Professional Documents
Culture Documents
Tyre
Industry
Industry Overview
size and Categorization
Market Segments
Industry Concentration
Category-wise Market shares
Company wise Product Mix
Cost Structures and Profitability
Product Segments
Changing Trends
Replacement and Exports
Exports
Break-up of Exports
Export Destination
Export Trends
Profitability Analysis
Operating Margins
Realizations
Net Profit Margins
Return on Capital Employed
Gearing
Working Capital
Asset Turnover
5
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
7
Tyre industry is more than Rs. 200 billion in size and more than 3/4th of
the revenues is accounted for by commercial vehicles and tractors.
INDUSTRY OVERVIEW SIZE AND CATEGORIZATION
Size
Segmentation
Overall Industry
Commercial
Vehicles and
Buses (73%)
MHCV - LCV 59%
8%
Passenger
Vehicle Tyres (23%)
Tractos 10%
Cars/
MUVs 11%
2 - Wheelers
12%
Others (4%)
Replacement is the biggest market segment and account for about 54%
of the overall revenues.
INDUSTRY OVERVIEW MARKETS
Markets
10
Players
11
2007-08
Apollo
20.5
23.5
MRF
19.6
22.4
JK Industries
15.1
16.4
Ceat Tyres
18
11.4
Goodyear
7.7
6.2
TVS Srichakra
3.1
3.5
Falcon
2.5
2.5
Others
13.5
14.1
12
LCVs
Cars
Tractors
2wheelers
Apollo
27
24
18
17
MRF
20
24
23
18
25
JK
18
23
22
CEAT
15
11
10
Goodyear
10
25
TVS Srichakra
28
Falcon
20
13
LCVs
Cars
Tractors
2wheelers
Apollo
72
10
MRF
53
10
JK
72
10
CEAT
65
10
Goodyear
29
21
30
TVS Srichakra
95
Falcon
85
14
Raw material costs constitutes about 70% of the revenues and the
operating margins for the industry is about 10%
INDUSTRY OVERVIEW COST STRUCTURE AND PROFITABILITY
Key Costs (All
costs as % of
Income)
Profitability
15
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
16
17
9%
Trucks and
Buses
Passenger Cars
6%
4%
SUVs/MUVs/Je
ep
LCVs
2%
4%
Tractors
75%
18
2 Wheelers
9%
59%
Share of Revenues in %
Replacement
OE
Exports
MHCV
Tyres
60%
21%
19%
Passenger
Car Tyres
50%
43%
7%
Overall
54%
32%
14%
19
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
20
BREAK-UP OF EXPORTS
13%
3%
MHCV
40%
18%
Passenger Cars
27%
21
LCVs
Motorcycle and
Scooters
Tractors and
Others
8% 5%
5%
5%
52%
5%
5%
4%
3%
3%
3%
22
UAE
Phiillipines
Iran
Pakistan
Netherlands
Germany
Nigeria
USA
Italy
Kenya
Others
28500
11900
2000-01
23
2006-07
Exports Value in
Rs. million
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
24
Globally top 4 players account for about 55% of the market share.
GLOBAL MARKET-SHARE
17%
44%
17%
6%
25
16%
Bridgestone
Michelin
Goodyear
Continental
Others
Globally, Cars & SUVs is the biggest product segment whereas in India
it is MHCVs
COMPARISON : PRODUCT SEGMENTS
Segments
International
India
60%
19%
MHCVs
28%
57%
2-Wheelers
2.5%
10%
Tractors and
Earthmovers
6%
10%
Others
2.5%
4%
26
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
27
Though radialization have long term benefits, its penetration levels are
different for different segments.
RADIALIZATION
Segment
Passenger Cars
70%
97%
LCVs
10%
15%
2%
9%
29
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
30
Re-treading is highly prevalent in India which can extend the life of the
tyre by about 60% with 25% of the cost of the new tyre.
RETREADING
Retreading is a process in which a new tread is applied on the body of the
worn tyres, called casing (A tread is that portion of a tyre, which comes into
contact with the road surface).
Cost of retreading a tyre is around 20 -25 per cent of the cost of a new tyre.
A retreaded tyre lasts for around 60 per cent of the life of a new tyre.
For example, average cost of an MHCV tyres is about Rs. 10,000 to Rs.
