Financial Year 2009-2010 (Est.

Turnover of Indian Tyre Industry Rs. 25,000 Crores

Tyre Production (Tonnage) 13.50 lakh M.T.

Tyre Production – All Categories (Nos.) 971 Lakh

Tyre Export from India (Value) : Rs. 3625 crores

Number of tyre companies: 36

Industry Concentration 10 Large tyre companies account for over 95% of total tyre production.

Radialisation Level - Current

(as a % of total tyre production) Passenger Car tyres: 98%

Light Commercial Vehicles: 18%

Heavy Vehicles ( Truck & Bus ): 12%

Government Policy

Tyre Industry Delicenced since 1987

Export (of tyres and tubes) Freely allowed

Import (of new tyres and tubes) Freely allowed.

Import Policy for Used / Retreaded tyres: Restricted from April, 2006

'Radialisation' in India - Current Status & Future Trends

"Rate of radialisation is actually an index of the status of road development, vehicle engineering and the
economy in general". Notwithstanding the problem areas, constraints and limitations, the tyre
companies have kept pace with the technological improvements that radialisation signifies and offer
state-of-the-art product (tyres), comparable to the best in the world.

Radialisation can be aptly classified as the most important innovation in tyre technology. Despite its
several advantages (additional mileage; fuel saving; improved driving) radialisation in India earlier did
not catch on at a pace that was expected, since its introduction way back in 1978. This could be
attributed due to several factors, viz. Indian roads generally not being suitable for ideal plying of radial
tyres; (older) vehicles produced in India not having suitable geometry for fitment of radial tyres (and
hence the general, and wrong, perception that radial tyres are not required for Indian vehicle;
unwillingness of consumer to pay higher price for radial tyres etc.

However, the situation has radically changed in recent years, especially for the passenger car tyre
segment where radialisation has crossed 98% mark and is expected to reach 100% in two to three years.
In the Medium and Heavy Commercial vehical segment current level of radialisation is upto 12%, and
that in the LCV segment is estimated at 18%. A few years back a beginning was made in Radialisation of
truck and bus and LCV tyres and this process is gaining momentum.

Future of Radialisation

The future of radialisation will be governed by the following factors:

Cost - Benefit Ratio

Road Development

Overload Control

User Education

Retreading Infrastructure.

AUTOMOTIVE TYRE MANUFACTURING ASSOCIQATION

CURB ON OVER-LOADING OF COMMERCIAL VEHICLES

CURB ON OVER-LOADING OF COMMERCIAL VEHICLES

Supreme Court had in November 2005 passed an Order directing State Governments to ensure that
commercial vehicles are loaded only as per norm prescribed under the Central Motor Vehicle Rules.

RETREADING INDUSTRY IN INDIA

In the manufacture of a new tyre, approximately 75%-80% of the manufacturing cost is incurred in tyre
body and remaining 20%-25% in the TREAD, the portion of the tyre which meets the road surface.
Hence, by applying a new TREAD over the body of the worn tyre, a fresh lease of life is given to the tyre,
at a cost which is less than 50% of the price of a new tyre. This process is termed as 'tyre retreading'.

However, the body of the used tyre must have some desirable level of characteristics to enable
retreading. Retreading cannot also be done if the tyre has already been over used to the extent that the
fabric is exposed/damaged. Retreading could be done more than once.

Types of Retreading

Retreading can be done by the following two processes:

Conventional Process (also known as 'mould cure' or 'hot cure' process) - In this process a un-vulcanized
rubber strip is applied on the buffed casing of the tyre. This strip takes the pattern of the mould during
the process of vulcanization;

Precure Process ( also known as 'cold cure')- in this process a tread strip, where the pattern is already
pressed and precure is applied to the casing. It is bonded to the casing by means of a thin layer of
specially compounded uncured rubber (known as cushion or bonding gum) which is vulcanized by the
application of heat, pressure and time.

The present all India pattern, by type of retreading, is as follows:

Precured - 50%, Conventional 50%.

Retreading is primarly done in the Truck and Bus trye segment. On an average a Truck/Bus trye is
retreaded 1.5 times.

