Owing to high demand of natural and synthetic rubber from this segment of the rubber industry, the tire industry is a subsidiary sector to automobiles. Consequently, this industry follows growth patterns similar to automobiles industry. As per 2014-15 rubber usage data, tire industry accounts for about 66% of the total consumption of rubber (both natural and synthetic).Even with a decrease in production of rubber, the consumption of the industry has increased by 4.7% in 2014-15.
With a future estimation of growth in the productivity of rubber, higher levels of demand will be met domestically which help to lessen raw material cost for tire manufacturing companies thus increasing the margins and profitability. There are two segments in this industry: Original Equipment Manufacturer (OEM) segment and the replacement segment.
With a total market capitalization of INR 45,870 Crores, the tire industry behaves like an oligopoly with some major players like MRF, Apollo Tires, JK tires and CEAT clocking $1billion in revenue. With fair valuations, less debt burden and overall higher profitability, the companies in this sector look poised to grow exponentially due to the sudden boost of demand of automobiles in the domestic as well as international market.
MRF being the market leader has come out with a series of new products in its portfolio to woo customers and gain market share faster than the other players. Products like “MRF NV series” will give the company a competitive edge in terms of both high quality and better technological prowess to compete with its international peers.
The market structure in terms of companies’ annual turnovers is:
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Domestic tire demand momentum has picked in 2014-15 due to improving auto industry sentiment after a muted growth in the industry for the past few years. The industry looks to grow at a 6-7% growth rate on the back of lower raw material costs, which form 60 – 70% of the total operating costs.
One of the major developments globally has been that the US Commerce Department’s International Trade Administration levied preliminary Anti-Dumping Duty (ADD) on all Chinese tires in their domestic market. Resultant to this, the Chinese companies have been pushing their products through Indian markets leading to a surge of 15% in imports in 2014-15. This also creates a surplus demand situation that major domestic players can use to boost exports and tap the US markets.
Due to the declining raw material costs, these companies are creating favorable opportunities by investing into building their production capacity to cater to the growing need both in the domestic market and in the international market. However, due to the slack of demand to be observed in the automotive sector globally, global OEM segment players have seen muted growth with players like Michelin, Goodyear and Bridgestone who own 40% of the global market posting disappointing figures. This will still not dwarf the series of good figures coming from all tire companies in the first quarter of 2015-16, which can increase the scale of Indian operations globally due to both intrinsic and economy-wide positive factors.
What this report contains:
A detailed overview of the industry
Structure of the industry from both, domestic and international perspectives
Related industries that this industry has inter-dependencies with and their understanding
Detailed analysis of industry segments in terms of the value and depth of corresponding market
Analysis & insights about the elements and critical success factors of this industry using strategic models
A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020
Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants
Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models