Two wheelers - Majority of exports are to Bangladesh, Sri Lanka, Bhutan and Nepal• PV - Exports are made to South America, Africa, Europe, Latin America and the Middle East.CV - Major portion of the exports are to Sri Lanka, Gulf countries and Africa 3 Wheelers Auto exports to Sri Lanka, Egypt, Nepal, Bangladesh among other countries
Tyre industry set for structural shift: Currently, manufacturing radial tyres is farmore capital intensive than cross-plys. Investment per tonnes per day (tpd) is3.2x of cross-ply at Rs6.1cr/tpd. On the other hand, the selling price of radialtyres is around 20% higher than the cross-ply tyres. Taking into account thedifference in capital requirements and consequent impact on asset turnover,interest cost and depreciation, to generate similar RoCE and RoE, the tyrecompanies would need to earn EBITDA margins of around 21% compared toaround 9% being earned on cross-ply tyres. Thus, higher capital requirementswill help protect margins from upward bound input costs, as the businessmodel evolves bearing in mind final RoEs rather than margins. With the sectorset for a structural shift and apparent pricing flexibility, it will result in animprovement in RoCE and RoE of the tyre manufacturers going forward.
Tyre Industry Analysis<br />By : <br /> Gagan Pareek<br />
Economic growth drivers….<br />GDP growth as per RBI is 8.5% .<br />Robust industrial growth backed by improvement in consumption demand<br />Increase in infrastructure spending.<br />Substantial improvement in domestic demand.<br />Increased thrust of the government on infrastructure projects.<br />All time high sales growth of few major automobile companies <br />eg: Maruti Suzuki India Limited sold a total of 10,18,365 vehicles in 2009-10.<br />
Indian tyre Industry<br />Indian tyre industry<br />Passenger vehicles<br />Commercial vehicles<br />Others<br />MHCV<br />HCV<br />LCV<br />Farm Vehicle<br />OTR<br />Industrial vehicle<br />Cars <br />Motor Cycles<br />scooters<br />
AN OVERVIEW OFINDIAN TYRE INDUSTRY<br />Financial Year 2009-2010 <br />Turnover of Indian Tyre Industry Rs. 25,000Crores <br />Tyre Production (Tonnage) 13.50 lakh M.T. <br />Tyre Production – All Categories (Nos.) 971 Lakh Tyre Export from India (Value) :Rs. 3000 crores<br />Number of tyre companies: 36 <br />Industry Concentration 10 Large tyre companies account for over 95% of total tyre production.<br />
Raw Materials of Tyre Industry - Overview <br />Tyre Industry is highly raw-material intensive. Raw materials cost accounts for approx. 63% of tyre industry turnover and 72% of production cost.<br />62% of total Natural Rubber consumption is by the Tyre Sector, balance by rubber based non-tyre industries.<br />Total weight of raw-materials consumed by tyre industry – 15.50 Lakh M.T.<br />Total Cost of Raw Materials consumed by tyre industry – Rs.16,000 Crores<br />Raw Material Availability <br /> No domestic Production of Butyl Rubber and Styrene Butadiene Rubber of tyre grades, i.e., 1502 and 1712.<br />Production of Nylon Tyre Cord Fabric, Polybutadiene Rubber, Rubber Chemicals, Steal Tyre Cord, Polyester Tyre Cord insufficient to meet domestic demand. <br />Tyre industry imports raw materials on account of the following factors:<br />
Can become World’s third largest automobile market in 2030.
By 2016, Automotive sector can DOUBLE its percentage contribution to GDP from current levels of 5% (US$50 billion) to 10% ($180 billion).</li></ul>Trends<br /><ul><li>Growth of exports of 22.30 FY 2009-10.
The Commercial Vehicles segment grew at 4.07 %.
Light Commercial Vehicles recorded a growth of 12.29 percent. </li></li></ul><li>The Growth Journey<br />
Automotive Companies in India<br />Major Multi-national companies<br />Major Indian Companies<br />
India : A Developing Hub for Compact Cars<br /><ul><li>Compact cars account for 70% of the total car market.
