Chapter -1

Introduction of Tire Industry

 1.1 HISTORY & DEVELOPMENT OF TYRE INDUSTRY:
the word tyre has been derived from the French word tyrer
meaning 'to pull'. Prior to the invention of pneumatic or air filled
tyres, tyres were made up of bands of leather or iron placed on
wooden wheels. This would protect the wheels of the carts and
wagons from rapid wear and tear.A craftsman, known as
Wheelwright was famously recognized as the pioneer of this form
of tyres.

Evolution of Rubber Tyres

The 1800's, Charles Macintosh experimented with sap from trees in Amazon area to create
rubber. Charles Goodyear discovered vulcanised rubber in 1839, by adding sulphur, making it
elastic and strong enough to be used as cushion tyres for cycles.

It was in 1845 that pneumatic or air-filled tyres were invented and patented by Robert William
Thomson, a Scottish inventor. His design had multiple thin tubes inside a leather cover, so that
the tyre could absorb shocks. But, it never really went into production due to its severe
limitations.

However, in 1888, John Boyd Dunlop from

Ireland, came up with the first practical
pneumatic tyre which later became Dunlop
tyres. He also tested the first pneumatic or
air-filled tyres on a tricycle and took it for
a spin. Pneumatic tyres gained their
popularity due to the growing use of
bicycles in the late 18th century.

The Michelin brothers, Andre and Edouard invented the detachable pneumatic tyre in 1891,
which could be used on automobiles. The tyre consisted of a tube bolted on to the rim.

The process of making pneumatic rubber tyre underwent tremendous engineering advances for
the next fifty years after its invention. During this period, automobiles were using different
forms of bias-ply tyres. The bais-ply tyre had an inner tube containing compressed pressure
and an outer casing to protect the inner tube and offer traction. The outer casing was reinforced
with plys of rubberized fabric cords.
Indian Tyre Industry
In 1926, Dunlop Rubber Limited became the first company in India to set up a tyre company
in West Bengal. The MRF (Madras Rubber Factory Limited)entered the tyre manufacturing
market in 1946. Since then, the Indian tyre industry has grown rapidly.

In the pre-Independence period, the tyre manufacturers were mainly foreign companies. Raw
material in the form of natural rubber was easily available and labour was cheap. Sometime in
1956, based on the recommendations of the Tariff Commission, the Government encouraged
domestic companies to set up their manufacturing facilities. A number of companies set up
their plants in India, usually with technical support from foreign companies.After the onset of
liberalization a few foreign companies entered India. However, they were not able to make a
dent in the market share of Indian companies. Some foreign companies like Michelin,
Continental Tyres and Pirelli are planning to enter India in the near future. Over the last few
years, import of tyres into India from countries like China, South Korea and Thailand has been
on the rise. The tyre manufacturers feel that due to the inverted duty structure foreign tyre
manufacturers have an unfair advantage.

The Indian tyre industry has grown over the last ten years. The reasons for growth are the robust
growth of the economy and the automobile industry. Besides domestic growth, there has been
a smart growth in the export of tyres also. The future is likely to see more growth in exports as
the supply of natural rubber goes down. It is expected that the Indian tyre industry will have a
very bright future.

Demand for tyres is derived from demand for automobiles. Therefore, it is a derived demand
product and its fortunes are very closely linked to those of the auto segment. Within the tyre
industry the trucks and buses (T&B) segment accounts for more than 70% of sales. Though
scooters and motorcycle tyre demand also plays a vital role, in value terms, CVs gain
significance.

Tyre Industry turnover from 2004-2005 to 2009-2010 has been grown up from Rs.13500 Cr.
to Rs.25000 Cr. i.e. 85.18% growth has been observed. But in 2004-2005, there were 47 tyre
factories which got reduced to 36 in 2009-2010.Top seven large companies in India account
for 85% of total tyre production around globe.

With an estimated revenue of $ 8.421 billion and with a production of 165.6 million tyres from
167 operational plants in the country in financial year 2016-17, India is among the fastest
growing tyre markets globally. Indian tyre market reached a consumption volume of 184
million units in 2018. Today, the India tyre industry employs as many as one million people
including dealers, retraders, and growers of natural rubber.

1.2 OVERVIEW OF THE INDIAN TYRE INDUSTRY

With a production figure of 165.6 million tyres from 167 operational plants in the country,
India is among the fastest growing tyre markets globally. With an estimated revenue figure of
$8.421 billion in financial year 2016-17, the Indian tyre industry can be segmented into four
broad categories based on the tyres produced for various types of vehicles.

 two and three-wheeler tyre segment

 truck and bus tyre segment
 passenger car segment
 Tractor and light commercial vehicle (LCV) segments

In terms of volume, two and three-wheeler tyres account for more than half of production, but
contribute only 13% of the industry revenues. In contrast, the truck and bus tyre segment
contribute approximately 13% to the total tyre production, but has the highest revenue share of
the industry at 54%. The passenger car segment at 14% in terms of revenue accounts for 23%
of the tyre production in India. This segment is showing an increasing trend both in numbers
and revenue. Tractor and light commercial vehicle (LCV) segments’ total volume share stands
at approximately 9%, while its revenue share stands at about 17%.

