Despite the havoc caused by Covid-19 on various sectors, there were few sectors that survived the initial downtrend and bounced backed, OTR tyres sector in one such sector which bucked the trend. With innovations, technology, R&D and plenty of roads and highways projects, this sector all set to sustain the growth gained in the Pandemic
Taking utmost precaution and following all the protocol of Covid 19 such as keeping safe distance, wearing mask, and sanitising & washing hands, as and when required, infrastructure projects are being commissioned and executed as usual. In fact, there is an upswing in the commissioning and execution of roads and highways projects. The government is well aware any let down in infrastructure activities will be detrimental to the economic growth of the country. Even during the initial havoc by Covid-19 last year, infrastructure activities were going on as usual, but with few workforces, especially in roads and highways construction, mining and railways. Recently, the Ministry of Road Transport and Highways (MoRTH) has stated that its daily highway construction achieved a new high by laying down 37-kilometres of national highways on daily basis in 2020-21. MoRTHconstructed 13,394-km of National Highways in the financial year 2020-21. Though there was initial disruption in mining sector due to Pandemic it rebounded rather quickly during relaxation in lockdown. All these favourable conditions aided the Off the Road (OTR) tyres industry. “The Overall OTR segment has grown well last year though it is difficult to put a specific number on the industry size. This is due to some major players in this segment not being part of ATMA,” says Anshuman Singhania, Chairman, Automotive Tyre Manufacturers’ Association (ATMA).
Demand increases despite Covid-19 roadblocks
“The OTR Industry picked up from Q2 and has grown very well in Q4. This has been possible due to government achieving road construction of more than 30 km per day. Mining has also come back to near normalcy in H2 impacting demand positively,” says Anshuman Singhania. Leading OTR tyre manufacturer Balkrishna Industries (BKT) reported 30.58 percent growth in total sales revenues for the December 2020 quarter on consolidated basis at Rs. 1,509.23 crores. “A year before Covid-19 struck we reported a healthy revenue and sales. Our profits were pretty good. In the Pandemic period, despite losing two months due to lockdown we registered a marginal growth over last year,” says Rajiv Poddar, Joint Managing Director, Balkrishna Industries.
Apollo Tyres reported 16.67 percent growth in gross revenues for the December 2020 quarter on consolidated basis at Rs 5,153.84 crores. For the same quarter the consolidated operating profits were up 164.23 percent at Rs. 662.10 crores. The consolidated Profit after tax (PAT) for the December 2020 quarter was up 155.27 percent at Rs.443.81 crores while PAT margins improved from 3.94 percent in the December 2019 quarter to 8.61 percent in the December 2020 quarter.“The increase in roads and highway construction has significantly increased the demand for industrial tyres in India. We have seen a 100% increase in our sales to road and construction customers,” says Satish Sharma, President, Asia Pacific, Middle East & Africa, Apollo Tyres.
Ceat has reported a marginal increase in consolidated net profit at Rs 52.5 crores for December quarter 2020. The company had posted a profit of Rs 52.25 crores in the same period a year ago. Revenue from operations during the quarter stood at Rs 1,761.77 crores as against Rs 1,729.75 crores in the year-ago period.
JK Tyre & Industries reported a multi-fold jump in consolidated net profit at Rs 230.46 crores in December 2020 quarter. The company had posted a consolidated net profit of Rs 10.27 crores in the third quarter of last fiscal. Consolidated revenue from operations in December 2020 quarter stood at Rs 2,769.28 crores as against Rs 2,199.80 crores in the corresponding quarter last fiscal. MRF reported over two-fold rise in its consolidated net profit to Rs 520.54 crores for December 2020 quarter. The company had reported a net profit of Rs 241.32 crores for the October-December period in 2019. Revenue from operations increased to Rs 4,641.6 crores in December 2020 quarter, from Rs 4,075.75 crores in the year-ago period.
Innovation and digitalisation amidst the Pandemic
The Pandemic followed by lockdown gave enough time to rethink strategies and to come with process to streamline operations which in normal time was quite impossible. These few months of lockdown gave the OTR tyre manufacturers to digitalise their operation right from manufacturing to final dispatches. “The lockdown provided us a good opportunity to shift focus from “routine works” on “improvement” projects. We undertook various projects with our partners to address specific requirements in specific markets. Like all, we were forced to focus more on “digital” ways – and it impacted all areas of our work. We are certainly more productive than we were before. Collaboration with OE customers is more intense and faster than before! We have developed platforms and apps for order processing, product warranty registrations, claim resolution processes, customer contact programs through webinars, etc. We have been positively surprised with the productivity gains we saw. Even on R&D front, we were excited to see new ways of collaborating amongst team members – which we had not envisioned before. We have, of course, also invested heavily in digital infrastructure to enable team members work seamlessly and in a secure environment,” says Vijay Gambhire, CEO, CEAT Specialty.
