tyre industry

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1 By: Jaimin Patel(12) Sudeep Bhatt(18) Adhikar Gupta(09) A PRESENTATION of MANAGEMENT RESEARCH PROJECT - 1 ON TYRE INDUSTRY IN INDIA

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1

By:Jaimin Patel(12)

Sudeep Bhatt(18)Adhikar Gupta(09)

APRESENTATION

ofMANAGEMENT RESEARCH PROJECT - 1

ON

TYRE INDUSTRY IN INDIA

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INDUSTRY OVERVIEW

• Dunlop Rubber Company (India) was incorporated in 1926 as a First Indian tyre company.

• The size of Indian tyre industry is estimated at about

Rs.14250 crore.

• Comprising 43 players with an aggregate installed

capacity of over 655 lacks tyre.

• The 10 large tyre companies account for over 95% of the

total production.

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Cont…….

• The industry is raw material intensive with raw material constituting over 55 per cent of the sales turnover.

• Raw material cost about 70 per cent of production cost.

• Rubber accounts for the major share of the material cost.

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• The major demand comes from the replacement market accounting for around 48.70 per cent, the growth driver of industry.

• 42.80 per cent from the Original Equipment manufacturers (OEM) and 8.50 per cent from the exports.

• The Indian tyre industry has witnessed a CAGR of 7.7 per cent over the last decade.

Cont…….

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Market Profile

The Indian tyre industry is Two Tiered

Tier-I players (top 5 tyre companies)

Account for over 80% of industry turnover and have a well diversified product-mix and presence in all three major segments

i.e. : replacement market, original equipment manufacturers (OEM's) and exports

Tier-II companies

Small in size, mainly concentrating on production of small tyres (for two/ three-wheelers, etc.), tubes & flaps and the replacement market.

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TYRE MANUFACTURING PROCESS

• Mixing the materials

• Extruding the tread

• Weaving the plies

• Preparing the bead core

• Building process

• Vulcanisation

• Trimming

• Final inspection

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Raw Materials

• Natural Rubber

• Synthetic Rubber

• Carbon Black

• Nylon Tyre Cord

Raw materials By Value (%)

By Weight (%)

Rubber 52 49

Carbon Black 23 10

Nylon tyre cord

8 24

Chemicals 15 12

Others 2 5

Total 100 100

Source : Way2Wealth.com

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DEMAND SCENARIO

Classification of Demand

BY Type:

Bus and TruckScooterMotorcyclePassenger CarTractor

BY Market:

OEM

Replacement

Export

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18%7%

1%21%

2%2%2%

47%

Category wise Sales FY07(%)

Truck/Bus LCV Tractor-trailerPassenger Car Tractor Front JeepTractor-rear Others

Source : ATMA

Source : ATMA

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General Economic Scenario

Growth of Automobile Industry

Fluctuations in Raw Material Prices

Relative Importance of Road Transport

Retreading

Radialisation

Demand- Supply Gap

Demand Determinants

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MAJOR PLAYERS IN INDUSTRY

MRF

Apollo Tyres (ATL)

JK Industries

CEAT

Goodyear India

BRIDGESTONE

Falcon Tyres

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FIVE FORCE ANALYSIS

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The demand of most raw material especially rubber is high, while supply is restricted

Threat of Substitutes- Low

• No direct substitutes

• Here we consider retread tyre as a substitute for new tyre

Competitive Pressure-High

Top six players enjoying over 80% of total market share

Buyer Power- High

High competition pressure due to high bargaining power of OEMs and wide brand choice in the replacement market.

Barriers to New Entrant-High

¨ Capital- intensive¨ Distribution Network¨ Low operating Margin¨ Branding

Supplier Power-HighSupplier Power-High

Threat of Substitutes- Low

Competitive Pressure-

High

Buyer Power- High

Barriers to New Entrant-High

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PEST ANALYSIS

Political Factors

Trade Policy

Tariff – Duties

Excise Duty

Budget Impact On Tyre Industry

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Cont……

• Economical Factors

• Fluctuation in Raw Material Prices

• Dumping

• Import and Export

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Cont….

Social Factors

Human Resource Development

Much more Safer Transportation

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Cont……

Technological FactorsTechnology LadderTyre with Cotton Tyre with Nylon Radial Tyre Tubeless Tyre Run Flat (Puncture Proof) Tyre Fuel economy/low rolling resistance tyre Green Tyre

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SWOT ANALYSIS

Strengths• Growth of automobile Industry• Cheaper Raw material

Weaknesses• Lack of technology• Number of Player

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Opportunities

Growing Economy - --Growing Automobile Industry ----Increasing OEM demand ----Subsequent rise in replacement demand

Development of infrastructure

Global sources for raw materials

Cont…..

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Cont…..

Threats

Increase in prices of natural rubber

Cheaper imports

Crude prices scaling upwards

Ban on Overloading

Cyclical nature of automobile industry.

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KEY SUCCESS FACTORS

Technology up gradation

Growth Of Automobile Industry

Introduction of new Concepts

Favorable Government Policy

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FUTURE OF TYRE INDUSTRY

India is no more an isolated economy, and the continued economic liberalization, and relaxation of import duties and laws, makes competition from overseas inevitable.

Unique road conditions, and consumer behavior in India, provides a window of opportunity.

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Conclusion

• Performing well in the Indian economy

• Provides very good amount of the employment and technology innovations

• Tyre companies face competition, together with price and cost pressures.

• Tyre companies would definitely show improvement in the margins, sequentially, and if prices remain at these levels, profitability would improve

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Cont…….

• The main problem to the industry is the price of its raw materials, most of which are petroleum by-products

• Overall Indian Tyre Industry is enjoying the fruits of more sales in the replacement market when the input cost is comparatively lower.

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