Replacement market accounts for nearly 60% of the total tyre market by value. OEM (22%)
and export (18%) sales make up the rest. The major reason for high replacement share is due
to the fact that the ratio of annual sales to the number of registered vehicles remains at a ratio
of 1:10. There are about 203 million registered vehicles against approximately 21 million
annual vehicle sales.

According to the nine-month data (April 2016-Dec. 2016) from the Automotive Tyre
Manufacturers’ Association (ATMA), the overall industry showed a volume growth of 12%
led primarily by the passenger vehicle and two-wheeler segments, which cumulatively account
for nearly 77% of the total tyre volume production in the country. The industry followed a
similar growth graph for the commercial vehicle (CV) segment, which accounts for the highest
value. While the tyre production for medium and heavy commercial vehicles (M&HCV)
slowed by 3%, the tyre production for the light commercial vehicle segment grew by 7%.
Low-cost imports from China have been growing at a rapid pace and now account for a
significant share of the radial truck tyres in the replacement market. Given that the Chinese
radial truck tyres are often 25-30% cheaper than the Indian variants, this is resulting in faster
decline of the truck bus bias segment. The country has already witnessed closure of few tyre
plants and others operating at low capacity utilization because of this threat.

The spike in the raw material prices, along with low cost imports, gave a serious blow to the
Indian tyre industry. While the year saw a stable raw material regime for the first nine months,
there was a sharp increase in Q4 to the tune of 15%. Natural rubber, a key component of the
overall raw material basket, saw prices jump by 52% in Q4 fiscal year 2017 as compared to Q4
fiscal year 2016.

1.3 MAJOR PLAYERS OF TYRE INDUSTRY

Indian tyre industry is booming, especially in the last decade or so, a number of tyre companies
have started operating in the Indian tyre market. These include foreign stalwarts like Goodyear,
Michelin, etc. as well as trusted Indian giants such as Apollo, JK Tyres, MRF to name a few.

1. Apollo Tyres

Established in 1972, Apollo is one of the biggest

companies in India having a market share of
62.6% (tyre sales revenue) in India. They have
sold Rs. 117.1 billion in the financial year 2016,
having a net profit of Rs. 10.93 bn. The year 2016
saw Apollo tyres maintain its leadership position in Truck and Bus segments. The company’s
robust and quality portfolio ensured that it leads the market with over 25% market share. This
year the company introduced XT-7 Gold HD, a new bias truck tyre with improved durability
for moderate to high load applications. It has 4,900 dealers approx. across India.

2. JK Tyres and Industries Limited

Based in Delhi, it was formed in 1974, and soon
market leader in Truck/Bus Radial Tyre
segment in India and is the only tyre
manufacturer offering the entire range of 4-
wheeler radials for trucks, buses and cars. JK
Tyres states itself as ‘The Badshah of radial tyres on Indian roads’ with more than 3-million
truck and bus radial tyres on Indian roads. It is also India’s No. 1 truck and bus radial tyres
manufacturer. It has been awarded as a Superbrand for the year 2013-2014. The group also
received the ‘Brand of the Year’ Award in 2015 at World Branding Awards held in London. It
has exports of INR 581 crores (2016).

3. MRF Tyres Ltd

Madras Rubber Factory, was created in 1946, and is a
multi-national company and the largest manufacturer of
tyres currently in India. The company is advanced in
terms of technology with its world-class facilities. For
the 12th time in the last 16 years, it has been ranked as
India’s No 1 tyre manufacturer in the customer
satisfaction in the J D Power Asia Pacific 2016 India
Original Tyre Satisfaction Study for Passenger cars for
SUVs and Passenger cars.

4. CEAT Ltd.

Established in 1958, and a flagship company of

RPG Enterprises. It is one of the India’s leading
tyre maker with a capacity of rolling out more
than 95,000 tyres per day. Its major market
share is in the light truck and truck tyre market
segment. The company’s major share of its export sales comes from Middles East (29%). In
2015 the Net Sales in INR was 5, 75,477 lacs (CEAT Annual Report 2014-15).

5. Balkrishna Industries Ltd.

The company is currently an OEM vendor for

the heavy equipment manufacturers like JCB
company, John Deere and CNH Industrial.
Balakrishna Industries Ltd has developed into
a global player and currently enjoying 6%
market share of the global “off the road tyre
segment”. In 2013, it was also ranked as 41st among the world’s tyre makers. The company is
known for its good services and durable tyres.

6. TVS Srichakra Ltd.

The TVS group is one of India’s largest

industrial conglomerates and TVS Sundaram
Iyengar and Sons Ltd. (TVS & Sons) is its
parent and holding company. TVS Srichakra is
one of the leading two and three-wheeler tyres
manufacturing company. Set up in 1911, the
company has been rolling more than 11 million
tyres a year. They are recognised as the largest manufacturer of industrial pneumatic tyres,
farm and implements tyres, multipurpose tyres. Gross income – INR 2,082 crores (2016
estimates).

7. Goodyear India Limited

Parent organisation, Goodyear Tyre and

Rubber Company (Global Name) was founded
in 1898, with headquarters at Ohio (USA), they
went on achieving heights in tyre
manufacturing claiming World’s first
Detachable tyre and the Mass-produced Car i.e.
the Model T-Ford. They are also engaged in
manufacturing of tyres for different products such as Automobiles, Trucks, Racing Cars,
Airplanes, Farm Equipment and Heavy Earth-Mover Machinery. The company has facilities
across 6 continents and annual sales of more than $16 bn. The sales performance during the
Financial Year 2015-2016 for tyres was INR 1, 78,223 Lakhs.

