tyre sector - pacra

Tyre SectorAn Overview

October 2020© The Pakistan Credit Rating Agency Limited

TYRES | GLOBAL INDUSTRYTYRES |TABLE OF CONTENTS

Global Industry Pg. No

Overview 1

Market Segments 2

Composition of Tyres 3

Automobile & Tyre Correlation 4

Production 5

Market Shares 6

Exports 7

Country Wise Import Export 8

Natural Rubber Price 9

Crude Oil Price 10

Local Industry Pg. No

Overview 11

Demand 12

Automobile & Tyre Demand 14

Supply 15

Market Shares 16

Capacities 17

Duty Structure 18

Business Risk 19

Import & Local Price Variance 21

Tyre Types 22

Financial Risks 23

Rating Curve 26

SWOT Analysis 27

Outlook & Future Prospects 28

TYRES | GLOBAL INDUSTRY | OVERVIEWTYRES | GLOBAL INDUSTRY

OVERVIEW

• Global tyre market reached a volume of 3.2 billion units in CY19 (3.1 billion units in CY18).

• Total market size was USD~167bln in CY19 (USD~169 billion in CY18). Global tyre market declined in CY19 mainlydue to slowdown in passenger car sales by ~6%. OEMs car witnessed a decline of ~6.3% in CY19. This is mainlyattributed to economic slowdown in developed countries.

• Average CAGR of the Industry (5 years) has been ~3%. However, demand is estimated to drop by ~6% in CY20due to Covid-19 pandemic and economic fallout.

• Tyre demand is derived mainly from growth in automobile sector, which, in turn, is dependent upon economicgrowth, per capita disposable incomes and demand from emerging economies.

• Industry Structure is concentrated – Top 4 Players make up ~45% of World Market Share.

• The demand for light vehicles and thus LVH Tyres (full) has been rapidly increasing over the last five years inemerging economies like China, East Europe, South America, and India. However, Covid-19 crisis is expected tocast its impact on the overall demand.

Source: Expert Market Research, Global Tire News, ETRMA 1

TYRES | GLOBAL INDUSTRY | MARKET SEGMENTTYRES | GLOBAL INDUSTRY

MARKET SEGMENTS

By Design: Radial Tyres Bias Tyres

By Vehicle Type: Passenger Cars Light Commercial Medium & Heavy

Commercial Two & Three Wheelers Off-the-road (OTR)

By End Use: Original Equipment

Manufacturers (OEM) Replacement Market

By Region: North America Asia Pacific Europe Latin America Middle East & Africa

2

TYRES | COMPOSITION OF TYRES

Source: IMC

TYRES | GLOBAL INDUSTRY

COMPOSITION OF TYRES

*Synthetic Polymer is same as Synthetic Rubber 3

TYRES | GLOBAL INDUSTRY | AUTO & TYRE CORRELATION

Source: Statista

Global Tyres Demand is derived from Global MotorVehicle Demand.

China and Europe generate the highest Automobiledemand i.e. ~28% and ~24% respectively.

Automobile sector is expected to decline by ~18% inCY20; thus Tyres demand is also predicted to decline by~6%.

Passenger cars dominate the automobile sector with ashare of ~82%. Similarly, passenger car tyres dominateGlobal Tyre Demand Market with a share of ~72%.


AUTOMOBILES & TYRE CORRELATION

4% 6% 6%5%

-3%

5% 4%2%

-6%

-18%-20%

-15%

-10%

-5%

0%

5%

10%

140,000

145,000

150,000

155,000

160,000

165,000

170,000

CY16 CY17 CY18 CY19 CY20*

Global Tyre Sales - USD

Global Tire Sales US $ Mln World Nominal GDP Growth Global MotorVehicle Sales

4

TYRES | GLOBAL INDUSTRY | AUTO & TYRE CORRELATION

Source: Statista

World Tyre Production has historically grown at a steady pace. In CY19, due to slowdown in developed economies, tyre production growth fell from ~8% to ~4%.

Bearing Covid-19 pandemic and its aftermaths, tyreIndustry is expected to witness a dip of ~12% in its production in CY20.

Major decline may be contributed by European Countries ( France, UK, Germany), Japan, China, and USA.


