We have developed an 80% biodegradable tyre: JK Tyre CMD Singhania

Average selling price of tyres will 'slightly move up', he says in interview about where industry is headed

Production volume of the Rs 85000-crore Indian tyre industry is set to grow by 6-8 per cent in Financial Year 2023-24, helped by passenger and commercial vehicles. Apart from investing in capacity expansion, JK Tyre & Industries is focusing on research and development (R&D). RAGHUPATI SINGHANIA, chairman and managing director of the company, in a conversation with Sohini Das in Mumbai spoke about testing a biodegradable tyre. Edited excerpts.

We are at the end of 2023; what is the industry outlook for the next year?

There has been quite a sizable growth compared to last year; so the next year is also looking good for the tyre industry. I think the same traction will go on for the third quarter of this fiscal. Overall, a 10-12 percent growth for the industry is likely. Demand is good as auto markets are performing well. We are a derived demand sector, so we will tread the demand path of the auto sector – plus the usage factor of the customer.

How is demand for replacement tyres across segments?

The size of the automotive market has gone up. Tyre makers are making more durable, better tyres, and hence replacement cycles have come down slightly. Truck tyres now have much longer lives now as we have enhanced the product quality, giving customers much better value. If you look at the number of vehicles on the road, they have gone up sharply. Therefore, the overall replacement demand is growing. In the commercial vehicles segment, the share of sales to OEMs (original equipment manufacturers) is 65-70 per cent and around 30 per cent is for replacement demand. In passenger vehicles, the share of sales to OEMs versus replacement demand is almost 50:50. More people are driving cars on better roads. The auto sector and road sector movement is under a high-pitch change – driving habits, consumer habits and usage factors.

Commercial, passenger or two wheelers – which tyres are likely to do well in 2024?

Passenger car radials (PCR) will do well next year. Commercial vehicles are doing well because overall economic activity is good; but in terms of growth I expect PCR tyres to see traction next year. Even two wheeler tyres should buck up, which had mellowed down last year. The higher performer, however, will be PCR tyres. We are expecting 6-8 per cent volume growth in car tyres' growth. We are doing better than the industry growth rate for the last several quarters – so we may do 7-9 percent. Two-wheeler tyres went down because of affordability as well as rural demand going down. Now with a better crop, a little bit of money is coming back into the hands of the rural folk. Therefore, demand for two-wheeler tyres should come back. Here also the share of sales to OEMs and replacement demand is around 50:50

You have launched a Rs 500 crore QIP recently. Is this for your ongoing expansion project?

The funds will be utilised for growth, capital investment and general corporate purposes. The Rs 1,100-crore expansion plan will be completed by March 2024. We have been inching up our market share. Our board approved another Rs 1100-crore expansion recently, and this we aim to complete by March 2025. We are in the middle of placing orders for the expansion. Most of this capacity expansion is into PCR and some into light truck tyres. GDP (gross domestic product) growth outlook is positive, and the IMF (International Monetary Fund) projections are even more bullish. Macroeconomic factors are positive.

With premiumisation, has the average selling price of tyres gone up?

The average selling price of tyres will slightly move up. But the percentage of premium tyres in overall numbers is still not that high – maybe 25-30 per cent. So, the prices of tyres would depend on that product mix. We are offering premium tyres even in the truck segment – better fuel economy, higher mileage tyres. We are commanding a better price there.

Can you tell us about some new product developments you have done?

In the five to seven years we have pumped in Rs 600 crore into R&D for product development, future development and material sciences. We have developed a green tyre which is 80 percent biodegradable. It is not a concept tyre, but a working model. It has already done 35,000 kms on the road, and we are evaluating it more in pilots. This is a car tyre. Lot of work is still to be done, we have to evaluate it in the marketplace for some more time. For such tyres a market has to be created, and we have to use more sustainable material in our day to day use. Tyres are essentially petroleum product based – almost 70 percent of the raw materials are oil based. Therefore, developing an 80 percent biodegradable tyre is very relevant.

Any major discussions the tyre industry is having with the government?

Today what is important is life-time management of tyres. The industry has to take care of scrap disposal and the end of its life cycle. This is an important discussion that the industry is having with the government. The duty drawback scheme was withdrawn. We are pleading that there should be a return of the embedded duty.

Chinese tyre imports have come down over the years, and we should be careful about not letting cheaper imports be dumped here. We are also exporting to several countries. The EU and US are very big export markets for tyres. Exports will keep on increasing bit by bit.