By Koshy K Varghese , Executive Vice President, Marketing-MRF Ltd
SE Listed MRF tyres is a tyre manufacturing company headquartered in Chennai. Founded in 1946, the company exports to more than 65 countries and has a market cap of $56.78 billion.
The Indian tyre industry has been reporting good growth figures, over the past few years, spurred on by the rise in the automobile industry led by passenger vehicles and two-wheelers. The Indian tyre industry has emerged as one of the most competitive markets in the world and with the emergence of new technology, ultra modern production facilities and availability of raw materials,the sector is poised to grow further. A recent study states that the Indian tyre production is expected to reach almost 20 crores units by 2016-17.
In the previous financial year, the Indian tyre industry witnessed a turnover of Rs. 30,000 crores, producing 11.92 crores tyres, a total tonnage of 14.88 lakh metric tons. Currently India has 40 listed tyre manufacturing companies, out of which the top 10 account for over 96 percent of the country’s total tyre production. The tyre export market in India is valued at Rs. 3600 crores. While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres.
With the focus on providing better products and services, the Indian tyre manufacturers are giving emphasis to applied research and the setting up of well-equipped in-house R&D centers with emphasis on developing cutting edge technology for compound development, development of new designs for different segments, reinforcement materials, cost optimization for quality improvements and orientation towards changing customer requirements.
Major technological changes have taken place in tyre design from conventional bias or diagonal ply to steel-belted radial tyres, tubeless tyres, tyres with low aspect ratio, puncture-resistant tyres, flat tyres etc. and testing standards have also evolved accordingly to ensure performance, mileage, safety, reliability and the longevity of tyres.The Indian tyre industry has exhibited versatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs. The manufacturers are also investing in the development of Green Tyres and Radial Tyre capacity expansion. Innovative technologies like self inflation and run flat tyre (RFT) are also gaining popularity in the Indian market.
The concept of ‘green tyres’ is becoming a paradigm of the industry’s competitive edge. Though the technology has been around since ‘90s, due to higher manufacturing costsit was put on a backburner until recently. Green tyres have numerous benefits over normal tyres and provide advantages in fuel consumption. The green tyres reduce rolling resistance thereby improvingfuel efficiency and reducing carbon dioxide or CO2 emissions.
In India, MRF Limited is a pioneer in the introduction of Green Technology. MRF ZSLKrange of tyres are high-end, premium tubeless car radial tyres which are environmentally friendly and fuel-efficient. The tread compound of these radial tyres, reinforced by silica, provides lower rolling resistance, with overall fuel efficiency as the resultant outcome.
Tremendous work is being carried out towards the development of tyres with modified special compounds, besides tyre construction aspect, to reduce rolling resistance thus gaining in fuel consumption.
The market for radial tyres in commercial vehicles segment has seen a rapid increase in recent times. In the Medium and Heavy Commercial vehicle segment current level of radialisation is around 15 percent and that in the Light Commercial Vehicle segment, it is estimated at 18 percent. The passenger car segment however switched to radial tyres in a short period of time, with radial tyre penetration level for the category reaching almost 100 percent. This segment will surely be the focus area for Indian tyre manufactures as it is expected to grow at about 15 percent over the next few years to Rs. 393 billion by 2015.
Increasing sales of passenger and commercial vehicles in developing countries and strong demand for replacement tyres is providing significant opportunities for players in the automotive tyre industry. With a projected CAGR of around four percent over the next five years for the global tyre market, it is estimated to touch around $187 billion by 2017.
Higher dependency of suppliers on the OEMs are market challenges, the increasing per capita income in developing nations, population growth, new infrastructural projects, urbanization, increase in middle class population, and the green movement are all expected to drive growth in the industry.
The passenger car segment is forecast to see the highest growth over the next five years. Regionally, the APAC region is anticipated to experience lead growth during the forecast period. APAC is expected to attain the strongest growth in rubber demand through 2012, reflecting strength in China, India, Thailand and Vietnam.
The global automotive tyre market is highly consolidated and consists of passenger car tyres, heavy truck ties, and others segments. North America dominates this market with approximately 30 percent of the global total tyre demand.
Fuel efficiency and safety concerns are key drivers for investments in tyres in developed markets, which are transitioning into higher performance tyres. Japan and Europe have implemented stringent tyre performance criteria (covering rolling resistance related fuel saving,wet grip-related braking distance and noise reduction). Europe anticipates a potential reduction of 20 million tones of traffic-related carbon dioxide emission per year from enhanced tyre performance.
India is gradually moving towards international norms for tyres and it will be some time before the Industry faces such stringent norms that will drive the demand for superior tyre technology.