1.     OVERVIEW OF THE INDIAN TYRE INDUSTRY:

1.1.                     Introduction

The Rs.20,000 crore Indian Tyre Industry, is highly raw material intensive and predominantly a Cross Ply (or Bias) tyre manufacturing industry. It is highly concentrated wherein 10 large manufacturers account for over 95% of the total tonnage production of 11.35 lakh M.T. It produces all categories of tyres, except Snow Tyres and Aero Tyre for which there is no demand domestically.

The Indian tyre industry accounts for around 5% of the global demand as well as global supply of tyres. Domestic tyre industry has witnessed a remarkable recovery in FY10, after a slowdown in FY09. This growth was driven by strong revival in automobile demand on the back of resurgence in economy, rise in employment levels, and easing of interest rate scenario. Although strong demand growth is an encouraging scenario for the domestic industry, rising imports has become key concern factor off‐late. On an average, 55% of the production is for replacement market, followed by 29.8% sold to OEMs directly and the remaining is exported.

1.2.                     Key Influencers

The level of economic activity, performance of domestic automotive industry, and the faring of the transport sector directly influence the performance of the tyre industry in India. With the replacement segment dominating the overall tyre demand, the industry remains inherently vulnerable to economic cycles. While radialisation has become the norm in the passenger car segment, in the bus and truck tyre segment, its acceptance is still limited. Bus and truck radialisation could emerge in the long term as the quality of roads improves and the restrictions on overloading are better enforced. The practice of re-treading, which is gaining increasing acceptance, could pose a challenge to replacement demand in the medium term. The ability of the re-treading sector to capture potential replacement demand would depend on the awareness among customers (of the benefits of retreading) and also the quality of retreading done. Given the low levels of penetration of two-wheelers and passenger cars in the country, OEM demand is likely to increase, which in turn would ush up replacement demand with a lag. Slowdown in automotive industry and global economy in general negatively impacted the Indian tyre industry in 2009. The industry tonnage growth was only 2.19% during first nine months of FY 2009, compared to 7.38% growth experienced during the same period last year. Demand side was also severely affected as almost all auto manufacturers were forced to adjust their production last year. A major relief for tyre manufacturers was provided by the government by reducing the excise duty on tyres from 14% to 10% in December 2008,

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