2 Wheeler tyre market gets busy
By Sharad Matade
The boom in the two-wheeler industry in India has prompted tyre makers – both domestic as well as international, enter the fray, giving competition to traditional two-wheeler tyre makers. The segment is now getting crowded and two-wheeler tyre majors, such as MRF, TVS Srichakra and Ceat, are scaling up capacity to stay ahead in the market
A recent study prepared by ICRA, the credit rating agency, says that the demand for two wheeler tyres in India is expected grow between 6 per cent and 8 per cent in the next three years (FY2019) on demand from both replacement and OE segments. Demand for motorcycles and scooters is expected to grow by 6 per cent and 11 per cent respectively in the same period.
According to the ICRA report, the two-wheeler tyre segment outperformed the overall industry volume growth in recent years. The two-wheeler tyre segment volume has increased by CAGR of 13.1 per cent on the account of robust scooter volumes in the period of FY2014 to FY 2016, comparing the tyre industry’s growth of 7.5 per cent in the same period. The dominant two-wheeler tyre makers such as MRF, Ceat and TVS Srichakra, which own around 90 per cent market share in two-wheeler tyre segment, are expected to lose their shares due to the new entrants.
“The two-wheeler tyre segment had been steady performer for the last several years now and is expected to witness consistent growth going forward,” anticipates Rajiv Budhraja, Director General, Automotive Tyres Manufacturers’ Association (ATMA).
Anticipating the growth in the segment, Apollo Tyres is already planning to set up a two-wheeler tyres and pick up truck tyres manufacturing plant in Andhra Pradesh. The company has signed a Memorandum of Understanding with the Andhra Pradesh government for the plant, for which it will invest around Rs5 billion. Currently, the Kanwars-led company is out sourcing two-wheeler tyres from the third party. According to a media report, Apollo Tyres currently produces 2,00,000 two- wheeler tyres a month and it will reach 2,50,000 per month by the end of this year. Commenting on the reasons for entering in the segment, Satish Sharma, President, Asia Pacific, Middle East & Africa, Apollo Tyres, says, “ Our entry into two-wheeler tyre space is guided by our vision of building leadership in India by 2020. A presence in this category is seen as imperative towards this objective.”
The inorganic growth has given an upper hands to JK Tyre among the recent entrants. This year JK Tyres acquired Cavendish Industries’ three plants, located at Laksar, Haridwar, which have 10 million tyres per year capacity, at Rs22 billion. In its second quarter financial results, JK Tyre said operation profits grew up 24 per cent on higher sales of two and three wheeler tyres. “Two and three-wheeler tyres have been well received in the market. With the larger volumes, available in the coming period, we hope to further strengthen our market position in the high growth area,” Dr. Raghupati Singhania, Chairman and Managing Director JK Tyres, said in a recent statement.
OTR major BKT and the world’s largest tyre company Bridgestone forayed into the segment in August this year. As a part of diversification process, BKT launched two new two-wheeler tyres in India to gain a 10 per cent of the two-wheeler tyre market by 2019 on the demand growth for two-wheeler tyres from the market.
Bridgestone India launched its two-wheeler tyre under the brand NEURUN for motorcycles and scooters. Speaking on the occasion of its national launch, Kazuhiko Mimura, Managing Director, Bridgestone India, had said, “The launch of two-Satish Sharma, President, Asia Pacific, Middle East & Africa, Apollo Tyreswheeler tyre brand ‘NEURUN’ is a big leap for us towards achieving our strategic expansion plan of catering to a high volume market and a wider audience reach. Our entry into the ever-growing two-wheeler market in India will facilitate us in providing a wider product range and services to our customers. We are looking forward to this exciting new phase and hope to expand with the subsequent growth in the market.” According to the Japanese tyre company, two-wheeler is the most dominating segment in the Indian automobile market in terms of volume sales. The two-wheeler category is growing at CAGR of 8.5 per cent in India with an estimated 150 million number of two-wheelers on the road which is testimony of the huge potential of tyre demand.
“It is a growing segment, which has led to the entry of newer players, including Apollo. I can only say that in the initial few months of our entry into the segment, we have had very good customer acceptance and demand for our products,” says Satish Sharma.
TVS Tyres is already planning to scale up production to 2.5 million units per month, from its both plants- Madurai and Pantnagar, by December this year to meet the growing demand,. “We, this year, increased our production of tyres from 2.3 million units per month to the current level of 2.4 million unit per month and now will increase it to 2.5 million units per month in next three to four months,” P Vijayaraghavan, Director, TVS Srichakra, had said.
To scale up, production capacity at its plants, TVS Tyres has invested in a capex of Rs.1.6 billion this year. Ceat has also doubled its sales in last four years, from 2.5 lakh two-wheeler tyres a month to 1.2 to 1.3 million tyres a month. To gain the market leading position, it has increased capacity and added a new plant in Nagpur for about Rs4 billion, which came on stream early this year.
French tyre maker Michelin also too intends capture a double digit market share in near time. In July this year, on the side on the launching of its first television commercial in India Gary Guthrie, President of Michelin 2-Wheel Tyre Division, said, “The Indian two-wheeler tyre market is important for Michelin to strengthen its leadership in the global market and is growing between 5 per cent and 10 per cent annually. Michelin claims that it is the only company in India which offers a complete range of two-wheeler tyres, especially tailored for the Indian roads. Guthrie also said that the company’s sales have been doubled in last three years in India and aims to capture a 10 per cent market share in the Indian two-wheeler segment.
The two wheeler segment is not only seeing the new entrants but also growing demand for radial and technical advanced tyres. “The two-wheeler tyre category is at an interesting stage of market evolution. Tube type tyres are giving way to Tubeless, and Radial motorcycle tyres are beginning to mark their presence. The volumes in the category are in any case exceedingly large. All this makes us believe that Apollo Tyres can present an interesting strategy and deliver superior products and experience to our customers,” says Sharma of Apollo Tyre.
“Also with the profile of 2w changing, especially die to high end bikes and got me t of radial tyres, the technology change is also going to commence and hence the interest of all tyre companies, including the ones which had not been in this segment,” adds Budhraja.
“Our aim is to create premium tyre segment, offering superior levels of performance and safety for every type of two-wheeler bike. We think we should be recognised doing that and that will translate into a 10 per cent market share in India in relatively quick time,” said Guthrie.
Currently, Michelin is importing high performance two-wheeler radial tyres, while two-wheeler bias tyres of Michelin are being manufactured by TVS Tyres. However, the French tyre maker does not have any plans to have own manufacturing plant to produce two-wheeler tyres. “The demand for the two-wheeler tyres would be driven more by the rural market than the urban. With higher capacity motorcycles getting introduced quite frequently in India, the demand for radial tyres for them would go up at a rapid pace,” Sharma added.