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Two-Wheeler Tyre Industry On A Smooth Drive, Sees Higher Growth Prospects
The government of India and Indian Automotive industry is collaboratively working to enhance universal mobility and road connectivity between urban and rural areas while empowering the Indian automotive industry for keeping held high in the global auto industry
Photo Credit : Bivash Benerjee
The Indian Automobile industry is considered as one of the largest few in the world contributing 7.1% to the GDP. As per the Autocar Professional’s analysis of domestic sales in two-wheeler industry, nearly 20,192,672 units are sold during the fiscal year 2018 marking it the first time that industry has ever surpassed the milestone of 20-million. With such a commendable hike in domestic sales of two-wheelers in India, the tyre-making companies are bombarded with the demands for two-wheeler OEM and replacement tyres. The mass market for two-wheeler tyres already accounts for almost 50% the domestic tyre production in India and is sprinting into the growth trajectory registering 13% y-o-y growth in the initial two months of FY19.
Two-wheeler tyre demand, including domestic and exports, is further estimated to grow by 6 to 8% by the end of FY19 at a CAGR of 10%, according to ICRA. Keeping up with the snowballing demand from automobile manufacturers and aftermarket players, two-wheeler tyre making companies in India are stepping forward to expand their manufacturing capacity. With the vigorous economic activities and increased mobility across the country, the replacement demand may also grow at a rapid rate. And, the Indian tyre-makers are in no mood to miss the chance of expanding their reach in domestic and international markets. Here are the growth drivers which tyre companies are relying on:
Automotive Mission Plan 2026
The government of India and Indian Automotive industry is collaboratively working to enhance universal mobility and road connectivity between urban and rural areas while empowering the Indian automotive industry for keeping held high in the global auto industry. To increase the annual production from 46400 to 1616000-1889500 crore in OEM and Auto component sector is the target set by AMP (2016-2026). This fuels the demand for 2W benefitting two-wheeler tyre making companies.
An upsurge in women riders
From 30 to 33 per cent of women in India form the total population of riders and are comfortable with riding scooters. Because the number of working women and finance penetration keeps on increasing every now and then, two-wheelers remain their choice which marks a good sign for two-wheeler tyre making companies. Moreover, recent cutbacks in tax deductions for Rs 2.5 to 5 lacs are conducive to the growth of the tyre-making companies in India.
A slowdown in Imports from China
Imposition of anti-dumping duty on truck and bus radial (TBR) tyres from China in 2017 has also catalyzed the growth of replacement demand and OEM business expansion while reducing the unfair tyre trade practices. The import of Chinese tyre has been cut short by almost half since then, which spearheaded the capacity utilization for demand and supply chain of domestic tyre companies.
A rising demand for radial tyres
The sidewall and tread functions of a radial tyre work independently, unlike the bias tyre where multiple rubber plies overlap each other and cause overheating. With stiffer tread, radial tyres are cut-resistant and have greater traction than bias tyre which makes them an ideal option for heavy vehicles. Moreover, the emphasis on lower emission levels and enhanced fuel-efficiency in all vehicles has stimulated the automobile industry to urge two-wheeler tyre manufacturers for quality radial tyres. For such changing tyre demands, tyre manufacturers have increased the use of silica in their manufacturing process in order to improve tyre performance with low rolling resistance and enhanced cut resistance.
Other favourable factors
In the urban cities, the road transportation infrastructure is disappointing. People opt for two-wheeler rather than four-wheelers to avoid getting stuck at massive traffic jam on roads. Moreover, the increasing consumer power and the obsession of young population with two-wheelers are leading to the great demand of two-wheelers. The easy finance and credit services have also made it easier for the working professionals to own scooters or motorcycles; policies which always delight the two-wheeler tyre making companies. On the other hand, agricultural credits and crop insurance provided by the government to the farmers will result in an increase in rural income. Consequently, the affordability of two-wheelers may double the 2W demand in rural areas.
There’s a lot happening in the two-wheeler tyre industry, and most of them are all for good reasons. However, there is one big challenge that tyre manufacturers may find it hard to deal with— the shortage of domestic raw material. Around 90% of the nation’s natural rubber is produced in Kerala. And now, after being poorly affected by the floods, Kerala won’t be able to fulfill the raw material requirements of tyre companies in India for next few months.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.
The Author is the Executive Director of Steelbird International.More From The Author >>