BUSINESS
Global tyre majors are delaying their expansion plans in India due to the prolonged slowdown in the domestic tyre business.
Global majors such as Michelin, Bridgestone, Continental and Yokohama had big India expansion plans that were expected to materialise and give tough competition to domestic players.
But, according to sources, some of these companies have slowed their expansion due to the current slowdown.
The industry, which has been seeing slow growth for almost two years, is not expected to revive this year, too, as demand continues to remain sluggish.
Weak demand in the automobile industry and slow replacement demand have impacted the overall growth of the tyre industry.
According to the Automotive Tyre Manufactures’ Association (ATMA), the tyre industry was almost flat last year. Within the tyre industry, the commercial vehicles segment grew just 5% last fiscal, passenger cars segment 6-7% and the two-wheeler segment remained flat.
“This year will be better than last year. But we don’t expect any major growth happening in this fiscal,” said an industry expert.
That could be because players such as French tyre-maker Michelin, which was expected to start its factory in early 2013, have delayed ongoing projects and planned expansions.
“There is still no clarity yet (on Michelin). The Japanese company Yokohama has just started work on building its plant after repeated notices from the Haryana authorities,” said a source aware of the developments. Yokohama had bought the plot in Haryana in 2008.
Michelin did not provide comments. But Bridgestone and Continental said their plans in India are on track.
“With the current market situation, the companies are redrawing their plans, which does not mean that they are withdrawing or cancelling their plans. A delay of 1-2 years should not make a major difference,” said Ajay Sevekari, director, Bridgestone.
Put together, planned additional production of Michelin, Continental and Bridgestone, whenever it materialises, would be to the tune of 8,000-10,000 truck/ bus radials and 15,000-20,000 passenger car/ SUV tyres per day.
“Some of the companies are going to delay to the extent possible. They may not shelve it, but may wait and watch the market. Nobody has confidence right now,” said a source.
On the other hand, to offset the slowdown in the domestic market, most Indian tyre manufacturers are going global through expansions or acquisitions.
Last week, Apollo Tyres announced acquistion of the US-based Cooper Tire for Rs 14,500 crore.
The deal is expected to give Apollo access to developed markets like the US and Europe as well as emerging markets like China.
Ceat Tyres, too, is setting up a tyre manufacturing facility in Bangladesh.
“Looking at the domestic market situation, the companies would be spurred to look at growth through acquisitions and global expansions,” said an expert.
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