PRODUCTION

5%

8%

8% 4%

-12%

-15%

-10%

-5%

0%

5%

10%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

CY16 CY17 CY18 CY19 CY20*

Global Tyres Production- Units

Production ( Units mln) Growth

5

TYRES | GLOBAL INDUSTRY | MARKET SHARE

Source: Global Tire Ranking

15%14%14%14%

15%15%15%15%

8%9%9%9%

7%7%7%7%

4%4%4%4%

4%4%4%4%

48%48%47%49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CY19CY18CY17CY16

Global Tyres Market Share

Michelin Bridgestone Goodyear Continental Sumitomo Pirelli Others

Top Tyre Producers Headquarters

Michelin France

Bridgestone Japan

Goodyear USA

Continental Germany

Sumitomo Japan

Pirelli Italy

Hankook South Korea

Yokohama Japan

Zhongce Rubber China


MARKET SHARE

6

TYRES | GLOBAL EXPORTS

Source: World Exports


EXPORTS

World Export growth decelerated by ~2% in CY19 majorly stemming from Chinese exports and small countryplayers.

Projecting 1HCY20 figures, exports for CY20 are expected to decline sharply by ~21%.

WORLD EXPORTS | USD "000" CY16 CY17 CY18 CY19 1HCY20*

World 70,338,644 76,018,450 80,809,676 79,000,000 31,241,881

China 12,893,129 14,162,306 15,112,290 14,800,000 5,838,600

18% 19% 19% 19% 19%

Germany 5,490,394 5,890,152 6,016,233 5,700,000

Japan 4,784,154 4,849,729 5,096,502 5,200,000

United States of America 4,471,379 4,656,767 5,088,889 5,000,000

Thailand 3,557,764 4,391,321 4,901,311 5,600,000

Korea 3,413,127 3,437,703 3,474,419 3,300,000

France 2,499,570 2,556,945 2,766,603 2,700,000

Spain 2,047,676 2,217,025 2,499,762 2,400,000

Poland 1,973,581 2,139,450 2,393,481 2,100,000

Netherland 2,319,594 2,374,211 2,296,513 2,509,000

India 1,394,793 1,650,420 1,821,338 1,900,000

Rest of the World 25,493,483 27,692,421 29,342,335 27,791,000

7

TYRES | EXPORTS AND IMPORTS BY COUNTRIES

Source: Trading Economics

19%

7%

7%

6%

7%4%3%3%

3%

3%

38%

Tyres Exports by Countries

China

Germany

Japan

United States of America

Thailand

Korea

France

Spain

Poland

Netherland

Other Countries

19%

9%

5%

4%

4%

4%3%3%3%2%

45%

Tyre Imports by CountriesUnited States of America

Germany

France

Mexico

Canada

United Kingdom

Netherlands

Italy

Australia

Belgium

Other Countries

- Top 10 countries contribute ~62% to world Exports. China, Germany and Japan contribute ~37% to world tyre Exports.

- Top 10 countries contribute ~55% to the world Imports. USA, Germany and France are major importers of Tyres with ~33% share.

- The mix has largely remained stable over the last 5 years.

*Figures in USD


COUNTRY WISE IMPORT- EXPORT

8

TYRES | NATURAL RUBBER GLOBAL PRICES

Source: SICOM

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Oct

-15

Dec

-15

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

Feb

-20

Ap

r-2

0

Jun

-20

Au

g-2

0

Natural Rubber Price Trend

Rubber Price USD/KG Price Rubber Price USD/KG Change

Prices of Natural Rubber depict a volatile trend asare a derivative of stock to consumption ratio.Following Dec’19, after the outbreak of Covid-19,rubber prices fell steeply by ~20% till April’20 due toglobal demand contraction. At End CY16, prices hit apeak of USD2.7/kg due to supply shortages.

With re-stabilized Chinese market and easing up oflockdown in most of the major economies, tyressegment is entering into a recovery phase now;prices of natural rubber have, therefore, jumped by~37% from June’20 to September’20.

Provided a second wave of virus does not threatenthe global economies again, prices of natural rubberare expected to remain in their average bandwidthof USD 1.5-1.7/Kg.


