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Change in industry structure and dynamics over the time:

Tyre industry is a significant part of the auto industry and being a complementary
product, the growth of tyre industry is influenced by a performance of automobile
demand. This dependence will continue in future too. Around 80% of the market in
India is controlled by four players and this trend has been there for a decade and
most likely to continue in future, looking at the actions taken by market leaders.
Following are the factors that may change the structure of tyre industry

Decline in Exports:
Net export earning of the sector has dropped by 10.7% CAGR over the past
five years. This slowdown will most likely affect the four top players in the
market. But the trend in the industry is that Indian tyre companies are setting
up plants in foreign countries to cater their local demand instead of exporting
from India.
Capacity Expansion to Boost Supply:
In terms of volume, tyre production grew by 5% during FY 2012-16 1.With the
expected capacity expansion in the auto sector, Tyre industry is also
witnessing capacity development. The industry is expected to see INR 100 Bn
investment in FY 15-16 spread across eight projects. Investment breakup is
given in ExhibitRising Chinese Import: Low import duties in India on finished tyre have
encouraged growth in tyre import volume, despite investments made in new
capacity expansion and adequate domestic installed capacity 2. Cheap import
from China is putting price pressure on domestic players. And relaxed import
policy is fueling this change.
The presence of International Brands: Many international brands like
Michelin and setting up plants in various parts of India.In future domestic
players are most likely to face competition from global brands in the premium
price category.
Trend towards Radial tyres: Demand for radial tyres, which are of superior
quality and have a longer life-cycle compared to bias tyres, has been
continuously growing in the Indian market3. Industries have taken a note and
are increasing their radial tyre production capacity and also are investing in
R&D. Similarly, the shift towards tubeless tyres is replacing cross-ply tyres.

It is expected that domestic player will lose small market share to low-cost Chinese
tyre manufacturers, but local companies also have made a significant investment in
capacity expansion. This may trigger a price war in market affecting the profitability
1 India's Tyre industry: Dun and Bradstreet report, Supply and demand dynamics
Page no 21
2 India's Tyre industry: Dun and Bradstreet report, Import and export, Page no 23
3 www.crisilresearch.com, Radialisation in India - Evolution

of Industry. The new trend towards Radial tyres most likely to slow down tyre wear
and will in future slow down the replacement market. But major players are most
likely to hold their market in future. To remain competitive in the industry may go on
the consolidation through M&A or JVs in R&D.

Actions that can be taken to sustain and improve industry profitability:


Imposition of higher customs duty on Chinese manufacturer:
Reduce import duty on raw material

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