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Tyre cos to invest Rs 12,000 crore in next 3-5 years

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Yogima Seth Sharma New Delhi
Last Updated : Jan 21 2013 | 3:13 AM IST

Global tyre leaders aim to develop India as hub for radial tyres.

Leading tyre manufacturers have lined up investments of about Rs 12,000 crore for the next three to five years to expand capacities and set up greenfield sites for truck and bus radial tyres, as the country faces a scarcity of 2.16 million radial truck tyres a year.

Over 50 per cent of these investments would come from global tyre leaders like Michelin and Bridgestone, as they aim to develop India as a hub for radial tyres to cater to the domestic market, where demand is expected to grow by 15 per cent year-on-year.

Monthly sales of truck and bus tyres are expected to go up to 175,000 units in the next three years from 130,000 to 140,000. According to industry estimates, while original equipment manufacturers (OEMs) need 1.5 million radial truck tyres, after market demand is at 1.2 million. Since the supply is a mere 0.54 million radial truck tyres a year, there is an estimated demand-supply gap of 2.16 million units a year.

“The Indian market is one of the few emerging economies where the bias tyre market is still much more prevalent. However, with the government’s focus on improving road infrastructure, we are confident that the radialisation pace will pick up in the country,” said Prashant Prabhu, president, Africa-India-Middle East, Michelin.

According to Prabhu, Michelin has lined up investments worth Rs 4,000 crore for the next seven years to manufacture truck and bus radials (TBRs) from 2012. India has one of the lowest levels of radicalisation at just five per cent, against the world average of 65 per cent.

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Similarly, Apollo Tyres recently set up a new facility in Chennai and expanded production at its Baroda facility at an investment of Rs 2,000 crore, while JK Tyres is expanding capacity at its Mysore plant to 10 lakh units and also setting up a two-lakh capacity in Chennai at an investment of Rs 1,400 crore.

Birla Tyres will pump Rs 1,000 crore into a greenfield site in Uttarakhand, while CEAT Tyres plans to invest Rs 650 crore at Halol (Gujarat). Bridgestone would invest Rs 2,500 crore at its new site in Chakan, Pune and another Rs 170 crore in expanding its existing facility in Indore.

“Even as the road infrastructure develops and improves rapidly, newer generation vehicles are being launched and there is a greater desire amongst transporters to achieve fuel savings by switching to radial truck tyres. Consequently, from levels of two-three per cent a few years back, radialisation has already moved to a level of 10 per cent in India and this is estimated to go up to 15 per cent by the end of 2010 and 25 per cent by 2013,” Satish Sharma, chief (India operations), Apollo Tyres, said.

However, the rising rubber prices have been hitting the profitability margins, which in turn make Indian tyres less competitive, compared to those imported from China. “In the last 18 months itself, natural rubber prices, which accounts for 60 per cent of the total raw material cost for tyres, have gone up by more than 150 per cent and every rupee increase impacts the profitability of the tyre industry by Rs 60 crore,” said Sharma of Apollo Tyres.

“With high rubber prices and the inverted duty structure, our margins continue to be under pressure. As such, unless the government offers protection to the domestic manufacturers, future investments in the sector would be jeopardized,” AS Mehta, director (marketing), JK Tyres, added.

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First Published: Jun 15 2010 | 1:22 AM IST

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