At present only 3-4 large companies are in the organized sector of tyre retreading .Organized sector is
classified as that comprising of companies which operate through the franchisee route.er norm
prescribed under the Central Motor Vehicle Rules.

aw Materials of Tyre Industry - Overview (FY 2009-10)

Tyre Industry is highly raw-material intensive. Raw materials cost accounts for approx. 63% of tyre
industry turnover and 72% of production cost

Given below is the composition of raw-materials as a percentage (%) of Total Raw Material Cost:

Natural Rubber 43%

Nylon Tyre Cord Fabric 18%

Carbon Black 11%

Rubber Chemicals 5%

Butyl Rubber 4%

PBR 5%

SBR 5%

Others 9%
62% of total Natural Rubber consumption is by the Tyre Sector, balance by rubber based non-tyre
industries.

Total weight of raw-materials consumed by tyre industry – 15.50 Lakh M.T.

Total Cost of Raw Materials consumed by tyre industry – Rs.16,000 Crores

egmentwise Tyre Supplies 2010 - 11 (April - September)

Tyre supplies are broadly to the following segments:

Replacement Market (aftermarket)

Original Equipment Manufacturers (OEMs), i.e. vehicle manufacturers

Export

State Transport Undertakings (STUs) (primarily for Bus tyres)

Government Purchases

Estimated supplies of key tyre categories to various segments are given in the following table:

Category

Production(Nos.)

2010-11

(April-Sept)

Segmentwise Percentage supply

(as % of Total Production)

Replacement

Market

OEMs

Export

Truck/Bus 7608145 68 19 12

Passenger Car / Jeep 13309377 43 52 4

LCV 2839757 42 36 23

Tractor Front 1388271 64 36 0.3

Tractor Rear 917825 44 54 2

Scooter / Moped 9160925 44 53 3

Motor Cycle 20991306 50 49 2

Indian tyre industry report: the Indian Automotive Tyre Manufacturer''s Association (ATMA) collects
data on the Indian tyre industry. Here we summarise a recent ATMA report. (Indian tyre
industry).Publication: European Rubber Journal

Publication Date: 01-JUN-03 Format: Online - approximately 2428 words

Delivery: Immediate Online Access

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Article Excerpt

India's tyre industry supplies role of the largest markets in the world. However, harsh import tariffs close
the market to most external competition. Basic import duty on tyres is 30 percent, with a further 30
percent in excise duty, making imported tyres up to 60 percent more expensive than locally-produced
ones.

Due in part to this lack of international competition, and part to the strength of the Indian economy, the
Indian tyre industry continues to boom, with at least 33 local companies making tyres in around 50
factories. Most of these make a range of different tyre types, putting the industry structure a decade or
more behind the European and North American sectors, which saw considerable specialisation during
the 1990s and before.

According to official statistics front the Indian Automotive Tyre Manufacturers' Association (ATMA),
overall tyre production in the six months to April 2002 was up 14 percent on a year earlier, with strong
growth in all categories except tyres for animal drawn vehicles.

India made a total of 43.5 million tyres in the 12 months to March 2002. ATMA says this represents a
capacity utilisation of 72 percent when compared with a total installed capacity for 60.5 million units
annually.

Exports are also growing. In simple numeric terms, truck and bus tyres dominate the export market,
comprising 62 percent of the 2.9 million units exported in the 12 months to March 2002. This amounts
to 1.8 million units or 21 percent of the total truck and bus tyre production volume of 7 million units.

How accurate the numbers are, however, is anyone's guess. According to insiders, many companies in
India mis-report their production figures in order to save on taxes and other government payments.
Overall, said ATMA, the industry was worth Rs97000 million ($2000 million) and paid Rs40 000 million in
tax and excise duty.

However, even if these reported numbers are lower than they should be, there can be no doubt that
business was healthy for Indian tyre makers in the 12 months to March 2002.

