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Speciality is Asia’s flavour

Speciality is Asia’s flavour

By TA News Bureau:

Lead Analyst with market research firm Technavio, Keerthi Balu has come out with an in-depth assessment of the global speciality tyre market. The insightful industry report based on sectoral trends gives detailed analyses of the market by way of data from multiple sources that are comprehensive, reliable, and the result of extensive research, both primary and secondary. In this interview he gives a detailed picture of the global specialty tyre market (2018-2022) and predicts the swiftly changing market scenario and vendor landscape for the industry to leverage this knowledge to gain competitive advantages

As the Lead Analyst with market research agency Technavio, Keerthi Balu has an insight into the trends in the global specialty tyre market. His analysis is based on the drivers that influence market growth and the emerging opportunities that the industry can leverage to deepen its presence.
His focus is on how the global specialty tyre market is evolving, particularly agricultural and aircraft tyres, HCV and mining tyres in the light of recent uptick in Asian regional economies.
He notes that major tyre manufacturers have realised the strong Asian growth impulses and are committing new investments in plants and capacity expansions in this geography. He notes that as most Asian countries are based on the agrarian sector that contributes a major chunk to their GDPs, agriculture tyres are set to see high growth.
Modernization of agriculture, increasing rate of food consumption, rising need for agricultural exports, government subsidies and lower production costs in Asia are boosting the region’s agriculture sector.
The growth of the mining industry is attributed to the rise in the number of mining projects worldwide. Growing population, rapid urbanization, and widespread infrastructure development in leading and emerging countries such as China, India,
Indonesia, UAE, and African countries such as South Africa and Nigeria have led to an increase in the consumption of metals and minerals such as iron, copper, limestone, and shale gas.
The India has also announced plans to invite 100 per cent FDI in mining projects under the ‘Make in India’ programme. To cater to this demand, governments across the world are increasing investments in the mining industry. This is expected to directly benefit the growth in the specialty tyre segment, says Balu.
Magna MA04+ giant tyres were recently shipped to Asian mining contractors for rigid dump trucks operating under severe off-road conditions. Such influx of European specialty tyre manufacturers supporting Asian mining and construction activities certainly shows the growth potential for the tyre industry.
The influence is also strongly observed in the aircraft industry which is poised to grow at CAGR of 4.5 per cent globally with the APAC region expected to grow around 6 per cent till 2022. The increased demand for tyres stems from the growth of narrow-body aircraft segment in the Asia Pacific region.
Bridgestone’s announcement to set up two aircraft tyre manufacturing plants in Thailand (one for new tyres and the other for retreading) shows the importance of this region.

Strong growth

In macroeconomic perspective, the Indian agricultural sector contributes to 17 to 18 per cent to India’s GDP which is likely to grow at 2.1per cent. At present, Indian farmers are adapting farm mechanization at a faster rate in comparison to the recent past. But adoption of modern methods in farming is low compared to developed economies, says Balu.
Hence, India is offering subsidy, easy and flexible tractor and other agriculture loans for farmers. In the long-term perspective, the total agricultural workforce will reduce from 58.2 per cent in 2001 to 25.7 per cent by 2050 which will pave the way for farm mechanization. This will be the major driving force for agricultural tyres in India.
China’s agriculture has also been undergoing major technological changes since 2015.The low production costs of farm equipment like tractors combined with government subsidies is allowing farmers to buy farm vehicles at lower rates.
The country is also rapidly embracing farm mechanization technology to compete within the international agriculture market. This will be a growth enabler for the agricultural tyre market in China.
Increasing spending on infrastructure projects by China and India will drive the specialty tyre market. Like China, India’s coal output is on the rise. This will aid the growth of commercial vehicle, OTR tyres etc.
Balu believes the Asia region is experiencing a surge in the demand for agriculture vehicles and machinery. These machineries are equipped with specialty tyres, and the global tyre manufacturers have strategically positioned themselves with their product offerings.
This is further fuelling investments, market consolidation and global product launches. For instance, Michelin has strengthened its global leadership position in the specialty businesses with the acquisition of Camso, a market leader in rubber tracks for farm equipment having strong manufacturing presence in emerging markets, particularly in Sri Lanka and Vietnam.
Other leading tyre manufacturer, Continental is already producing bias-ply tyres for the agricultural sector in Petaling Jaya, Malaysia, to meet the existing demands from the Asia Pacific market.
Bridgestone has a well-developed farm tractor tyre range that features maximum traction and durability in tough Asian conditions. It has built a strong presence in Indonesia, Vietnam and Australia.