NATURAL RUBBER PRICE

9

TYRES | NATURAL RUBBER GLOBAL PRICES

Source: Macro trends


CRUDE OIL PRICE

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0

10

20

30

40

50

60

70

80

90

100

HY16 CY16 HY17 CY17 HY18 CY18 HY19 CY19 HY20 9MY20

Crude Oil Prices-USD

Crude Oil Prices/barrel-USD % Change

Synthetic Rubber - a key component of Passenger Cartyres is a derivative of Crude Oil.

Prices of crude oil have remained tremendously volatiledue to the Covid-19 crisis and OPEC cartel problems.

10

TYRES | DOMESTIC MARKET OVERVIEW

Source: PSX, Global Tires, PBS

TYRES | LOCAL INDUSTRY

OVERVIEW

• Pakistan domestic** tyre Industry worth USD~242 million (PKR~38 billion) in CY19. (USD~339 million (PKR~43 billion) CY18).

• In terms of end use, Industry segments include OEMs and Replacement Market. Replacement market makes up ~70 of the total market share.

• Tyre Sector growth is dependent on the performance of automobile sector. FY19 has been one of the most distressing periods for the automobile sector due to rising inflation, interest & exchange rates resulting in hiked prices and contraction in demand, particularly of passenger cars and LCVs.

• In terms of vehicle types, Pakistan tyre Industry can be broadly categorized into 2&3 wheeler tyres and 4 wheeler tyres. 4 wheeler market is further segmented into passenger cars, LCVs, trucks & buses and tractors.

• Pakistan tyre demand is met through local sales and imports. Import market is predominant in the 4 wheeler segments.

•

*CY19 exchange rate : 154.7, CY18: 126.3, **does not include Import segment 11

Tyre Demand is generated from three sources in Pakistan:

Original Equipment Manufacturers: are local assemblers of Bikes, Cars, LCVs, Buses, Trucks and Tractors. Revenue from this division is dependent upon growth of respective OEMs. Main OEMs in Pakistan include Pak Suzuki Motor Company Limited, Indus Motor Company Limited, Honda Atlas Cars (Pakistan) Limited, Al-Ghazi Tractors Limited, Millat Tractors

and others

Replacement Market: Replacement Market is the secondary market for tyre manufacturers. The replacement market

comprises of distributors, wholesalers and retailers

Export: Only 2 & 3 wheelers’ tyres and tubes are currently exported, while sales of other vehicles’tyres is concentrated in local market.

12

DEMAND



DEMAND

CY19 2 & 3 Wheelers Cars & LCVs Buses TrucksTractors &

OthersTOTAL

REGISTERED MOTOR VEHICLES (Units) 22,842,248 3,871,588 253,652 287,701 1,796,685 29,051,874

ESTIMATED TYRES (Units) 46,600,259 15,486,352 1,014,608 1,150,804 7,186,740 71,438,763

*Source - Pakistan Economic Survey

MARKET CATEGORIES

Replacement Market 70% 75% 90% 84% 85%

OEM 30% 25% 10% 16% 15%

Replacement Cycle | Years **Assumption 1 5 5 5 5

Tyres Demand

Replacement Market 32,620,181 2,322,953 182,629 193,335 1,221,746 36,540,844

OEMs 13,980,078 3,871,588 101,461 184,129 1,078,011 19,215,266

TOTAL DEMAND (Units) 46,600,259 6,194,541 284,090 377,464 2,299,757 55,756,111

Total Demand assumes standard replacement cycles for different categories of tyres, which can vary. This demand is catered through local sales & imports.

13Source: Economic Survey, PACRA Database

TYRES | AUTO INDUSTRY VS AUTOMOBILE INDUSTRY

Source: Economic Survey, PAMA

-

500,000

1,000,000

1,500,000

2,000,000

0

20,000

40,000

60,000

80,000

100,000

120,000

FY20FY19FY18FY17FY16

Passenger Cars VS Passenger Car Tyres

Passenger Cars Local Sales (Units) Passenger Car Tyres Local Sales (Units)

-

1,000,000

2,000,000

3,000,000

4,000,000

0

20000

40000

60000

80000

100000

120000

140000

FY20 FY19 FY18 FY17 FY16

Trucks & Buses VS Trucks & Buses Tyres

Total Trucks & Buses* Local Sales (Units) Total Trucks and Buses Tyres Local Sales (Units)

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

0

500000

1000000

1500000

2000000

2500000


2/3 Wheelers VS 2/3 Wheeler Tyres

2/3 Wheelers Local Sales (Units) 2/3 Wheelers Tyres Local Sales (Units)


