6 reasons why Chinese Tyre companies are finding it easy in the Indian TBR tyre market.
Each stake holder in the Indian Tyre market has been taken by surprise with the Indian TBR market exploding beyond its seams. The TBR tyre segment was just 2% of the truck & bus tyre market about 4 years ago & presently its share stands at 45%. While conversing with an Indian tyre company official it was revealed that Chinese tyre imports surged from an average of 40,000 tyres per month in March, 2015 to 1, 40,000 tyres per month in September 2015. Just to make it easier for you to comprehend the numbers: 1, 40,000 tyres is also the approximate capacity of Apollo’s new & largest plant in Chennai. Needless to say instead of Indian tyre companies, it’s the Chinese tyre makers which are making merry. How & why? Let’s have a look through these quick 6 pointers:
Indian tyre companies were betting on TBB: For reasons best known to them, Indian tyre companies felt that although the entire world has moved to TBR, Indian market will remain a TBB market for years to come. They were perhaps banking on Indian roads remaining in poor condition & overloading to be in Indian truckers DNA forever. These are the very conditions where TBB scores well over TBR tyres. However, some unexpected but firm political & official decision making led to an accelerated change in consumer preferences. When the Chinese came knocking with TBR tyres in their arsenal, they found Indian Tyre companies looking the other way & Indians practically gave walkover to their neighboring competitors.
Not enough TBR capacities in India: Just couple of years ago when TBR constituted only 2% of the Indian truck & bus tyre market every tyre company was trying to address the 98% of the market that is TBB market. The capacity expansions also came in TBB segment which now, in hindsight looks very bad strategic call. Although Indian Tyre companies now have some TBR capacities, but as it seems now, it’s not enough to take care of surge in India’s appetite for TBR tyres. When the demand came there were simply no capacities in India. Chinese stepped in to fill the vacuum.
Anti-Dumping duty not coming through: Indian Tyre companies were banking on Indian Government imposing anti – dumping duty on TBR tyre imports. However with historically high share prices & great looking balance sheets they simply could not present a believable case to the Indian authorities resulting in no anti – dumping duty on Chinese tyres. This opened the floodgates for the Chinese to enter.
BIS certification – Not so difficult after all: When it was launched BIS certification was seen to be a huge non-tariff barrier. Everyone felt that BIS, which is responsible for the certification will be slow & cumbersome process. However, as it turned out BIS men were not in any way slouch. Mushrooming of consultants made it easier for the overseas tyre companies to apply & get the certification. Chinese tyre companies were quick to learn, understand, respond & now, many of them have BIS certifications. To make it easier for them, unlike PCR – TBR tyre segment does not have too many size options.
Price gap between TBB and TBR tyres: With surging sales but limited supplies, Indian tyre companies priced their TBR tyres to about 50% premium to TBB tyres. However, the fact remains that the manufacturing costs especially the variable costs between the two kinds of tyres is not much. One cannot fault Indian tyre companies for that. If there is a mismatch in demand & supply any company will do that. However the Chinese were quick to spot this gap and priced their products accordingly. Currently in Indian tyre retail market Chinese TBR tyres are priced at similar levels as Indian TBB tyres. Not surprisingly fleet owners instead of going for Indian Bias tyres started replacing the same with Chinese TBR tyres.
Chinese quality not that bad: We at Tyre Times have been talking on this subject to the Indian fleet owners to make sense of this Chinese invasion. The Indian fleet owners are still reserving their verdict but the common refrain is that Chinese TBR tyres in terms of quality are “not that bad”. They have no major reasons to complain. This does not come as a surprise. Tyre technology has become a commodity & Chinese tyre companies have been sourcing their technology from the very same consultants who are hired by the Indian companies too. On the other hand Chinese have been exporting to a spectrum of markets like Africa, UAE, USA, Europe & South East Asia for a while now. They been able to learn, evolve & perfect their offerings. However, for Indian Tyre companies TBR is a still a new phenomenon & they are perhaps in their learning phase. It’s clearly a race against time for them.
One thing is clear, moving ahead Indian TBR market will keep on growing at the expense of TBB segment. Indian Tyre companies have to focus on expeditious expansion of their TBR capacities. Unfortunately, their TBB capacities cannot be converted into the TBR & the expansions have to start practically from scratch. Further it’s also important that Indian Tyre companies have a relook into their pricing strategy which gives an incentive to fleet owners to look at Chinese tyres as an attractive option.