CEAT focusing on expanding profitable segment — agriculture radial tyres, says MD & CEO Arnab Banerjee

CEAT, one of India's leading tyre manufacturers, is strategically focusing on the most profitable segment in their business: agriculture radial tyres. In an interview with CNBC-TV18, Arnab Banerjee, the Managing Director and CEO of CEAT, shared the company's plans and insights into their expansion and market position.

“The focus is on the most profitable segment, which is agriculture radial and their capex is going on, we are expanding our Ambernath plant. We have reached about, let's say 100 tonne per day. And we plan to reach by next financial year about 150 tonnes per day. So, that's the most profitable part of our business where capex is going.”

Discussing the financial aspects of the company, Banerjee expressed optimism about Ceat's revenue prospects. He stated that Ceat aims to achieve a revenue of Rs 14,000 crores in the next three years.

“We have a lot of headroom in terms of capex, which has just ended. So, we can easily grow, let us say up to Rs 14,000 crore into three years. To grow 10 percent we need to have capex of about Rs 1000 crore every year right.”

CEAT reported Rs 11,302 crore revenue for the financial year 2022-23 ended March 2023, up 21% from Rs 9,341 crore in the year ago period.

However, he emphasised the importance of managing capital expenditure (capex) effectively in the tyre industry, which has seen instances of capex bunching up in the past. Ceat plans to invest Rs 700 crores in capex this year, prioritising prudent financial management.

Banerjee highlighted Ceat's strong presence in the motorcycle and scooter tyre market, where they currently hold a market share of one-third. With ambitious goals in mind, Ceat aims to increase their market share to 37-40 percent in the motorcycle and scooter tyre segment. This demonstrates their commitment to consolidating their position as market leaders.

“We are market leaders in motorcycle and scooter tyres. We have roughly about one-third of the market with us. So it's a huge dominant market share and we intend to grow it gradually to about 37-38 per cent and closer to 40 percent over the year.”

While the passenger tyre segment is highly competitive, with seven to eight strong players in the market, Ceat has made significant progress.

In just a few years, they have managed to increase their market share from 2.5 percent to an impressive 15 percent. Banerjee believes that a further 2.5-3 percent increase in market share will establish Ceat as the market leader in the passenger tyre segment.

As the automotive industry transitions towards electric vehicles (EVs), CEAT recognises the unique requirements for tyres in this emerging market. Banerjee explained that EVs demand noiseless tyres and have distinct design specifications. With EVs expected to gain more traction in the future, CEAT has already secured a 40 percent share in the two-wheeler EV market. Looking ahead, they anticipate that approximately 30-35 percent of four-wheeler vehicles will be electric by 2030.

CEAT has proactively started collaborating with original equipment manufacturers (OEMs) to develop tyres specifically tailored for EVs. Research and development (R&D) initiatives are underway to meet the demands of the EV market. Banerjee pointed out that while the costs associated with EV tyres may differ, the production processes remain relatively similar.

As CEAT continues to expand and innovate, they are well-positioned to capitalize on the growing demand for agriculture radial tyres and maintain their market leadership in the motorcycle, scooter, and passenger tyre segments. With their focus on the EV market and ongoing R&D efforts, CEAT is prepared to cater to the unique requirements of electric vehicles, ensuring they stay ahead in this rapidly evolving industry.