8. Govind Rubber Ltd.

It is a global name for a range of world-class

bicycle tyres. Founded by late Mr. M.P. Poddar
in 1964, their inception was laid with a motto of
creating durable and reliable tyres for the (then) nascent Indian bicycle industry.

9. PTL Enterprises Ltd.

It was incorporated as a company in 1959. It became
an associate company of Apollo tyres ltd (ATL) in
1995. They have a plant in Kerala and are
manufacturing tyres since 1962, as of today that plant
is on lease to Apollo Tyres on a long-term basis. PTL
Enterprises is listed on Bombay and Cochin stock
exchanges and has over 7,000 shareholders.

10. Falken Tyre India Private Ltd.

It is a joint venture of Japan-based Sumitomo

Rubber Asia Pvt. Ltd. and Singapore-based
Stamford Tyres Corporation Ltd. Launched in
Japan in 1983, and later introduced itself in
North America, the headquarters of Falken are
based out of California. Now after 34-years,
Falken has globally become a well-known
brand that focuses on UltraHigh-Performance products as well as valued lines in Light Truck,
Commercial Medium Truck and Bus Radial Tyres while utilizing professional motorsports to
further develop and improve products for worldwide distribution. Sumitomo, the parent unit of
Falken, is the world’s 6th largest tyre maker, and the product range of Falken matches very
well with the company’s global standards. In India, the company sells passenger car and SUV
radial tyres.

1.4 STRUCTURE OF TYRE INDUSTRY

The Indian Tyre Industry is an integral part of the Auto Sector, contributes to 3% of the
manufacturing GDP of India and 0.5% of the total GDP directly. Indian tyre industry has almost
doubled from Rs 30,000 crores in 2010-11 to Rs 59,500 crores in 2017-18 of which 90-95%
came from the domestic markets. The top three companies – MRF, Apollo Tyres and JK Tyres
have 60% of the market share in terms of revenue. In terms of segmentation tyres can be divided
in two ways.
 1. Based on End Market

Indian tyre market is clearly skewed towards the replacement segment which contributes ~70%
of total revenues. Whereas in volume (tonnage) terms the replacement segment contributes
~60% indicating realizations in the after-market are clearly higher than OEMs (Original
Equipment Manufacturer) market

2. Based on Products

T&B tyres in India generates the major revenue i.e. 55% of total revenue whereas globally it’s
the PCR (Passenger Car Radials) contribute the largest portion of the revenue. This is mainly
because of very low penetration of passenger vehicles in India – below 20 per 1,000 people
whereas in China the number is ~69 per 1,000 people and 786 per 1,000 people in US. In terms
of volume (tonnage) T&B contributes around ~50% of the total volume.

1.5 PRODUCT APPLICATION

Tires may be classified according to the type of vehicle they serve. They may be distinguished
by the load they carry and by their application, e.g. to a motor vehicle, aircraft or bicycle.
1. Light–medium duty

Light-duty tires for passenger vehicles carry loads in the range of 550 to 1,100 pounds (250 to
500 kg) on the drive wheel. Light-to-medium duty trucks and vans carry loads in the range of
1,100 to 3,300 pounds (50 to 1,500 kg) on the drive wheel. They are differentiated by speed
rating for different vehicles, including (starting from the lowest speed to the highest): winter
tires, light truck tires, entry-level car tires, sedans and vans, sport sedans, and high-performance
cars. Apart from road tires, special categories include:
 Winter
Snow tires are designed for use on snow and ice.
They have a tread design with larger gaps than those
on summer tires, increasing traction on snow and ice.
Such tires that have passed a specific winter traction
performance test are entitled to display a "Three-
Peak Mountain Snow Flake" symbol on their
sidewalls. Tires designed for winter conditions are
optimized to drive at temperatures below 7 °C
(45 °F). Some snow tires have metal or ceramic studs that protrude from the tire to increase
traction on hard-packed snow or ice. Studs abrade dry pavement, causing dust and creating
wear in the wheel path. Regulations that require the use of snow tires or permit the use of studs
vary by country in Asia and Europe, and by state or province in North America.
 All-season:
Related to snow tires are those with an M+S rating, which denotes an "all-season"
capabilityquieter on clear roads, but less capable on snow or ice than a winter tire. These tires
have tread gaps that are smaller than snow tires and larger than summer tires.
 All-terrain:
All-terrain tires are designed to have adequate traction off road, yet have benign handling and
noise characteristics for highway driving. Such tires are rated better on snow and rain than
street tires and "good" on ice, rock and sand.
 Mud-terrain:
Mud-terrain tires have a deeper, more open tread for good grip in mud, than all-terrain tires,
but perform less well on pavement.
 High-performance:
High-performance tires are rated for speeds up
to 168 miles per hour (270 km/h) and ultra-high-
performance tires are rated for speeds up to 186
miles per hour (299 km/h), but have harsher ride
characteristics and durability.Other types of
light-duty automotive tires include run-flat tires
and race car tires.
 Run-flat tires:
Run-flat tires obviate the need for a spare tire, because they can be travelled on at a reduced
speed in the event of a puncture, using a stiff sidewall to prevent damage to the tire
rim. Vehicles without run-flat tires rely on a spare tire, which may be a compact tire, to replace
a damaged tire.
 Race-car tires:
Race car tires come in three main categories, DOT (street-legal), slick, and rain. Race car tires
are designed to maximize cornering and acceleration friction at the expense of longevity.
Racing slicks have no tread to maximize contact with the pavement and rain tires have channels
to eject water to avoid hydroplaning.
2. Heavy duty