AUTOMOBILE & TYRE DEMAND

-

50,000

100,000

150,000

200,000

250,000

300,000

-

20,000

40,000

60,000

80,000


Tractors VS Tractor Tyres

Total Tractors Sales (Units) Tractor Tyres Local Sales (Units)

14


SUPPLY

CY19 2 & 3 Wheelers Cars & LCVs Buses Trucks Tractors & Others AVERAGE

Local Sales 100% 30% 10% 5% 39% 37%

Imports (Direct & Grey Channel) 0% 70% 90% 95% 61% 63%

UNITS TOTAL

Local Sales 46,600,259 1,858,362 28,409 18,873 896,905 49,402,809

Imports (Direct & Grey Channel) - 4,336,179 255,681 358,591 1,402,852 6,353,302

TOTAL 46,600,259 6,194,541 284,090 377,464 2,299,757 55,756,111

In terms of units, Imports cater only ~11% of the tyres demand in the Country. The portion is significantly high in terms of value since Imports are dominant in the high priced tyre market segments.

Proportion of grey channel is relatively low in passenger car tyres segment as compared to trucks, buses and tractors.

Tyre Supply is met through local sales & imports in Pakistan:

Source: PACRA Database 15

TYRES | LSM SHARE

Source: PACRA Database

25%29%36%35%39%

33%27%

26%27%23%

41%44%38%38%38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Local Market Share

General Tyres Panther Tyres Servis Tyres

General, Panther and Servis Tyres make-up ~80%of the Local Sales.

Other players include Diamond, Ghauri and CECO.

In FY16, General Tyres was the market leader with39% of the market share. Over the years, ServisTyres has been successful in achieving the highestmarket share ~41%.

General Tyres and Panther dominate in 4 wheelermarket (passenger cars, trucks, tractors). GeneralTyres ~60% sales are attributed to 4 wheelers.Servis Tyre is dominant in 2/3 wheeler tyres.

In terms of units, 2/3 wheeler tyres form ~68% ofthe market share. However in terms of revenue 4wheelers dominate the local market.


MARKET SHARES

16

Most of the top players have achieved significant capacity enhancementsin the past years.

Installed Capacity increased by ~10.2% (FY19) after the imposition ofimport taxes in FY18.

Average utilized capacity of the top players had declined in FY19 to ~61%.

Servis Tyre’s capacity is majorly utilized for 2/3 Wheelers. General Tyres~44% capacity is utilized for passenger cars and ~16% for trucks.

TYRES | LSM | CAPACITY UTILIZATION

Source: PACRA database

Capacity Installed


General Tyres 3,230,820 3,407,100 3,558,862 3 3,933,850 3,947,553

Panther Tyres 26,030,000 26,046,000 30,832,000 31,200,000 31,200,000

Servis Tyres 10,549,966 17,053,960 18,534,780 19,114,360 19,114,360

Total 39,810,786 46,507,060 49,366,780 54,248,210 54,261,913


CAPACITIES

61%64%

59%58%

50%

60%

70%

80%

90%

100%

FY19FY18FY17FY16

Industry Average Capacity Utilization

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000


Domestic Tyres Production

17

TYRES | DUTY STRUCTURE

PCT Code Description

AdditionalCustom Duty

Custom Duty RegulatoryDuty

Total

FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19

Raw Materials

28.03Carbon Black

(Rubber Grade) 4% 0% 16% 16% 0% 0% 20% 16%40.01 Natural Rubber 2% 0% 0% 3% 0% 0% 2% 3%40.02 Synthetic Rubber 2% 0% 0% 3% 0% 0% 2% 3%

Finished Goods

4011.1Tyres - Used on

motor cars 4% 0% 16% 16% 10% 15% 30% 31%


Light Trucks 4% 0% 16% 16% 10% 15% 30% 31%


Buses 2% 0% 3% 3% 15% 25% 20% 28%4011.4 Motorcycle Tyres 7% 0% 20% 20% 0% 0% 27% 20%

4011.7

Tyres - Used on Agricultural Machines 7% 0% 20% 20% 0.0% 0% 27% 20%

40.13 Inner Tubes 2-7% 0% 3-20% 3-20% 0% 0% 5-27% 3-20%Note: In addition, sales tax of 17% is also applicable

• Overall, Import duty structurerepresents protection to thedomestic players through impositionof RDs and Additional CDs onfinished tyres, particularly on Motorcars and Light Truck Tyres.

