A study on the Indian Tyre Industry

1. THE TYRE MANUFACTURING INDUSTRY

2. INTRODUCTION Faces huge competition, cost and price pressure. The zooming auto industry has driven the growth. The number of vehicles is swelling. The truck and bus market is the largest segment in terms of value.

3. Economic expansion and road development has made a contribution. eg. The golden quadrilateral and the NSEW Corridor project. Though the volumes have increased the profitability has gone down due to the increase in raw material cost.

4. Five forces model

5. A 2 tier Industry Tier 1 players Present in all three segment - 1)Replacement market 2)Original equipment manufacture(OEMs) 3)Export Tier 2 player

6. Key Players

7. Major Sales Segment

8. Intensity of Rivalry : High The tyre industry in India is fairly concentrated, with the top 5 companies accounting for more than 80% of the total production of tyres.

9. BARGAINING POWER OF SUPPLIERS - High

11. Number of Suppliers – Low Availability/ acceptability of raw material substitutes – Low Switching costs – High Threat of forward integration – High Tyre industry not the key customer

12. Demand for Tyres

13. Bargaining Power of Buyers OEM’s High In Replacement Market Moderate Switching Cost Low Threats of Backward Integration Low

14. THREAT OF POTENTIAL ENTRANTS LOW, due to HIGH ENTRY BARRIERS

15. ENTRY BARRIERS Highly capital intensive industry Rs4bn for radial tyre plant with a capacity of 1.5mn tyres Rs1.5-2bn for a crossply tyre plant of a capacity to manufacture 1.5mn tyres High raw material costs

16. Shortage of raw material Force of rivalry High risk

17. THREAT OF SUBSTITUTES Low, but increasing Import of tyres ISI mark made compulsory

18. Porter’s Model Entry High returns BarrierHigh risks High Low HighLowExit Barrier