Tyre industry deserves more appreciation
By Sharad Matade
KM Mammen, Chairman and Managing Director of MRF, has taken the leadership of the Industry body Automotive Tyre Manufacturers’ Association (ATMA) at a time when the industry is going through a tough phase. Though tyre companies’ profits are widening on plunging input costs, production and exports are falling. The import of cheap tyres from China, mainly in TBR segment, is at its peak and many policies are not in favour of them. In an interview with Tyre Asia, Mammen said he wants to change the perceptions of the Indian tyre industry in public domain and hopes government will take action to curb the flood of Chinese TBR tyres. He also said that 2015-16 has been a difficult year for the industry and 2016-17 will bring a higher growth on revival in infra and mining sector
What are your immediate priorities after being elected as the Chairman of ATMA?
I would certainly wish to take forward the agenda of building desired perceptions for the industry. A lot of what the tyre industry has achieved over the years is not being appreciated in the public domain. Tyre industry is a forerunner of the ‘Make in India’ drive which is being pursued now. For long, India has been self sufficient in manufacturing tyres for all possible requirements. And India needs one of the largest variety of tyres since road profile is so diverse here. For many years now, tyre industry in India is engaged in its own research & development without any technological partnership with global majors and yet our new manufacturing capacities vie with the best in the world. Not many industries can match that claim. As a responsible corporate citizen, the industry has been sensitising motorists about the role of tyres in road safety in certain vehicle-rich pockets in the country. That campaign will be spread out nationally so that more road users understand the need for well-maintained tyres and be safe on the roads.
China’s economy is derailing and that is leading to a slowdown across the sectors in the country. We are already seeing a spurt in imports of tyres, mainly in TBR segment. How is ATMA taking this issue to concerned authorities?
ATMA is engaged with the Government on the issue of tyre imports as indiscriminate imports and dumping from China is causing irreparable damage to the industry especially in the Truck & Bus Radial (TBR) segment. Government has appreciated our concerns. We hope to see some action against Chinese TBR tyre imports much like US has taken by imposing anti-dumping duties. That will help correct the inverted duty to some extent.
Do you think the consolidations in the industry will be carried on aggressively in near future?
World over tyre is a consolidated industry with few companies owning a large share. This is primarily because tyre industry is vulnerable to several uncertainties. Industry is raw material, capital and labour intensive. Often there is volatility in raw material pricing and availability. The margins in tyre industry have been traditionally low. So only the players who are able to build economies of scale despite challenges and yet remain price competitive are able to carry on in the business.
New regulations in transportation sector are expected to be introduced in near future. Do you think it will curb cheap imports from China?
Yes. ISI mark has been made mandatory for sale of tyres in India keeping in view the safety on the roads. The same needs to be implemented strictly.
What kind of policy supports are needed for the Indian tyre industry?
Primarily Indian industry is looking for a level playing field so that it could compete both in domestic and international markets. India is grossly deficient in natural rubber production and imports are a must to meet the requirements. Yet a stiff 25% duty is charged on NR imports, perhaps the highest in the world. Import duty on tyres is one third or even lower than import duties on NR. This is also leading to dumping of tyres in India. This scenario needs to be corrected by imposing much higher duties on import of tyres and reducing duties on NR. Import duties on NR to the extent of its domestic deficit actually needs to be NIL. There are many other raw materials which are either not manufactured in India or have a serious shortfall in production. Interestingly import duties are levied on such materials also. Tyre industry is not seeking any protection. Just that these anomalies need to be corrected.
How has been the FY 2015-16 and how do you predict the industry growth in FY 16-17?
The year 2015-16 has been tough on the industry. The industry is likely to end the year without any growth or marginal growth in turnover. Notwithstanding pick up in the Medium & Heavy Commercial vehicle segment, the replacement tyre demand is muted. Tyre imports have taken over a significant percentage of tyre demand thus denying Indian manufacturers the opportunity for growth. Certain vehicle segments such as motorcycles and tractors are facing stress in view of two years of deficient rains. With expected movement in infrastructure and mining sectors, hopefully, the growth in tyre industry will be higher in FY17.