Heavy duty tires for large trucks and buses come in a variety of profiles and carry loads in the
range of 4,000 to 5,500 pounds (1,800 to 2,500 kg) on the drive wheel. These are typically be
mounted in tandem on the drive axle. Truck tires—Truck tires come in a variety of profiles that
include "low profile" with a section height that is 70 to 45% of the tread width, "wide-base"
for heavy vehicles, and a "super-single" tire that has the same total contact pressure as a dual-
mounted tire combination.
 Off road:
Off-road tires are used on construction vehicles,
agricultural and forestry equipment and other
applications that take place on soft terrain. The
category also includes machinery that travels
over hardened surfaces at industrial sites, ports
and airports.Tires designed for soft terrain have
adeep, wide tread to provide traction in loose dirt, mud, sand or gravel.
3. Other
Aircraft, bicycle and a variety of industrial applications have distinct design requirements.
 Aircraft:
Most aircraft tires are designed for landing on paved
surfaces and rely on their landing gear to absorb the shock
of landing. To conserve weight and space required, they
are typically small in proportion to the vehicle that they
support. Most are radial-ply construction. They are
designed for a peak load when the aircraft is stationary,
although side loads upon landing are an important factor.Although hydroplaning is a concern
for aircraft tires, they typically have radial grooves and no lateral grooves or sipes.Some light
aircraft employ large-diameter, low-pressure "tundra tires" for landing on unprepared surfaces
in wilderness areas.
 Bicycle:
Bicycle tires may be designed for riding on roads or over unimproved terrain and may be
mounted on vehicles with more than two wheels. There are three main
types: clincher, wired and tubular. Most bicycle tires are clincher and have a bead that presses
against the wheel rim. An inner tube provides the air pressure and the contact pressure between
bead and wheel rim.
 Industrial:
Industrial tires support such vehicles as forklifts, tractors, excavators, road rollers, and bucket
loaders. Those used on smooth surfaces have a smooth tread, whereas those used on soft
surfaces typically have large tread features. Some industrial tires are solid or filled with foam.
 Motorcycle:
Motorcycle tires provide traction, resisting wear, absorbing surface irregularities, and allow
the motorcycle to turn via counter steering. The two tires' contact with the ground affect safety,
braking, fuel economy, noise, and rider comfort.

1.6 TECHNOLOGY INVOLVED

The technology evolved from solid wheel to spoked wheel to pneumatic tyre by 1847. The first
practical pneumatic tyre came in 1888 in cross ply fabric technology. Further improvement
happened in ply material as it moved from cotton to stronger and lighter synthetic fibers such
as nylon and polyester.

Next milestone in tyre technology was the radial technology and the first steel belted radials
were introduced in 1946 by Michelin. But a lot is happening in the world of tire technology
because innovations spurred by customer demand and regulations for greater fuel economy
filter down to tire makers.

Tires are part of a push to use technology to increase car safety. A system known as “Contact
Area Information Sensing,” or CAIS, includes a sensor attached to the interior wall of the tire
that monitors how it interacts with the road’s surface. The system checks road conditions to
distinguish among dry, wet, slush, fresh snow or ice, and sends that real-time information to
the driver via a digital screen.

Low tire pressure is bad for tires and gas mileage. A potential remedy would be self-inflating
tires, which use sensors to measure tire pressure and automatically add or decrease air if the
pressure is too high or low. This technology is being used in heavy machinery and military
vehicles, and may be coming soon to passenger cars, including a low-tech version with just
two parts.

Easily the most visually striking trend to emerge of late is the airless tire. Impervious to
punctures, airless tires have an outer tread supported by flexible polyurethane spokes that
absorb the force of the road. They use less rubber, potentially last up to three times longer than
traditional tires, and have high lateral strength and resistance to hydroplaning.Since then along
with the improvements in automobiles, tyre technology also improved in terms of performance
such as speed capability, load bearing capability, durability, mileage and fuel consumption in
rolling.

As far as performance of tyres is concerned, inflation pressure still plays the most vital role and
this very fact has made the tyre inflation the potential source of problems also. This realisation
has led to further research on preserving right inflation or even running the tyres without it.
Equipment such as TPMS are to ensure right inflation in tyres whereas technology such as
Run-flat support the tyre to run without inflation.

