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Despite a deep shrink in the sales of original equipment manufacturer (OEM), the replacement demand has kept the tyre market afloat in the first nine months of the last financial year. And the trend is likely to continue in future as well, experts forecast.
Data compiled by the Automobile Tyre Manufacturers Association (ATMA) showed that the replacement demand of tyre grew by 10 in unit terms while in tonnage term, the same recorded a strong growth of 27% on y-o-y basis in the first nine-months of the financial year 2012-13.
In tonnage term, the replacement demand of all types of tyre was recorded at 0.78 million tonne between April – December period of FY 2013 as compared to 0.60 million tonne in the corresponding period last year. In unit terms, however, tyre’s replacement demand was witnessed at around 45 million units as compared to around 41 million units in the same period last year.
The OEM demand of tyre industry that has been growing at a healthy pace during FY10-FY12 period, hit a roadblock in FY13.
Challenging economic scenario and steep hike in fuel prices during FY13 augmented the overall cost of ownership that led to subdued demand in the automobile industry, straining the OEM demand. In unit terms, the OEM demand witnessed a drop of around 2%. While in tonnage terms, the drop has been much sharper at around 7% during April- December FY13 period indicating sharp drop in the demand for higher tonnage tyres.
A Care Ratings report suggests the OEM demand at around 350 tonne in April – December 2013 period as compared to around 385 tonne in the same period last year. Similarly, OEM offtake also reported a decline from around 42 million units to 41 million units.
A sharp drop was observed in sales of higher tonnage trucks and busses (T&B) tyres has considerably pulled down the OEM demand especially in tonnage terms during April-December FY13 period.
Over the last one decade the automobile industry has gone through various structural changes that has driven automobile sales and in turn OEM demand for tyre industry. The emergence of small commercial vehicles (SCV’s), growing demand of mid size cars and premium hatchback cars, recent emergence of small utility vehicles, growing popularity of gearless scooters are some of the key structural changes that triggered growth in their respective segments. On the other hand, growth in the replacement demand has been propelled by healthy rise in automobile sales during last 8-10 years barring FY08 and FY09 that has led to considerable increase in population of vehicles on road.