Source: FBR


DUTY STRUCTURE

18


BUSINESS RISK

Pakistan’s tyre Industry performance has remained subdued in the outgoing fiscal year FY20.

Overall economic slowdown and lockdown amid Covid-19 had substantially reduced the demand of tyres in the OEM market,particularly in passenger cars segment. Demand from replacement market was, however, modestly impacted. Most of the players’shifted their focus towards replacement market.

Increase in Interest rates during 9MFY20 resulted in higher auto-financing rates. This, coupled with FBR and traders deadlock onCNIC matter, negatively impacted the overall auto industry demand.

Rising Exchange Rates increased the cost of doing business for the Sector Players. Additionally, under absorption of fixed costs dueto low business volumes kept the Industry margins under pressure.

Import Price Disparity: Apart from the short term business risks stated above, Pakistan tyre Industry has historically been facingchallenge from low priced imported tyres. The proportion of Import market is significantly high in case of passenger car and lightcommercial vehicle tyres. Additionally, grey market influx also hampers the growth of the legitimate sector.

19

TYRES | FINANCIAL PERFORMANCE


66%

14%

10%

10%

Tyre | Cost Break Up

Raw Material

Salaries & Wages

Fuel/Utilities

Other

Raw materials contribution to overall cost of the sector is ~66% in FY20. This percentage has grown in the costcomponent due to currency devaluation.

Industry margins depict a gradual fall from ~20% in FY16 to ~15% in FY20. Margins for FY18, FY19 and FY20however, do not depict a significant decline, which implies that exchange rate fluctuations are passed to theconsumers in the price of the tyres.

*Industry data is derived from 80% of the market share


BUSINESS RISK

19.5% 17.5% 16.3% 15.8% 15.3%

13.8%10.0% 9.5% 9.5% 8.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%


Industry | Margins

Gross Margin Operating Margin

20


BUSINESS RISK | Import & Local Price Variance

*Price data as of Sep'20. Source: General tyres, Panther Tyres, Pak Wheels, Ali Baba

Relatively cheaper imported Tyres are available ininternational market. China is the biggestproducer of cheaper Tyres.

Minimum prices of Imported Tyres are muchlesser than that of Local Tyres.

Passenger Car Tyres minimum prices of localmarket depicts nearly 53% disparity whencompared to imported prices.

Protection is provided to the Local Industrythrough imposition of Regulatory Duties andAdditional Custom Duties on Imported tyres.However, under-invoicing and grey marketcontinue to pose a threat to the domesticmanufacturers.

Vehicles Local ImportedPrice Disparity

(Minimum Level)

Passenger Cars 4,500-7,200 2,100-9,900 53%

Trucks and Buses 29,000-72,000 19,800-42,900 32%

Tractors 29,000-72,000 16,500-99,000 43%

2/3Wheelers 1,000-5,000 990 - 5,000 1%

21


TYPES

BIAS TYRES Nylon Belts

Standard Duty Less Expensive Less Flexible

More sensitive to Overheating Low Life Expectancy

RADIAL TYRES Steel Belts High Duty

More Expensive More Flexible

Less Sensitive to Overheating Long Life Expectancy

22



34,810 36,225

32,962

27,336 24,432

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000


Industry| Total Tyre Sales - PKR mln

Sales growth rate reduced to ~9% in FY19 from ~17% in FY18. Tyre Industry witnessed a negative growth of ~4% in FY20. Onthe other hand, automobile Sector has reflected a sharp fall of ~36% in 9MFY20. However, the decline in volumetric sales oftyres is not as sheer and is compensated by increase in prices of tyres during the period to pass on the impact of inflation andexchange rate.

With demand taking a dig, RM and finished inventories went high, resulting in increased working capital needs.



FINANCIAL RISKS

-

20

40

60

80

100

120

Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

Industry | Working Capital Cycle

Inventory Days Trade Receivable Days Trade Payable Days

23

61.6%57.7%54.9%

49.7%45.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%


Total Borrowing/(Borrowings + Equity)

81.4%75.8%

69.1%

46.0%52.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


Short-Term Borrowing/Long-Term Borrowing



The Industry’s reliance on Short term borrowings has increased over the periods due to increased working capital needs.

