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Managing a Business/Automobile tires manufacturing business.


Dear Leo

Can you consider Automobile tire manufacturing business as a good startup venture?.

How much initial capital investment may be required for this business?.



I  will send  the balance  asap.

The scope  / demand  is  there.
The initial  investment  could  be  rs  300 crores
The major factors affecting the demand for tyres include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, radialization, retreading and exports.

Tyre Industry in India
Technology generation in the Indian tyre industry has witnessed a fair amount of expertise and versatility to absorb, adapt and modify international technology to suit Indian conditions. This is reflected in the swift technology progression from cotton (reinforcement) carcass to high-performance radial tyres in a span of four decades. Globalization has led to the linking of the economies of all the nations and therefore major Indian players in the tyre industry are pursuing global strategies to enhance their competitiveness in world markets.  The present section broadly undertakes an overview of the Indian tyre industry through an examination of its growth trends with respect to production, exports and acquisition of technological capabilities.

Key Features
•   At present there are 40 listed companies in the tyre sector in India.
•   Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industriesand Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop,Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some of the other significant players in the industry.
•   While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres.
•   The industry is a major consumer of the domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the material content in Indian tyres. Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres is 30:70
•   The sector is raw-material intensive, with raw material accounting for 70% of the total costs of production
•   Total production figures in tonnage: 11.35 lakh MT & total production of tyres in all categories: 811 lakh (2007-08)
•   Current level of radialization includes 95% for all passenger car tyres, 12% for light commercial vehicles and 3% for heavy vehicles (truck and bus)
•   Restrictions were placed on import of used /retreaded tyres since April 2006
•   Import of new tyres & tubes is freely allowed, except for radial tyres in the truck/bus segment which has been placed in the restricted list since November 2008
•   Total value of  tyre exports form India is approximately Rs 3000 crore (2007-08)

The major factors affecting the demand for tyres include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, radialization, retreading and exports.

Evolutionary Phases of Tyre manufacturing in India

Table 1: Evolutionary phases of the Tyre industry in India
Phase   Period   Characteristics   Policy Regime
Phase I   1920-35   No domestic production. Demand met through imports. Key players included Dunlop (U.K), Firestone & Goodyear (USA)   Liberal imports
Phase II   1936-60   Domestic production begins by erstwhile trading companies: Dunlop, Firestone, Goodyear and India Tyre & Rubber Company   Imposition of tariff & non-tariff barriers on imports
Phase III   1961-74   Indian companies-MRF, Premier & Incheck- enter manufacturing sector with foreign technology; licensing of additional production capacity   Regulation on capacity expansion and repatriation of  profits of foreign companies; enforcement of export obligation on MNC; protection from external competition
Phase IV   1975-91   Entry of large Indian business houses like Singhania & Modi & technical collaborations with MNCs, introduction of radial tyres, vertical integration and exponential growth in tyre production & exports   Delicensing of production, placing of imports under OGL with tariff & non-tariff barriers
Phase V   1992 onwards   External trade liberalization & reduction in import duty; re-entry of MNCs either independently or in collaboration with Indian capital   Progressive reduction in import duty; liberalized imports


Fig 1: Category-wise tyre production in India for 2007-08 & 2008-09 with percentage of change
Figure 1 displays production figures for different categories of tyres in the year 2007-08 and 2008-09 (April-September). It shows a relatively significant increase in percentage of production of tyres in the segments related to passenger cars, tractors, light commercial vehicles and motorcycles. On the other hand, production of tyres for scooters and mopeds declined by nearly 8 per cent.


Fig 2: Segment-wise exports in different categories for the year 2007-08 & 2008-09

Figure 2 shows the tyre export figures in different categories for the year 2007-08 and 2008-09. The figure shows a significant decline in exports in the truck and bus, tractor, ADV and industrial tyre categories. On the other hand, the figure shows a significant increase in exports in the tyre categories of jeeps and trailers.


Fig 3: Supply of key tyre categories to various segments like replacement market, original equipment market (vehicle manufacturers) and export market for the year 2007-08

Tyre supplies are targeted and marketed primarily to the following categories: Replacement market, Original Equipment Manufacturers’, Export, Government Supplies and State Transport Undertakings. The replacement market is significant for manufacturers of tyres in the category of motor cycles, scooters/mopeds and tractors, while the OEM segment is significant for the category of passenger cars and jeeps.

Acquisition of Technological capabilities
Radialisation has been a significant dimension in the acquisition of technological capability in the Indian tyre industry. The degree of radialisation is a clear indicator of the status of road development, vehicle engineering and the economy in general. Inspite of some constraints and limitations, the tyre companies in India have kept pace with the technological improvements that radialisation signifies and offered state-of-the-art products, comparable to the best in the world. Radialisation is linked to factors such as road development, overload control and retreading infrastructure. Some of the advantages of radialisation are additional mileage, fuel saving and improved driving. However, attempts towards radialisation have not taken off at the expected pace due to factors like lack of suitability of Indian roads for plying of radial tyres, older vehicles not possessing suitable geometry in terms of fitment, unwillingness of the Indian consumer to pay higher prices for radial tyres etc. Nevertheless, the scenario is radically different for the passenger car tyre segment, where radialisation has crossed 95%. In the medium and heavy commercial vehicle segment, the level of radialisation is comparatively poor, i.e. merely 4% and in the LCV segment; it is 15%.