Overall production grew 2 percent to 43.5 million units. If tyres for animal-drawn vehicles (almost 488
000 units) are included, then half the total Indian output is for two wheeled vehicles, broken down as
motorbikes (12.28 million), scooters (8.55 million) and mopeds (135 000). Production of motorbike tyres
was the highest ever in 2002, according to ATMA.
The next largest category after scooter tyres is truck and bus (8.47 million units), down by 2 percentage
points on the previous year, followed closely by passenger car tyres (7.48 million). Light truck tyres (2.3
million) round off the main categories, with other tyre types, such as industrial, agricultural and so on
having 1 million units per year or less.

Another area where the Indian tyre industry lags a decade or two behind those of more developed
nations, is the extent of radialisation. Until 1998, less than half of passenger car tyres made in the
country were radials. Just four years later, in 2002, that figure was well over 70 percent. The
radialisation figure has been steadily increasing by 5 to 10 percentage points per year since 1995, when
the figure was under 30 percent.

In truck tyres, the radialisation figure is static at around 2 percent, while the figure in light trucks is
closer to 10 percent, but with no obvious signs of strong growth.

Tyre technology: still lagging

A third area where India is roughly l0 years behind other contries is in terms of tyre design and
technology. According to an ATMA graphic, Indian companies can make eco-friendly tyres by using silica
and other modern fillers, but cannot yet master the sophistication to make truly energy-efficient tyres.
Also, Indian companies are making rear tractor tyres in radial construction, but cannot make super-
single truck tyres, for example. Other targets for the Indian tyre industry include radial aircraft tyres and
intelligent tyres with pressure warning systems.

Demand projection

One sector marked for strong growth is passenger car tyres, expected to show 6.8 percent annualised
growth, increasing demand to 13.8 million units in 2011, compared with 7.6 million currently. Much of
this new capacity will be in radial technology, as the market for radials expands much more quickly than
cross-ply construction.

Demand for truck tyres is set to increase at around 5 percent CAGR, with total demand rising from 5
million units to almost 8 million units over the same 9-year period.
Demand for motorcycle tyres, meanwhile, has been booming in India in recent years. This sector is
projected to continue with double-digit growth over the next 10 years. Demand throughout India in
2002/3 was about 13.7 million units, but this is expected to rise by 12.5 percent annually (CAGR) to 40
million units in 2011, this is an increase of some 2.5 million units per year in each of the next ten years.
Current supply is not keeping pace with the demand. Annual production of about 12.5 million
motorcycle tyres is slightly short of demand, leaving potential opportunities for tyre makers to add large
amounts of capacity with a strong probability of filling the capacity quickly.

Raw materials for tyres

Unlike Europe and the Americas, most tyres in India are made primarily from natural rubber, thanks to
the wide availability of natural rubber and the relative scarcity of synthetic materials (see table, above,
right)

Like the tyre industry itself, the raw material supply sector also benefits from government protection,
with imports of synthetic rubber, steelcord, carbon black and chemicals all subject to 30 percent import
tariff and a further 16 percent sales tax.

The Indian tyre industry reports that around 70 percent of the production cost of a tyre is accounted for
by raw materials, corresponding to 50 percent of total tyre industry sales, or Rs 49 000 million. The total
weight of the raw materials consumed in 2002 was some 800 000 metric tonnes. The table shows how
this was broken down in 2002 and the historical trend.

The historical trend in raw material consumption has followed tyre production, with growth averaging
between 10 and 20 percent per year.

Production facilities

India has no domestic production facilities either for butyl rubber or for polyester tyre cord. A newplant
fur steelcord was built by Tata SSL in Tarapur during 2001, and approvals are being sought both for bead
wire and steelcord, following the award of QS9000 in September 2002, but the reliance on 100 percent
imports of bead wire and steelcord has been broken.

India uses more natural rubber than other nations. Around 30 percent of all rubber consumed in the
country is synthetic, compared with 60 percent in many industrialised nations. This is primarily because
India is a large producer of NR, which makes the material available at lower cost than synthetic rubber,
which has to be made in large chemical facilities.

Despite tariffs and duties, there is international trade in most raw materials, with imports of all these
products and limited exports of many (See table page 36).

However, by 2004-5, the Indian government has said the import duties on all raw materials,
intermediates and components will be reduced to 10 percent, while import duties on non-agricultural
finished goods will be 20 percent.

Raw material breakdown...

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