Overall Leverage of the Industry has increased from ~58% in FY19 to ~62% in FY20.


FINANCIAL RISKS

24

Source: PACRA Database



14%

11%

7%6%

8%

0%

2%

4%

6%

8%

10%

12%

14%

16%


Average Borrowing Rate

1.852.5

4.93.84.15

0

2

4

6

8

10

12

14

16


EBITDA/Finance Cost- times

Average Borrowing Rate of the Tyre Industry increased to ~14% FY20 due to increase in Interest Rates.

EBITDA over Finance cost dropped to ~1.85 times in FY20 due to increase in raw material costs, Finance costs, and decrease in sales.

With a policy rate cut of 625 bps, the Industry can save an amount of PKR~650mln on its Short term Borrowings (STBs – PKR~10bln FY20).


FINANCIAL RISKS

25

TYRES | PACRA RATINGS

0

1 1

0

0

1

A+ A A- B+

PACRA Rating

PACRA Rates two of the 3 market leaders: General Tyres and Panther Tyres


RATING CURVE

26Source: PACRA database

TYRES | Global Technology Trends

Source: Auto Futures, PBS, BR

TYRES | SWOT ANALYSIS

•.

• New technology Trends: green tyres, sensor tyres (for data collection), soybean oil for tyres

• Growth of Pakistan urban population

• Recovery of economic conditions of Pakistan.

• Agriculture and Construction industry growth of Pakistan in FY21.

• Import duties on tyres.

• Local raw material shortages and price volatility.

• Reduced Automobile Sector over last two years.

• Reduced per capita income in FY 19 AND FY20.

• High Tax

• Available Capacity

• Effective and efficient labor market.

• Government incentives and ease policies

• Covid-19 and its negative implications on production and consumption.

Strengths Weaknesses

ThreatsOpportunities• Devaluation of currency and

volatile imported raw material prices.

• Government’s inconsistent policies

27

Despite current difficult economic situation and pressuring competitive environment, long term growth potential for the Sectorremains intact.

After the dip of 70% in automobile Industry in June’20, the market is in its recovery phase. Passenger Car Sales in Pakistan haveincreased by 8.3% in Sep’20 (YOY).

Pakistan GDP is expected to increase by 2.1% in FY21. It declined by 0.4% in FY20. Tractors domestic demand has witnessed a 50%growth since June’20 and the supply side has increased by 15%.

Smuggled Tyres segment is rapidly increasing. 45% of domestic sales are catered by smuggled market which has resulted a loss of USD210 mln in terms of taxes in CY19. Government’s eagerness to curb smuggling is a positive sign though.

Chaoyang Long March (Chinese Producer) has invested USD 250 mln in a joint venture with Servis Tyres. It is expected tocontribute USD 100 mln to truck tyres exports.

It is predicted that Pakistan Tyre Industry will witness a CAGR of 3-4% over the next five years.

Policy rate cut by 625 points is expected to increase auto financing that may result in better OEM offtake. Exchange rate is alsoexpected to remain stable in the short horizon

TYRES | OUTLOOK AND WAY FORWARDTYRES | OUTLOOK & FUTURE PROSPECTS

OUTLOOK: STABLE

28

TYRES | BIBLIOGRAPHY

• World Bank• Expert Market Research• ETRMA• Global Tire Ranking• PAMA• Pakistan Bureau of Statistics (PBS)• Federal Board of Revenue (FBR)• Securities & Exchange Commission of Pakistan (SECP)• Business Recorder• Trading Economics• State Bank of Pakistan (SBP)• Pakistan Stock Exchange (PSX)• Statista.com DISCLAIMER

PACRA has used due care in preparation of this document. Our information has been obtained from sources we consider to be reliable but its accuracy or completeness is notguaranteed. The information in this document may be copied or otherwise reproduced, in whole or in part, provided the source is duly acknowledged. The presentation should not berelied upon as professional advice.

Research

Team

SaniyaTauseef

Asst. Manager

[email protected]

Aimen Noor

Associate Analyst

[email protected]

Contact Number: +92 42 35869504

TYRES | BIBLIOGRAPHY

mailto:[email protected]

tyre sector - pacra

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