As Herman Vereecken, the Manager of Communication Strategy and Deployment at the

Goodyear Innovation Centre suggests, “for 100 years tyres have been material and mechanical,
but now we’re getting an electrical dimension’, in other words, ‘electrical components in tyres
is the future’.
 Chapter -2

International Scenario
 2.1 TYRE INDUSTRY AT INTERNATIONAL LEVEL

Automotive Tyre is a ring-shaped vehicle component that covers the wheel’s rim to protect it
and enable better vehicle performance. In 2014, the global production of the Tyre reaches over
115666 (10K Units); the growth margin is around 25% during the last five years. Automotive
Tyre are mainly produced by Bridgestone, Michelin, Good Year, Continental, Sumitomo,
Pirelli, Hankook, Yokohama, Cheng Shin Rubber (Maxxis), Hangzhou Zhongce Rubber, and
these companies occupied about 58.23% market share in 2014.

International tyre brands like Michelin, Bridgestone, Goodyear are Yokohama are amongst the
more widely used tyres in the international markets and some of these are also OEM suppliers
for various car manufacturers.Along with higher price tags these tyres offer a lot more in terms
of performance, ride comfort and specific applications due to the years of experience and R &
D which goes into their development. With international car manufacturers bringing in their
models in to market, the demand for these tyres has grown substantially over the years,
especially in the premium segments.
The global tire market size was worth 3.1 Billion Units in 2018, growing at a CAGR of
4.3% during 2011-2018. A tire surrounds a wheel’s rim to transfer the vehicle’s load on
the surface and offers a strong grip between the road and the vehicle. It is a flexible and
robust structure that is manufactured using various materials such as wire, fabric,
natural rubber, carbon black and synthetic rubber. Tires are strong and flexible and help
absorb vibrations. Since they improve the overall performance of the vehicle, they are
widely utilized in buses, cars, trucks, bikes, bicycles, wheelchairs, lawn mowers,
forklifts, shopping carts and airplanes.

Various factors such as rapid urbanization, changing lifestyles, mounting income levels
and rising population have led to an increase in the sales of both commercial and
passenger vehicles. Strong growth in the automotive industry is directly influencing the
sales of tires across the globe. Moreover, increasing investments in the construction
sector, the thriving tourism industry and rising vehicle motorization rates are positively
impacting the production of commercial vehicles, thereby boosting the growth of the
market.

Apart from this, manufacturers are now engaging in the development of products such
as ecological tires, flat run tires and nitrogen-based tires that are environment-friendly.
For instance, they are employing orange peel extracts in the production to diminish
petroleum usage. According to IMARC Group, the market is anticipated to reach a
volume of 3.9 Billion Units by 2024.

2.2 DEMAND & SUPPLY SCENARIO

World demand to rise 4.1% annually through 2019

World demand for tires is projected to rise 4.1 percent per year to 3.0 billion units in 2019. In
value terms, sales of tires are forecast to advance 7.0 percent per annum to $258 billion. Rising
incomes in developing regions will spur growth in the number of vehicles in use, fueling
demand for tires. Higher income levels and expanding economic activity will also contribute
to increases in average annual vehicle mileage, boosting replacement rates. However, the
increase in miles driven will be offset by rising tire quality, which will exert downward pressure
on replacement rates.

Motorcycle/other tires to outpace motor vehicle tires

The motor vehicle market will remain the largest outlet for tire demand, accounting for two-
thirds of the total in 2019. Demand for tires in this market will rise 3.3 percent per year to 2.0
billion units. Growth in demand for light vehicle tires will be driven by the expansion of the
middle class in industrializing countries, which will contribute to increased vehicle ownership.
Gains in sales of medium and heavy vehicle tires will be fueled by increased commercial
trucking activity.

Demand for tires in motorcycle and other applications is projected to advance 5.8 percent per
year to 990 million units in 2019. Tire sales in this market are concentrated in fast growing
developing regions, where motorcycles see heavy use as a low-cost substitute for motor
vehicles. Sales of tires in other applications, such as aircraft, tractors, and industrial vehicles,
will also grow at a healthy pace as manufacturing and usage of these vehicles increase.

Dominant Asia/Pacific market to also lead gains

More than half of all tires are sold in the Asia/Pacific region, and this region is forecast to post
the fastest growth in demand through 2019. China, which accounted for almost one-fourth of
global tire demand in 2014, will remain one of the fastest growing national markets for tires.
Several other countries in the Asia/Pacific region are also projected to achieve rapid gains in
tire demand, particularly India, Indonesia, and Thailand. Japan, which holds the world’s fourth
largest market for tires, will post disappointing sales and actually experience a contraction in
demand over the forecast period. The developing Africa/Mideast region and Central and South
America will post above average gains in tire sales, although each of these regions will remain
below six percent of the global total in 2019. Growth in demand for tires in North America and
Western Europe will post merger gains of about one percent annually through 2019.
Replacement tire markets in these regions are mature, as vehicle ownership rates are already
very high.

The global tire market size was worth 3.1 Billion Units in 2018, growing at a CAGR of
4.3% during 2011-2018.Europe and U.S. the largest market of auto tyres. Japan is also a
major supplier of auto tyres, with its mature auto tyre industry and developed manufacturing
industry.

2.3 MAJOR PLAYERS OF TYRE INDUSTRY

1. Bridgestone

This is a Tokyo based multinational tyre

manufacture company that is named after its
founder ShojiroIshibani, a name that literally
means bridge stone. Bridgestone is arguably the
number one tyre manufacturing company in the
world. It manufactures different types
of automobile tyres for almost all the different
types of vehicles around.