Technology generation
Technology generation in the Indian tyre industry is essentially geared to development research, involving the change of tread design, reinforcement material etc. Most of the major players do not engage in basic research due to the high costs involved. The source of technology for the domestic firms has been through reverse engineering, joint ventures and collaborations.
The emphasis given by Indian tyre companies to applied research and the setting up of well-equipped in-house R&D centers by the companies, which are manned by experts and experienced professionals, have also helped in technology upgradation. Indian tyre technology has exhibited versatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs. R&D is essentially business or market driven. However, raw material suppliers could also help in conceiving new projects. Compound development and in-process problems have been the main thrust of in-house R&D in the Indian tyre industry.

Fig 4: Comparison of R&D Expenditure, Exports, Sales & Raw Materials Expenditure among all companies for the period from 2000-07
Note: The primary vertical axis depicts expenditure on R&D (at current prices) in Rs (crores), while the secondary vertical axis depicts the percentage of exports and raw material expenses in relation to sales.

A significant proportion of R&D effort in the tyre sector is carried out by four or five top companies. The proportion of raw material expenditure in relation to sales has witnessed a sharp spurt in 2007. The proportion of exports to total sales continues to be negligible in the tyre sector and a major portion of the sales revenue is garnered through the domestic market.

Expenditure on Imported Technology and R&D Intensity: Comparison between Top Ten Firms and All Other Companies in the Tyre industry

Fig 5: Comparison of expenditure on imported technology (at current prices) and R&D intensity among top ten players and all remaining firms (sectoral aggregate) in the Indian tyre sector.
Note: The primary vertical axis depicts expenditure on imported technology (at current prices) in Rs (crores), while the secondary vertical axis depicts R&D intensity (in percentages).

Tyre technology upgradation is an extremely difficult process, particularly in the Indian scenario, due to several factors. First, since tyre technology encompasses various disciplines such as polymer, chemical, steel etc. compromises have to be made in the upgradation of technology because of a) the conflict and complimentarity inherent in these disciplines, b) the usage pattern of the tyres and c) the cost factor. Further, a tyre’s performance could be affected due to factors such as the weather, loading pattern etc. Despite these bottlenecks technology upgradation in Indian tyre industry during the last few decades has been significant. This has been possible to some extent due to government approvals of collaborations with MNCs in this sector. The emphasis given by Indian tyre companies to applied research, the setting up of well-equipped in house R&D centres by large tyre companies, manned by experts and experienced professionals have also helped in technology upgradation. Indian tyre technology has exhibited versatility in maintaining inflow of technology through foreign collaborations and tailoring the same to Indian needs.

Tyre production traditionally, is multi-stage, with significant inter-stage differences in the intensity of labour requirement, and a highly complex process involving the use of around 37 different materials including rubber, steel, fabrics and vulcanizing materials. The production system in the Indian tyre industry has been traditionally very labour intensive. The automation of manufacturing processes has increased gradually, which has slashed the size of the workforce to a considerable degree and has effected a change in its composition. The degree of automation has been greater in the area of radial technology, while cross ply technology is still labour intensive. The firms have been resorting to automation in order to tackle problems related to labour unionization and indiscipline in the sector. The rationale provided by the firms for the increasing drive towards automation of the manufacturing facilities has been that high quality and uniformity of the final product usually cannot be guaranteed with a labour intensive process. (Iyer & Upadhyay 2008).

New Policy Initiatives
The tyre industry in India has had to grapple with raw material price volatility, rupee appreciation and cheap Chinese imports. In this connection, some of the recent initiatives by the government to facilitate the growth of the sector include:
•   No WTO  bound rates for Tyres and Tubes
•   No restrictions on the import of all raw materials required for tyre manufacture except carbon black, which has been placed in the restricted list
•   Increasing thrust on development of road infrastructure

Future prospects of the Indian Tyre industry
The Indian Tyre industry is expected to show a healthy growth rate of 9-10% over the next five years, according to a study by Credit Analysis and Research Limited (CARE). While the truck and bus tyres are set to register a compounded annual growth rate (CAGR) of 8%, the light commercial vehicles (LCV) segment is expected to show a CAGR of about 14 %. However, we have to also take account of the effect of the global recession on the sector in making these assessments. The growth of the sector is closely linked to the expansion plans of the automobile companies,  the government’s thrust on development of road infrastructure and the sourcing of auto parts by the global Original Equipment Manufacturers (OEMs). Some significant hurdles towards attaining these projected growth rates could be raw material related price volatility, rupee appreciation and the looming threat of cheap Chinese imports. The Indian tyre companies need to make active efforts to explore newer markets as the existing markets for bus-truck tyres, which account for about 45 % of the total export volume, is nearing saturation. There is also an urgent need to increase the degree of radialization in order to safeguard their share in the export market. Global tyre manufacturers have been making constant efforts to innovate and offer a diverse range of products such as tyres with pressure warning systems, run flat tyres, eco-friendly tyres and energy efficient tyres. In this context, the Indian domestic companies have to pursue a growth strategy of continuous innovation and increasing emphasis on product differentiation.

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Leo Lingham


In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.


18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.


24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.




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