11,000, whereas the cost of retreading is only about Rs. 2000 to Rs. 2500
Average life of a new tyre is 60,000-65,000 kms. Life of a retreaded tyre
depends upon the number ofretreads carried on the tyre. Generally, a
retreaded tyre lasts for 30,000-35,000 kms.
A tyre can be retreaded 2-3 times.
31
32
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
33
Raw material costs is the biggest costs for the tyre industry.
COST STRUCTURE
Parameters (as % of
Sales)
Raw Material
Expenses
66
69
71
72
69
4.5
Selling Expenses
Other Overhead
Expenses
Total Operating
Expenses
92
93
94
93
90
34
Natural Rubber and NTC fabric are the biggest components of the RM
costs and constitutes almost 60% of the overall material costs.
BREAKUP OF RAW MATERIAL COSTS
Natural Rubber
10%
NTC Fabric
5%
Carbon Black
5%
41%
5%
Rubber
Chemicals
Butyl Rubber
10%
PBR
5%
18%
SBR
Others
35
Most Raw materials for tyres are petro-based and hence their prices are
linked to global crude oil prices..
ANALYSIS OF RAW MATERIAL COSTS
The tyre industry is highly raw material intensive. Materials account for
almost 66 per cent of the industry.s total cost of production as in 2007-08.
Natural Rubber (NR), Nylon Tyre Cord (NTC), Carbon black, Styrene
Butadiene Rubber (SBR), Poly Butadiene Rubber (PBR), rubber
hemicals, Butyl rubber and Zinc Oxide are the key raw materials used,
accounting for around 92 per cent of the total raw material costs.
Other raw materials include aromatic oil, bead wire, process oil, stearic
acid, etc., accounting for balance 8 per cent of raw material costs.
Increase in raw material costs result in a corresponding decline in the
industry.s profitability.
As most of the raw materials used to manufacture tyres are petro-based,
their prices are linked with global crude oil prices.
36
OTHER EXPENSES
Employee expenses
Employee costs of the industry have remained stable at 5-8 per cent of
operating income.
Employee productivity in the industry is lower because of poor
industrial relations. Some of the players in the industry including Apollo
Tyres, Dunlop, and Modi Rubber, have a history of lockouts, resulting in
production losses.
Selling and distribution expenses
Although tyres have very little product differentiation, the industry
incurs selling expenses of around 6 to 8 per cent of the operating income.
Freight and distribution account for around one-third of the total selling
expenses.
The industry also invests in brand building initiatives to compete in the
replacement market. (although brand consciousness is low in the truck
and bus tyres segment, it is higher in car radials).
37
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
39
Price realizations are highest for MHCVs and low for 2 and 3 wheeler
categories.
REALIZATIONS
Price realisations (in Rs per kg) of tyre companies vary, depending on the
product mix . distribution to MHCV, LCV, passenger car, MUV, tractor, and
two-wheeler tyres.
The MHCV tyre category has the highest price realisation (in Rs per kg);
followed by the motorcycle, car and LCV.
This is because, in the MHCV tyre category, the replacement segment
accounts for larger volume [replacement segment has higher price realisations
than the original equipment (OE) segment.
In the OE segment, as the buyers are concentrated, they have more bargaining
power.
Realisations in the two- and three-wheelers tyre categories are lower on
account of high level of competition and large share of the unorganised sector.
41
Net profit margins of the industry have moved in line with its operating
margins.
NET PROFIT MARGINS
12.00%
10.00%
8.00%
6.00%
Operating
Margins (%)
Net Margins
(%)
4.00%
2.00%
0.00%
-2.00%
-4.00%
-6.00%
42
20
0304
20
0405
20
0506
20
0607
20
0708
The return on capital employed (RoCE) of the Indian tyre industry touched
the 10-year high for 2007-08 and reached the level of 20.4 per cent.
RETURN ON CAPITAL EMPLOYED (ROCE)
25%
21.00%
20%
15%
10%
14%
13.00%
8%
9%
5%
0%
2003-04 2004-05 2005-06 2006-07 2007-08
43
The industry has not witnessed any major capacity expansion in the last 5
years; hence, borrowings were stable-keeping the capital structure of the
industry steady till 2007-08..
GEARING
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2003-04 2004-05 2005-06 2006-07 2007-08
44
Raw Material
Inventory (Days)
32
40
35
32
36
FG Inventory (Days)
25
18
21
21
25
Debtors period
(Days)
49
46
45
41
36
Creditors period
88
82
72
69
74
The Indian tyre industry enjoys some bargaining power with respect to raw
material such as natural rubber and carbon black as tyre industry accounts for a
major share of their total consumption.