As its marketing strategy, Bridgestone sponsors an array of sporting activities and events such
as formula racing, sports car racing as well as motorcycling among others. Other than tyre
manufacturer, Bridgestone also deals in golf products, journalism, bicycle brands as well as
commercial services etc.Bridgestone offers their Potenza, Turanza, S, and B series tyres
retailing for Rs. 3,000 – Rs. 9,200 with the Dueler series catering to SUVs ranging from Rs.
6,700 – Rs. 13800.

2. Michelin

A French-based tyre manufacturing company,

Michelin has over time been able to cut a niche
for itself on the market, not just through
advertisement but also by the fact that they offer
exactly what they advertise. Michelin is a top
tyre manufacturing company not only for car
tyres but also for bicycles among other commercial vehicles.

The company also manufactures tyres for heavy vehicles that include airplanes, space shuttles
as well as aircrafts etc. The company was the pioneer radial tire producer and other
technologies. The exceptional quality of tyres it produces has made it possible for the company
to stand the test of times, with formidable existence for about 130 years, and with revenue of
about 20 billion Euros annually.Michelin offers models like Energy MXV8, Energy XM1+,
Energy XM2, Primacy, Latitude and their Pilot range of tyres ranging from Rs. 2,800 – Rs.
13,300 per tyre.

3. Goodyear
 In the world, it comes third, but in the North
American continent, Goodyear is the best seller.
An Akron, Ohio based tyre manufacturer, the
company has been in existence since 1898,
supplying the market with some original and
superior replacement tyres for a wide range of
applications.

Goodyear owns 75% of Dunlop tires and 100% of Kelly-Springfield. For years, Goodyear and
its subsidiary Dunlop have often been pacesetters and leaders in the quality production of tyres
among their competitors. You will hardly go wrong with their much sought after tyres.

Goodyear has a wide range, namely Assurance, Ducaro, Duraplus, Eagle, Excellence, GPS2,
GT3 ranging from Rs. 2,300 – Rs. 11,500 per tyre. They also have the Wrangler series for
SUVs retailing for Rs. 5,000 – Rs. 14,100.

4. Pirelli

Headquartered in Milan, Italy, the company also

has its manufacturing branches in Rome and
Georgia USA. The company targets the high-
end market with its tyres commonly being
sought for by luxury and sports automobiles. In
the company’s business solution are also found
real estate investments, broadband solutions
together with environmental technologies.

The company’s products are designed to fit an array of light trucks and cars. The main selling
factor of Pirelli is its good name when it comes to handling wet and dry grips. You are not
going to be disappointed with Pirelli.

5. ApolloTyres
 Apollo is a top Indian tyre manufacturer that has
slowly but steadily been gaining acceptance in the
global platform. Altogether, Apollo, a company that
was founded in 1972, brags of five manufacturing
plants, four of which are in India with the fifth one
having been established in the Netherlands.

Annually, Apollo Tyres enjoys the total revenue of about a billion dollars, with 70% of this
being generated within the Indian market. Apollo is known for the quality tyre production. In
addition, its products are relatively more affordable as compared to other brands.

6. MRFTyres

Madras Rubber Foundation or MRF is yet another

Indian company that has become considerably
popular on the global market. It is the number one
tyre manufacturing company in India. Nearly all
the two-wheelers manufactured in India will hit
the market equipped with MRF tyres.

On the global platform, the MRF tyres are among the most trusted due to the combination of
comfort offered and the extreme toughness offered. MRF has won a number of awards such as
the JD Power Award that it has scooped a record eleven times. The reason for these awards
indisputably lies in the product’s supreme quality.

7. Continental Tire
This is a Germany based tyre manufacturing company
that’s headquartered in Hanover. Continental is the fourth
most popular tyre brand in North America andaround the
seventh in theworld. The company has beenable to make
a name for itself as a leading producer of replacement and
original tyres.

Together with tyres, Continental also produces and supplies various vehicle components such
as top-quality brake systems etc. In the USA, Continental ridable name on the market for its
high-quality light-truck tyres.
8. Dunlop

Like mother, like daughter. Dunlop has

gained considerable popularity on the
market, courtesy of the quality products
manufactured, just as is the case with its
parent company: Goodyear Tyre and Rubber
Company.

Dunlop manufactures tyres that are

characterized by some top-notch features including the Hydro-Paddle system, the Traction
Web, the Dunlop self-supporting and the Silicarbon Matrix TM technologies among others.
These are technologies that enhance for great and durable performances in all terrains. If you
love fancy things, the Dunlop manufactures sporty tyres for you to explore.

9. Yokohama

Yokohama is a Japanese company with its

headquarters in Tokyo. The company has a solid
global presence, thanks to its goal
of targeting performance enthusiasts in its
design. Yokohama places much emphasis on
handling of wet as well as dry grips. If you do
drive in areas where winter driving isn’t a
significant factor, then probably, the choice of Yokohama tyres would be a prudent choice for
you.

Yokohama mostly supplies tyres to premium car brands but also offers a wide variety for other
regular cars. Their models include: A Drive, C Drive, S Drive, Advan, Aspec and ES series of
tyres ranging from Rs.2,900 – Rs. 12,000. For SUVs, they offer the Geolander series ranging
from Rs. 5,600 – Rs. 10,000.

