Industry Specific Risk of Tyre Industry In India

Industry Specific Risks – 

  • Directly depended upon OEMs (Automobile industry) for growth, which is cyclicality in nature
  • Input price rise may strain industry’s profitability. Majorly natural rubber is imported from other countries because of less production in India. Tyre industry consumes 65-70% of the natural rubber produced in the country. However, import of natural rubber in India attracts 25% duty which is highest in the world. Higher import duties will hurt the margins of tyre manufacturers as they will be left with no option other than importing natural rubber in case of a deficit in production.
  • Raw material availability as Indian Rubber production is inferior to their demand
  • More than 60% both replacement & OEM wise is contributed by commercial vehicle, so any bad effect to CVs will directly affect tyre industry
  • Price competitiveness from Imported tyres
  • Intense competition in the industry (also from global brands like Michelin, Bridgestone, continental etc.)
  • Homogenous product & Pricing power more or less at the same levels
  • Majority of these tyre imports are radials and most of these are imported from China, Thailand and Vietnam, among others. These imports have been a threat to the domestic tyre industry as imported radials are significantly cheaper and are available at the price of domestically manufactured bias tyres. However, over the last 3 years, increased customs duty on tyres, levy of additional dumping duty on tyres and implementation of GST have reduced the price gap between imported and domestically manufactured tyres. (Currently, import of tyres are restricted)
  • Introduction of other transport facilities like metro, monorails and local trains keeping pollution hazards caused by automobile fuels

                                                                              Source – ZebraResearch

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