This can be seen in the favourable working capital mix for the industry where
creditor days are higher than debtor days as sales in replacement market (the largest
market)
are mostly done on cash basis.
45
Asset utilization has been steadily increasing for the five year period
between 2003-04 and 2007-08.
ASSET TURNOVER
1.6
1.4
1.2
1
1.1
1.2
1.3
1.4
Asset
Turnover
0.8
0.6
0.4
0.2
0
2003- 2004- 2005- 2006- 200704
05
06
07
08
46
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
47
9
8
8.1
7.8
7.1
6.5
6.9
6
2002-03 to
2008-09
2008-09 to
2012-13
5
4
3
2
1
0
OEM
48
Total
Tyre industry
is expected to
grow from Rs.
220 bn in 200809 to Rs. 315 bn
in 2013-14
CAGR (2003-04 to
2008-09 in %)
CAGR (2008-09 to
2013-14 in %)
MHCV
4.6%
4%
LCV
11.8%
8.8%
Passenger Cars
and UVs
12.1%
7.2%
2 wheelers
13%
11%
Tractors
10%
7-8%
49
Though LCV segment will grow faster than the MHCV segment, its growth
between 2008 to 2013 would be slower than the previous 5 years.
GROWTH ANALYSIS - LCVs
2-wheelers and tyres segment are expected to grow at 11% and 7-8%
respectively.
GROWTH ANALYSIS 2 - WHEELERS
The off-take from the motorcycles segment formed around 8-9 per cent of
the total tyre off-take.
With lower growth in the OEM segment, motorcycle offtake is expected to
grow at a CAGR of 11 per cent over the next 5 years as against 13 per cent
over the past 5 years.
Further, motorcycle exports which grew at a CAGR of 56 per cent over the
past 5 years, are expected to see a single-digit growth of 3-5 per cent over the
next 5 years,dragged down by high base and lower competitiveness.
The segment is thus estimated to reach a size of Rs 34 billion by 2013-14.
Tractor tyres are also expected to grow at a CAGR of 7-8 per cent over the
next 5 years in tonnage terms over a 10 per cent growth in the past 5 years.
This is attributable to a 6 per cent CAGR growth in OEM offtake against a
12 per cent growth over the past 5 years until 2008-09.
The
segment is thus estimated to reach a size of Rs 23 billion by 2013-14.
53
Radialisation
54
100%
65%
56%
48%
9%
Western
Europe
55
96%
US
Asia
South World
America
India
2004-05
2005-06
2006-07
2007-08
2010-11
MHCV
15
LCV
11
11
12
15
20
Passenger
Cars
87
90
95
97
100
57
Tubeless
Tyres
58
Penetration of tubeless tyres has been increasing in passenger cars and has
reached a level of 20% in 2009.
TUBELESS TYRES PENETRATION : CARS
2008-09
20
2007-08
18
2005-06
15
2004-05
11
10
2003-04
0
59
Tubeless Tyre
Penetration in
Passenger Cars
(%)
10
20
30
61
Capacity utilization has been more than 85% over the last 5 years.
93
92
91
90
89
88
87
86
85
84
83
92
90
86
Chinese imports constitute almost 90% of Indias tyre prices and this is
mainly due to their cost advantage.
IMPORTS : CHINESE THREAT
Chinese tyre imports account for more than 90 per cent of the total truck
and bus tyre imports.
Chinese tyre manufacturers have been traditionally able to quote lower
prices for tyres than the MRPs in India.
These low prices have resulted from a combination of cost
competitiveness and government/state subsidies.
While raw material prices and lower employee costs contribute to
marginally favourable cost economics, subsidies on power and fuel cost,
capital cost, interest expenses and tax exemptions have led to the cost
differentials.
A typical Chinese imported tyre of truck and bus radial segment is sold at
a 5-10 per cent lower rate in India as compared to prices quoted by Indian
tyre
manufacturers.
65
Profitability
Review and Outlook
66
68
69
Industry overview
Product Segments
Exports
Global Scenario
Radialization
Retreading
Cost Structure
Profitability Analysis
Demand Review and Outlook (2008-09 to 2012-13)
Player Profiles
70
MRF
71
SYNOPSIS
73
MRF is expected to touch a revenue of about Rs. 7000 crs in 2011 with a
healthy ROCE of close to 20%.
