Company Description: The
Automotive Tyre Manufacturers’ Association (ATMA), based in New Delhi, is a
representative body of ten large tyre companies in India accounting for over
90pc of tyre production. ATMA works towards promoting and safeguarding the
interests of the tyre industry in India primarily by acting as a conduit
between the government and the industry. The association strives to be an
active participant in policy making process and holds frequent meetings with
the government departments to discuss the challenges being faced by the
industry in the ever-changing economic environment. The association acts as the
industry’s interface with the media, opinion leaders, NGOs and other industry
associations around the world so as to present the perspective of Indian tyre
industry on different issues.
What are the current capacities in the Indian tyre
industry and the utilisation levels at this moment? Are any further investments
expected? And by 2020 what would be its total size?
The
current utilisation, in terms of percentage, is anywhere between 85-90pc. But
in the overall scenarios, it is 80-85pc utilisation. In terms of production, we
have done about 1,250 lakh tyres during FY-2011-12. In the last three years,
there has been a major capacity addition in the tyre industry in India. Never
before in the history of the tyre industry in India have we seen such kind of
investments taking place. For the last three years, we have witnessed investments
worth 18,000-20,000 crore. By 2013-end, we could be seeing a major block of
investments having come into this period. Once that utilisation level takes
place, then probably with a lag effect of 5-7 years by say 2020, we can have a
fresh set of investments happening.
While foreign brands like Michelin, Yokohama,
Bridgestone, et al are making big ticket investments in India, domestic players
Apollo, JK Tyres, etc have foreign tie-ups and acquisitions? Does it mean that
the Indian firms have arrived in terms of technology?
Yes,
of course. I think in the present context, to assume that any company is going
to be lagging behind on technology or product innovation is not believable. So
each player wants to be going global today.
With the shrinking of the tariffs with the greater exchange of trade
between the countries, it is very important that the tyre industry assumes
almost a global stature of its own. That is the reason the leading Indian tyre
players want to have a global footprint. Since India is one of the fastest
growing markets after China both for automobiles and tyres, it is imperative
for overseas firms to have a manufacturing presence in India.
As there would be new OEMs coming in like PSA
Peugeot Citroen, John-Deere-Ashok Leyland, Scania AB, KTM, Datsun, Triumph,
Lexus etc, can the industry expect enhanced business opportunities?
Yes,
in fact that is the reason practically all the large Indian tyre majors have
gone in for expansion because they have realised that India is going to be a
manufacturing hub for automobiles because of the inherent competitive
advantages that India would continue to enjoy. So I think that each company is
looking at a bigger picture. And the bigger picture is over the next 10-20
years. So there will definitely be more and more global automotive players
serviced by Indian tyre firms.
Will there be more overseas acquisitions by Indian
players in the next few years? What are the primary reasons?
As
you can appreciate, tyre manufacturing is actually shifting from the West to
the East. That is a trend that is happening. So in this kind of a shift, some
of the Indian tyre companies are looking at inorganic growth by way of these
global acquisitions also. So yes, it is quite possible and probable that Indian
companies would be reaching outside the boundaries of India for tyre plants
outside.
How important has the LCV industry turned out for
tyremakers? And is it witnessing unprecedented growth?
Yes,
to answer to your second part of the question first. It is witnessing unprecedented
growth. But one has to realise that the LCV is not the conventional segment as
it used to be earlier. That is also now breaking into two distinct segments of
which one is the small LCV segment which comprises light trucks of upto 1
tonne. And then there is the conventional LCVs which consists of products in
the range of one to seven-and-a-half tonnes. It is the lower tonnage which is
experiencing unprecedented growth.
Is there a trend towards buying rubber plantations
by Indian tyre making companies, something of backward integration of sorts?
Yes,
there is such a trend happening. First of all, we have to appreciate that there
is currently a demand-supply gap between domestic production and consumption of
rubber. This gap is only going to grow in the future. And if tyre companies are
setting up new capacities, it is important for them to also procure raw
materials. And one possible way is by backward integration Indian tyre
companies would like to secure the raw material supplies for their future production
requirements.
It’s a known fact that a number of Chinese
tyremaking companies are dumping tyres in the country? Is ATMA lobbying with
the government to keep a check on it?
Dumping is an unfair trade practice. We have to appreciate
that anything which is unfair needs to be brought to the attention of the
government. ATMA, as an industry body, would like the government to be abreast
of all the trends which are happening in the industry. Particularly, if there
are any such unfair practices or inconsistencies or anomalies both from the
domestic and trade fronts. So yes, we do bring such instances to the attention
of the government. We also take effective steps under the overall ambit of the
law, which is to go for anti-dumping measures as they are prescribed under the
law.
How much, in terms of percentage, is the Indian CV
industry radialised? And what are your projections for the same in the next few
years?
Radialisation
has gathered momentum, particularly in the last three years with the coming up
of these investments and capacities that I had just mentioned about. And that
is the reason we have seen a quantum jump in radialisation from 4pc to around
17-18pc (in the CV industry). Going forward, over the next two-three years,
radialistaion could be seen at almost 25pc (of the total CV industry). So again once it reaches 25pc, there will be
another faster acceleration of 40-45pc after which it will again level off.
Does ATMA support Free Trade Agreement (FTA) with
Europe and other nations?
We
are in favour of free trade agreements with other nations provided they are on
an equal level playing field. It should be both for raw material and finished
products. But you cannot call it a fair treatment if your access to raw
material is not allowed. In other words, if India is allowing import of tyres
into the country at a cheaper tariff under some concessional trade agreement,
we would also like access to raw materials at a cheaper rate. But
unfortunately, it has not happened in the case of our raw materials. For
instance, for ASEAN, which is a very major trade bloc, rubber is one product
which is not been allowed for import at a concessional rate. In fact, the three
major rubber producing countries like Thailand, Indonesia, and Malaysia are all
in the ASEAN region. And these countries are not allowed to export rubber to
India at concessional rates. While raw materials are not being allowed into
India despite domestic shortage in the country, it would be unfair on the part
of the government to allow overseas players access to Indian market for our
finished product i.e. tyres.
With fuel prices rising sharply, does it mean a
double blow for the industry?
A fuel price
increase is a serious matter of concern for the tyre industry. This is because
the fuel is the single largest operational cost for a transporter followed by
tyres. So you can imagine that if the fuel cost is moving up, it immediately
impacts the second rung of the expenditure i.e. on tyres. It only defers the
purchase of a tyre because a truck has to run and the fuel has to be filled in.
So a consumer can only postpone the buying of the tyre by a month or two. To
that extent, it leads to a deferred demand. He would like to use the tyres to
its last mile. He would not change unless it is absolutely essential. Because
of increased fuel expenditure, a trucker might end up buying retreaded tyres
instead of a new tyre. And as you know, a number of raw materials like
synthetic rubber, butyl rubber, styrene-Butadien Rubber (SBR), Polybutadienc
Rubber (PBR), carbon black, etc are derivates of crude oil in one way or the
other. And yes, if crude oil or fuel prices going up, the raw material chain of
the tyre industry gets impacted. So we take a dent on both the sides i.e. tyre
side as a finished product as well on our raw materials.
What is the current turnover of the tyre industry
in India? And going forward, what are your projections for the same?
The Indian tyre industry has reached a level of 42,000
crore. So going forward, you could see this touching about 50-55,000 crore over
the next two years. Out of the total revenue, exports will account for around
10pc. So out of 42,000 crore turnover, around 4,200 crore is contributed by
exports.