Retread market

The tyre retreading market can be looked as separate market as it faces challenges in the form of growing availability of low-cost new Chinese tyres, feels Balu.
The entrance of prominent tyre manufacturers in untapped market into the retreading tyre sector showcases the potential for the market. In most Asian economies, retreading market is fragmented with the domination of unorganized players.
Major tyre manufacturer Bridgestone is spending close to $150 million to build two aircraft tyre plants (including retreading) in Thailand.
The Goodyear Tire and Rubber has launched a new mould cure retread high load (HL) trailer tyres in April 2017. Named as TreadMax KMAX T HL and TreadMax SP246 HL, the tyres are available in size 385/65R22.5.
The tyres feature same tread design, including similar manufacturing techniques and materials that are used in the production of new tyres. The tyres are designed to withstand high load conditions, and they seem to be suitable for HCVs weighing 40 tons and more.
Continental has also launched new retreaded tyre named ‘ContiTread Hybrid HT3’. The retread tyre is optimized for use in spread axle trailer applications for both regional and long-haul travel.
The performance and fuel efficiency of these retreaded tyres are at par with new tyres. However, with the prominent tyre manufacturers offering retreading tyres in these regions, the tyre retreading market is expected to become more organized.
The growing emphasis on reducing environmental impact and cost-effective tyre purchase are acting as major market enablers for the retreaded tyres.

Natural rubber

Balu says the current downward trend in natural rubber price has come as a relief for specialty tyre makers. The prices are not expected to be low for very long.
Trade tension between the US and China has created uncertainty and oversupply of natural rubber is also a key factor for falling rubber prices. This situation will be an advantage for specialty tyre manufacturers which will ease the pressure on their margins.
But the efforts by Thai government to cut down the output of natural rubber will have an impact on the prices. Crude oil and natural rubber prices are beyond their reasonable control which are influenced by external environment and this will always be a concern for tyre makers.
The market is dominated by the APAC region, which accounted for around 45 per cent, followed by the Americas, and EMEA. APAC has been one of the promising markets for automotive as overall.
Apart from the demand, APAC has become a prime offshore location for automotive manufacturing due to government incentives, cost and raw material advantages. Specialty tyres also have received high investments as the top eight rubber producing countries in the world fall in the APAC region.
It is expected that the specialty tyre market will witness considerable growth in volume from APAC, primarily from countries such as China and India that have experienced stable macroeconomic growth in the recent past.

Positive signs

Revival of the US economy is a positive sign for specialty tyres in Americas region. The region also has the largest aircraft fleets and are into constantly upgrading their fleet which will create a strong replacement as well as OEM market for aircraft tyres.
Europe is the largest market for specialty tyres in EMEA. Stability in economic activity and improvement in consumer confidence will help in the recovery of the construction and automotive industry. Construction, mining, and transportation activities are reviving in Europe which will increase the demand for specialty tyres.
In Africa, over 30 per cent of the world’s global mineral reserves are found, yet less than 5 per cent of the total global mineral exploration and extraction budget is invested in the continent. Africa is a very potential market in long term perspective.
According to Balu the specialty tyre market is distributed between OEM (new tyres) and aftermarket (new and retreaded tyres). Most of the mainstream tyre manufacturers have their products meant for all the channels – OEM and aftermarket.
Retreading, being one of the major enablers for aftermarket tyres, is widely used in HCV fleets, aircraft etc. Retreads sell for less than 30-50 per cent of the new tyre price. It is estimated that around 80 per cent of all aircraft tyres (active) in the United States are retreads.
Tyres used for mining, industrial handling etc have a longer life-span which leads to fewer replacement cycles. Demand for mining trucks and aircraft is increasing recently which will propel the market for the OEM segment.
The major trend is low cost tyres from the Chinese market impacting the retreading tyre sector.

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