Automotive Retreading co.

Tyre makers import due to local shortage of natural rubber

ndian tyre manufacturers are being forced to import rubber as the local availability of natural rubber has decreased and prices have soared. With the heavy rains and strong winds that come in the monsoon season to the verdant state of Kerala in South India, the main centre for rubber production, tapping is obstructed and many rubber plantations suffer serious damage such as uprooted trees and demolished rain guards. In July this year, the rains led to a 32.4% drop in the production of natural rubber. Compared with July last year, which had an output of 68,000 tonnes, this July the production weighed in at only 46,000 tonnes. The scenario was even worse in June with 36,000 tonnes – a 47% drop.

The tyre industry consumes nearly 65% of India’s natural rubber. But with domestic shortage and prices rising to more than 26% of international prices, manufacturers have been forced to import rubber to meet demands. The spiralling prices can easily be attributed to the fall in production which translates into a shortage of supply. This went against the worldwide trend by which rubber prices have fallen. Business Line quoted Niraj Thakkar, President of All-India Rubber Industries Association, as saying, “This kind of supply crunch, when internationally rubber prices are falling, has not been witnessed for a long time. We understand from the trade that due to the daily escalating prices, growers are possibly holding the stocks, leading to non-availability and further increase in prices.”

The tyre industry is apprehensive about its prospects in 2013 as the growth of the domestic automobile industry has steadily declined. Satish Sharma, Chief of India Operations, Apollo Tyres, said, "The sluggishness in the automotive segment is a concern for us. However, there is demand for our products in the replacement and export markets. As a strategy, our production is tuned to the market requirements." People in the tyre industry believe that the government will provide respite in the form of incentives. "It could be in the form of excise duty benefits or more directly for the replacement of decade-old vehicles with new ones offering more fuel efficiency and safety," said Rajiv BudhIraja, Director General of Automotive Tyre Manufacturers' Association.

Perhaps, this is not the best time for foreign companies to expand their operations. As Budhiraja says, “The industry faces a potential oversupply situation in the short term if the much-needed economic recovery is delayed. The investments being made have not factored in a prolonged slowdown.” Foreign or Indian, tyre companies are currently caught in a sluggish situation as far as growth is concerned, and with foreign investment slowing down, the situation is especially serious for the Indian market.

TVS – Myers Tire joint venture for ‘premium’ repair products

The tyre repair industry in India is largely unorganised; small service centres and sometimes even roadside kiosks undertake the job of repairing and sometimes retreading tyres. Vendors are largely unaware of the new developments in the tyre industry and are not equipped with the latest tools to perform long lasting repairs. Besides reducing the lifespan of tyres, such repairs also pose a potential safety risk, as they increase the possibility of breakdowns and accidents. With the entry of international car-makers into the Indian markets, Indian consumers are becoming more conscious of the importance of vehicle maintenance and upkeep. Consumers are becoming reluctant to entrust the small vendors with their vehicles, and instead opt to go to manufacturers’ service centres. The market for tyre repair and retreading is potentially a large one and remains relatively untapped.

TVS Automobile Solutions is the first Indian company to have taken steps to establish itself in the field of tyre repair and retreading. MyTVS, which is a subsidiary of Chennai based company TVS Automobiles, provides car servicing and repairs for all brands at reasonable prices all over India. It has formed a partnership with Myers Tire Supply International Inc., a US company. Myers Tire Supply International Inc., which is headquartered in Ohio specialises in repair tools for tyres, tubes and accessories, and is a frontrunner in the tyre repair business. While TVS Automobile Solutions has a 65% stake in this partnership, Myers holds a 35% share.

Through this partnership, TVS aims to gain first mover advantage in the tyre repair segment. Mr. Sanjay Nigam President and CEO of TVS Automobile solutions declared that, “The tie-up with Myers will bring in global best practices in the after-market tyre service business through its equipment and consumables. The repair quality of the tyre has to be of some standard for people’s safety besides improved life of the tyre”. The joint venture will benefit both companies, as it will introduce the product range of Myers in India, while enabling the promotion of tools and equipment manufactured by TVS. TVS will be the only company offering a comprehensive range of services in the post-sales auto sector and Myers will gain a foothold in the Asian markets, benefiting from the large established network of TVS Automobile Solutions.