Indian tyre industry is expected to post robust growth figures over the next few years, spurred by the growing passenger vehicle, scooter and utility vehicle segments of the automotive industry. With already 12 global players churning out 140 lakh units per annum, it has emerged as one of the most competitive markets in the world and with the emergence of new technology, ultra-modern production facilities and availability of raw materials, the sector is poised to grow further.
BW Businessworld's Avishek Banerjee interacts with Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association (ATMA), who stated that India is poised to figure among the top 5 tyremaking nations in the world.
Edited excerpts:
What has been the performance of the Indian tyre industry and what your projections for this year?
It is been a mixed bag as far as the performance of the tyre industry in the past fiscal is concerned. In the CV segment, the growth has been lukewarm and not up to the expected levels mainly due to the slowdown in the OE segment. The replacement market has not come up to the expected levels because of many uncertainties and policy changes (by the government) during the course of the year. But if we see the PV segment, there the growth has been in double digits.
Two-wheeler segment, especially motorcycles, has not been performing the way it is doing earlier. While Tractor segment saw a double digit, OTR segment has been on the negative side. The tyre industry is directly dependent on the state of the country’s economic growth and GDP. We hope that the second half of this fiscal would be a better than last year because motorcycle and commercial segments would be witnessing an upturn in volumes.
Has there been any positive or negative impact on the industry post demonetisation?
We are supportive of any government policy which is progressive, forward-looking and is in the larger interest of the nation. The retail sales got impacted as the majority of sales are happening through cash transactions. What happened in our favour was that some imports from Chinese companies by small-time traders inadvertently dropped.
Moreover, the government was also losing revenue as these unorganised traders and importers were not paying their legitimate taxes and duties. So demonetisation has its upsides and downsides.
Are you now taking up the issue of cheap Chinese imports with the government? And has there been any progress on tackling the inverted duty structure?
We have filed the petition and considerable progress is being made on this front. The oral hearing on the imposition of anti-dumping duty has also been completed. We are now awaiting the findings that will be announced by the Directorate General of Anti Dumping and Allied Duties) at the earliest. We do hope that anti dumping duty is imposed on cheap Chinese tyre imports pretty soon.
The tyre industry has been a classic case of inverted duty structure where the duty on the principle raw material i.e. natural rubber is 25 per cent and the duty on the finish products i.e. tyres is 10 per cent. Furthermore, natural rubber’s imports are imperative since it is in short supply in the domestic market. So I think a prudent government policy is to encourage value addition in the country by giving access to raw material or intermediates at low rates of duty and keep the duty levels higher for the finished products. We were hoping that this is rectified in the current budget but it didn’t happen. The industry is concerned as well as disappointed that the long impending duty inversion anomaly for the tyre industry is not getting addressed on a priority basis.
What is the size of the Indian tyre industry and what are your projections by 2020?
The Indian tyre industry is somewhat flattish over the last three years for various reasons. Overall, the industry topline has been pegged at approximately Rs. 55,000 crore. By 2020, the topline would be worth over Rs. 60,000 crore. Around 140 lakh tyres are produced per month out of which nearly 15 per cent is for the export markets.
Just like auto component firms, do you see additional revenue streams from defence and aerospace sectors which have opened up for private participation?
Yes, very much so. For instance, one of our member companies has recently started manufacturing tyres for Sukhoi fighter jets. Until now, these tyres were imported into the country. We feel that going forward that both defence and aerospace industries will offer significant opportunities for the domestic tyre industry.
What is India’s rank in the global pecking order of leading tyre-making nations?
As of now, at least 4 of the homegrown firms figures among the top 30 global tyre companies. Furthermore, the axis of tyre production is shifting from developed markets to emerging ones like India, China, etc. Asia is going to be playing an increasingly dominant role as the global tyre producers in the world.
Nearly Rs 36,000 crore has been invested by various ATMA members to either set up Greenfield facilities or expand the existing ones for capacity expansion. India will also find its right place in the pecking order because we have a long and deep rooted history of tyre manufacturing dating back to the 50s era. Going forward, India will definitely be among the top 5 nations of tyre production.
BW Reporters
The author is a Principal Correspondent at BW Businessworld.
