Tyre industry to see tepid growth in FY13

Mumbai, August 06, 2012: India’s automotive tyre production is expected to clock 7 percent growth in FY2013 despite the decline in export growth but supported by improved domestic demand by a modest 8 percent, says a report by IMaCS. The domestic tyre industry may also feel the heat because of increasing threat from the OEM and replacement market, especially for the passenger cars and commercial vehicle markets.

Dwelling on the price trends of the tyre industry, the IMaCS report says that moderate demand slowdown and decline in prices of rubber contributed to an increase in tyre prices at sequentially lower rates to 4.5 percent in Q4FY2012. However, tyre prices have increased at higher rates for truck/bus and motorcycles, but at lower rates for four-wheeler (4W) tyres primarily because of higher imports in this segment.

Operating margins have been declining from 2010 because of higher increases in raw material/selling costs compared to prices. While the outlook on the demand growth for tyres continues to be positive, volatility in prices of rubber continues to be a concern.

The demand for tyres by major sectors stands at OEMs (47 percent), replacement demand (47 percent), and exports (6 percent). While OEM demand growth moderated from 28 percent in FY2011 to 14 percent in FY2012, replacement market demand declined 4 percent in FY2012 primarily of declines in two major markets—commercial vehicles (CVs) and two-wheelers (2Ws).

India’s tyre production increased 5.2 percent during FY2012 to 125 million units. Production growth peaked at 29.9 percent in Q4 of FY2010, but has thereafter declined substantially. The recent slowdown has been primarily because of substantial dip in demand for CV and four-wheeler tyres. India’s automotive tyre demand has increased at a three-year annual average of 18 percent to 131 million units in FY2012. Demand growth has slowed down from 30 percent in FY2011 to 5 percent in FY2012 because of lower demand growth from original equipment manufacturers.

The Indian tyre industry has around 43 companies, out of which the top 10 companies account for around 90-92 percent of total production. Although imports constitute only 8 percent of total tyre production, the share of imports has been increasing, driven by increased imports of tyres for passenger cars and CVs.