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Having reached the 80 per cent capacity utilisation mark, tyremakers are planning to invest Rs 35,000 crore in greenfield and brownfield projects to expand capacity. The manufacturers also anticipate double-digit growth from FY19 — against single-digit growth this year — driven by domestic and export demand.
During the same time last year, the capacity utilisation of the tyre industry was 65-70 per cent.
It is not only growth in the automobile industry that has helped the tyre segment. Growth has been aided by government policies also, said Satish Sharma, chairman, Automotive Tyre Manufacturers’ Association (ATMA), which claims to represent about 90 per cent of tyremakers.
Providing a few examples of how the industry had benefited from policies, Sharma said demonetisation had curtailed Chinese imports (a major challenge for capacity utilisation). The goods and services tax (GST) put even more pressure on Chinese imports, which have dropped by 50 per cent.
The government had announced the withdrawal of high-value currency notes on November 8 last year. The GST was rolled out on July 1 this year.
In 2016, China had exported 150,000 tyres a month to India. The number has now fallen to 60,000.
The number is likely to go down further, said Sharma, as Indian tyres would be competitively priced against Chinese ones.
The tyre industry invested about Rs 25,000 crore between FY11 and FY16, said Sharma, also president, Asia Pacific, Middle East and Africa, Apollo Tyres.
His company plans to invest about Rs 4,500 crore during the next two fiscal years. CEAT plans to invest about Rs 5,000 crore in Chennai, and MRF plans to invest Rs 800-1,000 crore every year, besides opening a Rs 4,000-crore facility in Gujarat.
Sharma said he expected the second half of FY18 to be better than the first for the industry. “Even second-rung tyre firms have reported good volume growth,” he said, adding the industry would close the year with high single-digit growth.
Kaushik Dutta, director, Thought Arbitrage, which does research works for the ATMA, expects between 2015 and 2026, the industry’s total turnover would grow by nearly four times. This will be led by both domestic and export markets.
According to Rajiv Budhraja, director-general, ATMA, in value terms, tyre exports for the first six months of 2017-18 rose by 13 per cent to $1,620.96 million. The corresponding growth last year was 7 per cent.
He said he expected in the coming years, growth would even touch around 20 per cent.
Besides Saarc, West Asia, and Asean countries, the tyre industry was betting big on Africa, currently dominated by the Chinese players. “We are second to them in terms of pricing, but our advantage is quality and technology,” said Budhraja. He added the industry needed to get into Africa and other countries. This would need support from the government.