Indian tyre exports lose out to S-E Asia

In fact, an over 10 per cent devaluation in the domestic currency has been rendered useless, because the south-east Asian currencies have devalued by margins in the range of 50 per cent to 75 per cent.

Most of the country’s leading tyre makers had planned to hike their export earnings in early 1997, fearing a downturn in the domestic auto-sector. The traditional export markets for these companies have been theIndian sub-continent, the Asian-rim countries and a major portion of Africa.

Some of the domestic firms like the RPG group’s Ceat Ltd had even made an entry in the US.

The problems of local firms have been compounded further after the domestic heavy-commercial vehicle makers like Telco announced that they will be forced to cut production further. The HCV and LCV makers form the bulk of the cross-ply tyre segment, which constitutes over 65 per cent of the tyre market.

Despite the entry of several big players like General Motors, Ford, Daewoo, Peugeot and others, demand from the passenger-car makers have not increased. Most of these car makers insist on using radial tyreswhere the margins are maximumfor original equipment supply.

Introduced way back in the 1970s by JK Tyres, radials have failed to pick up so far. And even today the conventional cross-ply or bias-ply tyres ride on the country’s roads.

The extent of radialisation in the country has been a low 35 per cent in the OE (original equipment)and 42 per cent in the replacement market for passanger cars. In case of the truck and bus segment, which accounts for a majority 75 per cent of the country’s total tyre sales, the penetration of radials is an abysmal 1 to 2 per cent. This is in contrast to the scenario in countries like Europe, America and Japan, with an overall 90 per cent radialisation rate95 per cent in the passenger car segment, 90 per cent in light commercial vehicles and 85 per cent in other categories.

The growth in the radial-tyre segment is estimated to be around 25 per cent for the next one year, industry sources said. According to the Association of Indian Automobile Manufacturers, by the year 2001, the number of cars produced in the country is expected to almost double to 850,000, up from 404,040 in 1996-97.

A fistful of international tyre majors such as Bridgestone Tire Corporation, Kumho Tire Corporation and Continental AG are eyeing the Indian market, while domestic companies including JK Tyre, MRF Tyres, Ceat Ltd andApollo are feverishly expanding their radial capacities.

The tyre industry is expected to invest around Rs 1,500 crore to Rs 2,000 crore to hike capacity to 8.4 million radial tyres in the next one year, according to industry sources.

At present, the demand for radial tyres stands at 30 per cent of the overall tyre demand, while the supply lags at 27 per cent. Analysts, however, fear a glut in the radial market in the time to come.

"With more and more tyre manufactureres joining the fray, the possibility of an oversupply situation in radials is very evident, an analyst said." Market watchers draw parallel to a situation in the overall tyre market between 1994 and 1997, when stocks had piled in anticipation of a boom that never happened.