Thriving Automobile Sales Propel Tyre Industry Growth
The recent surge in sales in the automobile sector in India is responsible for the growth in the tyre industry. In the past, the tyre industry growth was mostly driven by replacement market demand. However, the situation now is changing as the sales of Original Equipment Manufacturer (OEM) is increasing.
With the rising economy and the automobile industry, the tyre industry’s graph is moving upward in FY 2018. According to the estimates of Apollo Tyres FY 2018 annual market report, the growth has been led by the Original Equipment sales, more than by the sales in the replacement market. In the FY 2019, production of all automobiles grew little over 16 percent. The production volume had grown by 15 percent in FY 2018 to stand at 29.07 million units. This trend indicates that this year could be another record year of production in the country.
MRF Tyre has recorded tyre volume growth of 8-10 percent. But it expects replacement demand to grow by 6-8 percent in comparison to 9-10 percent growth in OEM consumption. While this growth has come as a respite for the tyre makers, it was also a positive sign that the growth in the production volume of Commercial Vehicle, which contributes the highest revenue to the industry is also growing at double-digit.
The share of OEM in the overall revenue of tyre markets has been growing steadily. According to Apollo tyres, the OEM contribution in their report has moved up to approx. 25 percent in FY 2018. CEAT has reported the OEM share increase to 24 percent. This growth has also been supported by the imposition of anti-dumping duty on truck and bus radial tyres from China last year, which resulted in the decline of Chinese tyre imports by almost 50 percent. Demand also got a boost up with the implementation of GST — as per the FY 2018 annual report of CEAT.
According to Automotive Tyre Manufacturers Association (ATMA), the industry is currently in the process of investing INR 206 billion in new units and another INR 157 billion in the expansion of existing units. President for the Asia-Pacific, Middle East & Africa at Apollo Tyres, Mr. Satish Sharma, said the company would increase Truck and Bus Radial capacity unit to 12,000 tyres a day from the current level of 9,000-9,500 tyres per day.
President (India operations) at JK tyre, Rajiv Prasad, said that the demand was rising from OEM sector and the replacement markets. He further added that better road infrastructure, stable interest rates and a good monsoon have supported demand for all automobile segments.