10. Hankook
As far as technological advancements are
concerned, South Korea is not left behind.
Headquarters in Seoul, Hankook has a global
presence, with the North American
headquarters having been established in
Wayne, New Jersey. Many original types of
equipment land on the market equipped with
Hankook tyres.

Hankook offers a complete line of tyres that fit a wide range of domestic automobiles and light
trucks. As far as price to good quality ratio is concerned, Hankook arguably scoops the top
position.

2.4 IMPORTANT FACTOR FOR

INTERNATIONALIZATION GROWTH
The global tire market size was worth 3.1 Billion Units in 2018, growing at a CAGR of
4.3% during 2011-2018. A tire surrounds a wheel’s rim to transfer the vehicle’s load on
the surface and offers a strong grip between the road and the vehicle. It is a fle xible and
robust structure that is manufactured using various materials such as wire, fabric,
natural rubber, carbon black and synthetic rubber. Tires are strong and flexible and help
absorb vibrations.

Various factors such as rapid urbanization, changing lifestyles, mounting income levels
and rising population have led to an increase in the sales of both commercial and
passenger vehicles. Strong growth in the automotive industry is directly influencing the
sales of tires across the globe. Moreover, increasing investments in the construction
sector, the thriving tourism industry and rising vehicle motorization rates are positively
impacting the production of commercial vehicles, thereby boosting the growth of the
market. Apart from this, manufacturers are now engaging in the development of
products such as ecological tires, flat run tires and nitrogen -based tires that are
environment-friendly. For instance, they are employing orange peel extracts in the
production to diminish petroleum usage. The market is anticipated to reach a volume of
3.9 Billion Units by 2024.
The tyre makers are gearing up to intensify its role in the modernisation phase. Besides, with
increasing focus on corporate average fuel efficiency (CAFE) norms to curb the alarming levels
of pollution, companies have immense pressure to build products which have minimal friction
and offers higher fuel efficiency.

Tyre industry include finer tolerances in the manufacturing process, inclusion of more radials
which consume less fuel, low rolling resistance and focus on better traction and on road
performance, overload control which increases mileage, fuel efficiency.

The companies are stepping up the manufacturing facilities with technologies that improve heat
development in tyres with effort towards less usage of carbon black, which in turn contributes
in lowering emissions. The Industry is adopting the latest trend which calls for lower usage of
carbon black and more silica content do increase the fuel efficiency and reduce pollution. In
the manufacturing of tyres include usage of higher component of 'silica' which helps in the
manufacturing process and in improving tyre performance by lowering the rolling resistance
as well as improving cut and chip resistance.
 Chapter -3

Indian Scenario

3.1 DEMAND SUPPLY SCENARIO

The Indian tyre industry is ancillary to the automobile industry. Thus, growth in the automobile
industry tends to support demand, supply and growth in the tyre sector as well. In fact, during
FY19 the auto industry registered a growth of 5% y-o-y on the back of rising urbanisation,
increasing disposable income, interest rate cuts leading to better finance availability and
improved road infrastructure, which supported the growth for the tyre industry. Tyres can also
be classified as cross-ply and radial based on the technology used.

Tyre demand originates from three end-user categories which are the original equipment
manufacturers, replacement demand and exports. The replacement demand is less cyclical than
OEM’s and is generally a higher margin business for tyre manufacturers. Tyre volumes is
expected to record a growth of 7% y-o-y in FY19 at 18.9 crore units primarily due to higher
demand by OEM’s and T&B replacement market demand. Exports on the other hand registered
14% y-o-y growth in FY19 led by revival in demand across all segments.

Replacement demand for tyres typically depends on road conditions, vehicle scrappage rules,
overloading norms, re-treading intensity and miles driven. Despite undergoing destocking by
several dealers in FY18 owing to the GST rollout, demand picked up FY19 indicating uptrend
in the market. Going ahead as well, notwithstanding tepid growth in the auto sales, the demand
from the replacement market is likely to continue and would be the key growth driver for the
sector. Current high density of vehicles on the roads coupled with steady OEM sales is likely
to drive demand.

Indian tyre industry has almost doubled from ~Rs 30,000 crores in 2010-11 to ~Rs 59,500
crores in 2017-18 of which 90-95% came from the domestic markets. The top three companies
– MRF, Apollo Tyres and JK Tyres have ~60% of the market share in terms of
revenue.Moreover, In India, the commercial tyre segment is dominated by cross ply tyres due
to road conditions and the high initial cost of radials. Currently, radialisation is highest in
passenger cars (~100%) followed by CV’s (~45-50%). However, with rising awareness of its
favourable cost-benefit ratio and improved fuel efficiency has led to expansion in radial tyre
capacities by tyre companies.

Tyre exports have been steadily increasing in the last one year with recovery in tyre demand
from overseas markets and rising competitiveness of Indian tyre makers, both in terms of
quality and pricing. The tyre industry in the country has witnessed large capacity additions in
the last decade with a cumulative spend of around Rs 27,800 crore, of which about 70 per cent
was spent in the last six years.

Consumption of natural rubber (NR) rose 12 per cent crossing 10.2 lakh tonne in the period
between April 2018 to January 2019, increasing the demand and domestic supply gap to 45 per
cent. Alarmed by the shortage of domestic supply, tyre manufacturers have asked the
government to reduce the import duty for rubber to less than 10 per cent. Production stood at
just 5.6 lakh tonne during April 2018 to January 2019, compared to 5.97 lakh tonne in the same
period last year.

