SUPPLY CHAIN OF TYRE INDUSTRY

SCM - Group 9
SEGMENT
OVERVIEW The Indian auto industry is expected to be the worlds third largest by 2016 behind China and
the US and will account for more than 5% of global vehicle sales.
Indian tyre industry is in modernization phase and is largely driven by demand and supply
conditions.
The domestic industry essentially caters to 2 segments
Original equipment manufacturers (OEM)
Replacement market (Aftermarket)
Replacement demand dominates the tyre market contributing 56% of total size while the OEM
market share is 44% as of 2015-16.

Indian tyre market is driven largely by two & three wheeler tyres (53%), followed by
passenger cars (28%) and commercial vehicle segments (16%). tractor segment accounted for
only 3% of the tyre sales in 2015-16.
There were 39 companies (2014-15) in the domestic tyre industry and the industry is valued at
around Rs.535 billion as of 2015-16.
SEGMENTATI
ON
CURRENT
STATISTICS

Top 10 companies accounting for

85-90% of the market share.

KEY DRIVERS DEMAND DRIVERS
Industrial and freight activity :
The price of a truck tyre is significantly higher than that of a
passenger car tyre (roughly 10 times). Thus the demand multiple
emanating from the commercial vehicle segment is highest in value
terms.
Personal purchasing power
As the economy booms and disposable incomes in the hands of the
Indian middle- class burgeon, the sale of passenger cars has been
witnessing an upward swing over the past decade. Since tyre sales
are directly linked to car sales, both through OEMs and the
replacement market, the tyre industry has witnessed a corresponding
increase in its sales figures.
Automobile sales
The demand from the OEM segment is a derived one and directly
correlated to the level of automotive production. Over the past few
years, the trend in tyre production and sales for OEM market has
been in line with the automobile sales for the period i.e., production
of tyres has been about 1.5 times that of a vehicle produced. While
the demand from replacement market has comparatively been higher.
Exports
INDUSTRY CONCERNS
Domestic production of natural rubber continues to
be far below its requirement
Sharp volatility in natural rubber prices has
led to further crunch in the domestic markets.
In the last 2 months, natural rubber prices have
zoomed a significant 30%
With rise in prices and high import duty,
imports have become un-viable.
High import duties on natural rubber
Tyre industry consumes 65-70% of the natural
rubber produced in the country. However,
import of natural rubber in India attracts 25%
duty which is highest in the world.
Higher import duties will hurt the margins of
tyre manufacturers as they will be left with no
option other than importing natural rubber in
case of a deficit in production.
Rampant dumping of cheap Chinese radial tyres in
the domestic market.
KEY PLAYERS

The TOP 10 players

MRF
Apollo
JK
CEAT
Balakrishna
Good year
TVS Srichakra
Falcon Tyres
Govind Rubber
Krypton Tyres
LOCATION
SUPPLY CEAT TYRES
CHAIN 3 level distribution structure
DESIGN
FACTORY TYRE SOURCING UNITS TUBES/FLAPS SOURCING UNITS

DIVISIONAL DISTRIBUTION CENTER (Nashik)

33 REGIONAL OFFICES

REGIONAL DISTRIBUTION CENTER

C & FA AGENTS

DEALERS

TYRE TRADER CEAT SHOPPE

RETAILERS RETAILERS CEAT exclusive retail outlets
Multi Brand Retailers Upcountry retailers for passenger cars and 2
wheeler tyre sales
KEY CEAT TYRES
INSIGHTS Pricing Receipt Flow Channel Member Management
Monetory Methods
Transportation from Factory to DC Minimum security deposit of Rs 1 lac for all dealers
Delivery Challan: Issues at the time of Interest on Security Deposit is 9% per annum for all
dispatch of tyres dealer through credit note
GRN(Goods Receipt notice): generated No COD on any payments
by RDC when goods are received Dealers are eligible for Turnover discount and
additional incentives
Transportation from RDC to C&FA
Non Monetary methods
IODC (Input Output Delivery Challan): Platinum Club: Top dealers attributed to special
Used to track transfer of tyres from RDC privileges
to C&FA Rhino Gold Club: Upcoming Promising Dealers
Delivery Challan Entry : entry made in Mechanism Followed : Target Setting Mechanism
SAP system when tyres are received by Monitoring: MOR(Monthly operations Review) meetings
C&FA
Type of Dealer Credit period Collection
Sales from C&FA Local 30 days Local Cheque
Invoice: Commercial invoice by dealer against
when tyre sale occur Delivery
Cheques: Payment cheque taken from Upcountry 33 days DD Local
the dealer after delivery of tyres Cheque
 PRICING MECHANISM CEAT
COMPARISON Percentage Discounts Slab System followed by CEAT
and JK
Schemes CEAT increases the discount % as In addition to this flat
the volume of sales increases
and hence large dealers have an
advantage over small dealers.
They can sell the tyre at a lower Since it s a flat discount, both
price than small dealers. So
CEAT and JK tyres will have a
few large dealers.
Credit System CEAT and JK have flexible credit
system and hence project an
image of being a less strict
company.
Dealer Schemes Dealer Schemes: Credit notes,
free tyres, Gold coins, foreign
trips (to dealers)
Apollo
Apollo has fixed percentage
discounts that are flat .
discount, Apollo runs schemes
which vary throughout the
year.
large and small dealers are
benefitted in a similar fashion
and hence, small dealers can
compete with large dealers
of Apollo.
Apollo has no intention to
provide a credit system and it
implements its policies uniformly
all across the country to avoid
being put in the same bracket.
Dealer Schemes: Credit notes,
free tyres, Gold coins, foreign
trips (to dealers)
THANK YOU