FINANCIALS
Parameters
FY-08
FY-09
FY-10 E
FY-11 E
50469
56728
62401
68641
7167
8391
9230
Net Profit
1445
2530
3017
3319
OPM (%)
13
13
13
13%
NPM (%)
ROCE (%)
19
19
18
18
74
MHCV
12%
LCV
5%
9%
53%
11%
10%
75
Passenger Cars
and MUVs
Tractors
2/3 wheelers
Others
MRF is expanding its capacities in Tamil Nadu and also entering into
aviation tyre segment.
KEY INITIATIVES
Signing of MOU
The company signed the memorandum of understanding (MoU) with
government of Tamil Nadu for the new MRF plant to be located at
Perambulur, Trichy and also for expansion of its existing plants in Tamil
Nadu.
This will be MRF`s third plant to be established in Tamil Nadu.
The other factories in Tamil Nadu are located at Tiruvottiyur
and Arakonam.
MRF is acquiring nearly 290 acres of land for its new facility in
Perambulur.
MRF to foray into aviation tyres
The company has announced entry in production of aviation tyres.
The company will invest Rs 1.25 billion in production facility of the
tyres the product is produced after three years of in house research. The
production will start at its Medak facility in Andhra Pradesh.
76
MRF is expanding its capacities in Tamil Nadu and also entering into
aviation tyre segment.
KEY INITIATIVES
77
Apollo Tyres
78
80
Apollo tyres is expected to reach about Rs. 5700 crores in FY-11 and its
ROCE is expected to be around 25%
FINANCIALS
Parameters
FY-08
FY-09
FY-10 E
FY-11 E
36939
40715
51533
57717
3360
8162
9141
Net Profit
2193
1081
4051
4578
OPM (%)
12
16
16
NPM (%)
ROCE (%)
15
12
27
25
81
Apollo tyres is mainly into MHCVs with very little presence in 2wheelers and tractors.
PRODUCT MIX
10%
8%
MHCV
LCV
Passenger Cars
Others
10%
72%
82
The company has set up a new plant in Chennai which will produce
radial tryes for domestic and exports.
KEY INITIATIVES
CHENNAI PLANT
The company has expanded its capacity in Chennai for the
production of truck, bus and passenger car radial tyres .
Plans are also afoot to enter the European markets with Apollo
branded tyres in the first quarter of 2010-11.
The commissioning of the Chennai facility is going ahead as per
schedule.
The plant is expected to start commercial production this quarter.
Production is expected to peak to the full capacity of 8,000 car radials a
day (2.4 lakh a month) and 1 lakh truck radials amonth by December
2010 and April 2011 respectively.
A part of the production from the Chennai facility will be marketed
in Europe.
83
84
85
CEAT
86
CEAT is expected to reach about Rs. 5700 crores in FY-11 and its ROCE
is expected to be around 12-13%.
FINANCIALS
Parameters
FY-08
FY-09
FY-10 E
FY-11 E
23,300
25137
27728
32552
461
2783
2840
Net Profit
1486
-161
1542
1461
OPM (%)
7.9
1.8
10
8.7
NPM (%)
-1
ROCE
12
13
12
87
11%
3%
7%
3%
10%
66%
88
MHCV
LCV
Passenger Cars
Tractors
2-3 wheelers
Others
CEAT is planning for capacity expansion for both radial and crossply
tyres..
KEY INITIATIVES
91
JK Tyre
92
JK Tyres is expected to reach about Rs. 3800 crores in FY-11 and its
ROCE is expected to be around 18-20%.
FINANCIALS
Parameters
FY-08
FY-09
FY-10 E
FY-11 E
28140
49221
34861
38348
3130
4422
4864
665
190
1743
1940
OPM (%)
13
13
NPM (%)
ROCE
12
13
19
18
93
9%
MHCV
10%
LCV
10%
71%
94
Passenger Cars
and MUVs
Others
95
JK Tyre & Industries is planning to triple direct supply of truck and bus
radial tyres to OEMs
The company is planning to triple direct supply of truck and bus radial
tyres to major companies like Tata Motors and Ashok Leyland in the coming
two years.
The companys sales to original equipment manufacturers (OEMs) are only
around 5% of its annual total production, while the rest goes to the after
sales market.
The company intends to increase this to 15% within the next 24 months.
The company aims to take the opportunity to tap the market offered by
OEMs with companies like Tata Motors and Ashok Leyland increasing the
use of radials.
97