3.2 MARKET DYNAMICS

Tyre demand originates from two categories – OEM and replacement segment. Demand from
replacement segment dominates the Indian market contributing about 70% of total revenue,
whereas OEM and Export accounts for balance 30%. In volume terms Replacement segment
contributes 60% and the balance 40% is contributed by Export and OEM. Consumption of
OEM depends on the new sales of automobiles while the replacement segment is dependent
upon usage pattern and cycles.

In the overall sales of tyres in unit terms, the commercial segment contributes about 21 per
cent while the remaining comes from sales of personal vehicles which includes passenger
vehicles, two and three wheelers. Under personal segment, two and three wheelers constitute
about 55 per cent sales while the passenger cars made up for the balance sales.

T&B (Trucks&Buses) dominates overall commercial usage segment with followed by LCV
segment. Tractor front and rear tyre segment constitute the remaining.Top 10 companies
account for about 80 per cent of the market share. Top three companies likes MRF, Apollo
Tyres and JK Tyres have 55 per cent of the market share of the Indian tyre industry and figure
among the top 25 global companies in terms of revenue.

The rise in the automotive demand and the production in recent years is fuelling the demand
for tires. The large fleet size is expected to be replaced with new automotive tires, which in
turn will spur the global demand for automotive tires. Further, increasing demands for better
durability & mileage, high-quality production and growing demand for eco-friendly tires, are
also estimated to fuel the demand for the global automotive tires market.
As truck bus radial (TBR) has emerged as the growth driver for the industry. The industry has
witnessed a tune investment of US $ 5.4 billion in TBR capacity in last few
years. Unfortunately, indiscriminate import has queered the pitch for domestic tire sector. With
expansion in capacity for TBR, the capacity utilization levels have come down to 60-65 per
cent from 80-85 per cent three years ago.

Import of cheap tyres from china is a serious threat for the Indian tire industry. Already, in case
of truck & bus radials, Chinese tires are accounting for over 40% of the replacement
market while the Indian capacities investments in recent years, re lying underutilized.

3.3 INVESTMENTS RELATED ASPECTS

Over the next three years, ICRA expects the tyre demand in the Indian market to report a 6-7%
volume growth, supported by a broad-based revival in Automotive OE demand. Pick up in
rural expenditure with good monsoon would translate into higher OEM demand for the rural
centric two-wheeler (2W) and tractor segments. Growing fleet on ground and higher miles
driven/freight moved would drive replacement sales.

Domestic tyre makers have invested significant amounts in new capacities in Truck & Bus
Radial (TBR) and 2W segments, over the last several years. As a result, between FY2010 and
FY2016, the industry witnessed the completion of investments worth over Rs. 200 billion.
However, with increasing influx of cheaper Chinese tyres and uncertain input price trends, the
industry is now looking to consolidate operations and optimally utilize the recently installed
capacities. Therefore, no major new capacity addition plans have been announced by tyre
majors over the past few months. That said, projects worth over Rs. 80 billion (capex
undertaken 2-3 years back) are expected to be completed over the next 12 months which should
help tyre makers gear up to meet the likely rise in demand.

“The Truck & Bus Radial segment has seen Rs. 350 billion worth capacities over the last five
to six years – this segment may get impacted if imports from China increases further”, says
Mr. Subrata Ray, Senior Gr Vice President, ICRA Ratings.

Largely in line with ICRA research estimates, revenues in the domestic tyre industry de-grew
by 2%, led by a 6%-8% fall in realizations although volumes grew by 4%-5%. The industry
benefited significantly from the fall in input costs; Natural Rubber prices fell by 15% during
FY 2016 leading to a 470 bps operating margin expansion to 19.1%. This was despite the
increase in employee expenses.
“While industry wide revenues are expected to grow by 9% during FY2017, supported by
around 6-7% growth in volumes, operating margins are expected to contract by 250-300 bps
with a modest increase in raw material (RM) prices, hike in wage costs and increased fixed
costs (with large capacities getting commissioned)”, adds Mr. Ray.

“Following an outlay of Rs. 39 billion in FY2016, the tyre industry is expected to witness a
cumulative spend of Rs. 86 billion in the next three years (FY17-19). However, given the large
cash balances, net debt position is expected to be moderate and the capitalization and coverage
indicators are expected to remain healthy. Overall, the credit profile of the tyre industry is
expected to remain stable; key headwinds however include slower than expected demand
growth, any sharp increase in raw material prices and intensifying competition. Capacity
creation for tyre industry will in turn increase capacity of rubber and tyre sector as well.

Icra expects the domestic tyre demand to grow by 7-9 over the next five years (2018-19 to
2022-23). With a stable demand outlook and strong credit profile, the domestic tyre makers
will continue to invest in capacities. The industry is likely to witness a capacity addition of
over 20,000 crores in the next three years. The revenue growth for tyre industry is pegged at
14-15 % for 2018-19, with operating margin and net margin of 14 % and 7 %, respectively,
almost in line with 2017-18. 2019-20 to 2021-22, revenue growth is projected at 9-10 % with
operating and net margins at 14-15 % and 6-7 %, respectively.

3.4 GROWTH