India's
tyre industry is on course to more than double its revenue to $22 billion by FY32 from $9 billion in FY22, according to a report by the Automotive Tyre Manufacturers’ Association (ATMA). The primary drivers are the rising demand for vehicles and continuous government investments in infrastructure. The large and growing population of vehicles will continue to support tyre demand in the replacement market, too.
India is among the leading tyre manufacturers globally and is also expanding its presence in the premium and luxury tyre segments, dominated by imports, according to a study by CRISIL Market Intelligence & Analytics (MI&A) Consulting.
The CRISIL study estimates the industry’s turnover will increase by 100 basis points to 3.4 percent of India’s manufacturing gross domestic product (GDP) by FY32 compared with 2.2 percent in FY22. Further, its contribution to Goods
and Services Tax (GST) will rise to $4.1 billion from $2.0 billion, the number of jobs supported to 3.7 million from 1.9 million and share in global trade to 4.5 percent from 3.1 percent.
Anshuman Singhania, chairman of ATMA, and Managing Director of JK Tyre & Industries Ltd, says, “The Indian tyre industry has the potential to lead domestic manufacturing on the global stage. This could be India’s moment if we are able to seize the opportunity offered by China + 1 policy by promoting sectors such as tyre manufacturing, which has proven credentials."
"India-manufactured tyres are being exported to more than 170 countries, with the US and Europe buying the most. It is time the industry is empowered in terms of raw material security and by pulling down barriers affecting exports,” Singhania said.
There is already considerable facilitation as well. Anti-dumping and countervailing duties and Atmanirbhar Bharat have helped substantially reduce tyre imports from Southeast Asia and China.
On the indigenisation front, the ‘India Natural Rubber Operations for Assisted Development’ project — a public-private partnership between select tyre majors, the Rubber Board, and the government — is an important initiative
where the consuming industry is directly helping develop 2 lakh hectares of rubber plantation in northeast India.
On the flip side, the increasing cost of raw materials is chewing away profit margins, while dependence on imports for certain raw materials continues.
Infrastructure constraints, challenges in competing with Southeast Asian rivals, increased capital expenditure (capex) and cheap imports are the other roadblocks for an industry where competition is also high due to multiple domestic and international makers.
Ceat MD and CEO Arnab Banerjee told
CNBC-TV18 that tyre manufacturing is a capex-intensive industry with a moderate asset turnover ratio. "For every Rs 1,000 crore of capex incurred, we get revenues of Rs 1,200-1,300 crore. To grow by 10 percent, we have to invest Rs 1,000 crore capex every year."
Ceat targets clocking Rs 14,000 crore in revenue in the next three years.
In FY23, the company made Rs 11,263 in revenue, growing 21 percent year on year. The tyre maker plans Rs 700 crore capex in FY24 and the focus is on the most profitable segment, as per them, which is agriculture radial tyres. The agri radial tyres are mostly in international markets.
Ceat is a market leader in motorcycles and scooter tyres with one-third of the two-wheeler market share. Banerjee said, "The company plans to increase market share to 37-40 percent in motorcycle and scooter tyres."
Ceat is also a large exporter of tyres and says while the Indian market is doing well, the export markets have a mixed performance as of now, with weakness in Europe and US.
Most tyre stocks ended the day of trading with no or limited gains on NSE.
