts toexplore newer markets as the existing markets for bus-truck tyres, which account
for about 45 % of the total export volume, is nearing saturation. There is also anurgent need to increase the degree of radialization in order to safeguard their sharein the export market. Global tyre manufacturers have been making constant effortsto innovate and offer a diverse range of products such as tyres with pressurewarning systems, run flat tyres, eco-friendly tyres and energy efficient tyres. In thiscontext, the Indian domestic companies have to pursue a growth strategy ofcontinuous innovation and increasing emphasis on product differentiation.References: CMIE Database Infac (1998-99): Tyre Industry: Review & Outlook Mohanakumar, S & Tharian, GK. 2001. Impact of Economic Reforms on Tyre Industry.Economic & Political Weekly. 36, 14 & 15, 1044-50. Iyer, PK & Upadhyay, V. 2008. R&D in Indian Tyre Industry: Socio-Economic Determinanants.SSRN. Working Paper series. (Paper accepted on September 24, 2008). Report of the Automotive Tyre Manufacturer’s Association (Data accessed from websitewww.atmaindia.org)Back to "Theme Overview"Go back to Home Page of India, Science & Technology:2008