Compact car sales increasing at about 20% each year
Excise duty on small cars slashed from 24% to 12% in last three years
Maruti Suzuki :</li></ul> • New car plant to make 250,000 cars per<br /> annum (total 800,000 cars/annum)<br /> • 10 new Component JVs to support new<br /> Diesel Engine Plant.<br /><ul><li>Hyundai :
Already a big player in the small car segment</li></ul> • Increase capacity to 600,000 cars per<br /> annum over next 1 year.<br /><ul><li>Nissan :</li></ul> • Micra, UK India<br /><ul><li>Four more models in India, involving a total investment of over Rs 2,000 crore.
Ford :</li></ul> • Plans to unveil its small car with 1.2 ltr engine by 2010<br /><ul><li>Honda :
Investing US $ 250 million in a new plant in</li></ul> Rajasthan with capacity of 60,000 car per<br /> year (First car to roll out in 2009).<br /><ul><li>Tata Motors :</li></ul>Tata Nano became a big success gaining worldwide popularity with Tata planning to increase capacity<br /><ul><li>Toyota :</li></ul> • Toyota Kirloskar motors planning to launch its own small car in India by 2011 <br /><ul><li>General Motors :</li></ul> • New Capacity to manufacture small cars at its Talegaon, Maharashtra plant with 80% local inputs.<br /><ul><li>Brought in Spark small car in 2007
Growth Drivers of Indian Automobile Market<br />Rising industrial and agricultural output <br />Rising per capita income <br />Favourable demographic distribution with rising working population and middle classUrbanisation <br />Increasing disposable incomes in rural agri-sector <br />Availability of a variety of vehicle models meeting diverse needs and preferences <br />Greater affordability of vehicles <br />Easy finance schemes <br />Favourable government policies <br />Robust production <br />
Socio Cultural<br />Environment<br />Explosion in the number of nuclear families<br />As the joint-family system crumbles and the number of nuclear families explode, more small families seem to be demanding a two/four wheeler for themselves. This has directly resulted in higher sales of tyres in the past decade.<br />Higher car density per family<br />The number of upper-class and upper-middle class families with more than one car per family seems to be increasing exponentially. This is especially true in cities where Brand Strategy Analysis working couples find it difficult to survive without more than one car for transportation. With higher disposable incomes, these families are finally able to afford this need.<br />Shifting away from Savings, to EMI culture<br />Another notable trend that seems to be fuelling car sales (and therefore tryre sales) is the shift in the middle-class consumers saving habits. The Indian middle-class family has long been known for its savings frenzy. But with a younger workforce, higher disposable incomes, lower unemployment and the influence of globalization, the average Indian middle-class family is slowly warming up to the idea of EMI and<br />buying on credit. This has helped in furthering the sales of passenger cars significantly.<br />Enviorment Analysis<br />
MRF<br />Market leader among tyre manufacturers in India, with a 24% share in terms of revenues.<br /> Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price-maker status.<br />MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands<br />around 19% market share in the segment. <br />The Company has a distribution network of 2,500 outlets within India and exports to over 65 countries worldwide.<br />Apollo Tyres (ATL)<br />Apollo Tyres is the second largest player in the Indian tyre industry, with a market share of 22%, in terms of<br />revenues, and the largest player in the T&B segment, with around 22% market share and 82% of its product mix<br />coming from this segment. <br />It also enjoys a strong brand recall. ATL derives 80% of its revenues from the replacement market, where the EBITDA margins are higher; hence, at operating levels, Apollo Tyres has better<br />JK Industries<br />JK Industries has a 17% market share, in terms of revenue, making it the third largest player in the industry. The<br />Company ranks first in the MHCV and Passenger Car tyre segments, with 79% and 7% of its product mix coming<br />from these segments, respectively. Exports account for approximately 17% of its gross sales.<br />CEAT<br />CEAT has a 14% market share, in terms of revenues, and is an average player across categories. 68% of its<br />product mix comes from the MHCV segment.<br /> In terms of profitability, CEAT has lower margins compared to its peers, in spite of deriving 60% of its revenues from the replacement market<br />Leading Market Players<br />