While Balkrishna Industries in the Pandemic launched 3300 R 51 tyre, “this is a big achievement for us because the machine itself was established by us inhouse. The product was designed and launched inhouse. It is a true example of my team being ‘Atmanirbhar’. One tyre is around 14 ft high in size and scale and roughly 2.5 tons without the weight of the wheel assembly,” says Rajiv Poddar.
“The pandemic significantly changed the route we will now take towards development of new tyres. Until the pandemic, tyres would undergo a stringent field testing for determining tyre characteristics under different road and climate conditions. But during the pandemic, the record keeping at all our test sites were not meeting our standards and many of the tests had to be repeated again from scratch. This delayed launch of many of our new products. This event pushed us to look at various technological solutions to simulate the testing conditions and evaluate tyre characteristics without relying on field. We plan to invest more in the simulation capabilities to minimise our reliance on field testing in off-highway tyre (OHT) segment,” says Satish Sharma.
Bridgestone India has introduced Contactless Tyre Servicing platform ‘Bridgestone Bookmyservice’, a platform that enables customers to take an online appointment in a few clicks, making them spend less time in outlets with these pre-planned visits. The planner will also allow Bridgestone channel partners to implement appropriate social distancing measures at the outlets, which are necessary in times of the Covid-19 pandemic. As part of their digital initiatives, the company has introduced “Pick Up and Drop”, a contactless service aimed at enabling consumers to book a valet to get all their tyre-related needs and services addressed, without stepping out of their homes. The ‘Pick Up and Drop Service’ caters to all tyre-related needs and requirements of the consumers, ranging from wheel alignment, balancing or fitting new ones.
Making presence: Technology embedded tyres
Till a few years back technology embedded tyres were unheard off. But now-a-days tyres fitted with sensors are a common feature. “Technology is going to come in to everything that we do or work around. Lot of our tyres are fitted with sensors for testing purposes. We have auto sensors for pressure monitoring system, air monitoring, to check heat development of tyres. We have developed SPOTECH, an innovative device able to provide exact information on the equipment position traced by satellite. It can be programmed and tailored as to the application site volumes and type of equipment in use. All information obtained by SPOTECH enable the creation of a real study on tire usage according to their effects and impacts on the piece of equipment it is fitted on. In the field of OTR, for which this device has been originally designed, equipment generally performs repeated cycles. This enables to assess the TKPH value, ie, a dumper’s strength by analyzing the weight that is transported on the average and the distance in kilometers per hour,” says Rajiv Poddar.
Apollo Tyres has collaborated with multiple organisations to develop IoT based solutions for tyres. “Our new ALT 188 HD tyre will be our first offering in OTR space to come with various sensors and an app where the tyre usage pattern will be summarized for our customers. This solution is still in development and will be commercially available only by end 2022,” says Satish Sharma.
Investment and expansion
The board of directors of Balkrishna Industries has approved a capex plan of Rs 1,900 crore. The company will be investing Rs. 800 crore towards brownfield expansion at its Bhuj plant to boost capacity by 50,000 mtpa from the existing 300,000 mtpa. This expansion is likely to be completed by the second half of fiscal year 2023. The company will also enhance its carbon black manufacturing capacity from 115,000 mtpa to 200,000 mtpa for a capex of Rs. 650 crore. Balkrishna Industries will be investing approximately Rs. 450 crore for modernization and technology upgrades at its Rajasthan and Bhuj plants. These are expected to be completed by the first half of FY23. According to reports Ceat is exploring export opportunities for its speciality tyres in Europe and North America and also looking for new markets for radial tyres for buses and trucks. The company has recently commissioned its Chennai plant and the second phase of its manufacturing facility based in Nagpur. The company has also announced the Scheme of Amalgamation for the amalgamation of Ceat Specialty Tyres with Ceat has been approved by National Company Law Tribunal Mumbai Bench.
Alliance Tire Group (ATG), owned by the Japanese major Yokohama Group, is setting up its third plant in the country in Visakhapatnam with an investment of approximately Rs 1,240 crore. The plant is expected to be commissioned by the first quarter of 2023. Mahansaria Tyres has commenced commercial production at its state-of-the-art greenfield Off Highway tyre manufacturing facility in Gujarat. Continental is expanding its truck tyres production capacity at the Modipuram plant in Uttar Pradesh. This move by the company will increase the product range for 20-inch and 22.5-inch tyres along with the existing other range of Truck and Bus Radial (TBR) tyres produced at the plant. This expansion will enable increased export volumes to the APAC region, favorably impacting Continental’s production cost and profitability.
Growth to Sustain
The commissioning and execution of roads and highways are at any all time high. This sector has demonstrated that despite lockdown or partial opening of lockdown roads and highways sector was on its job as usual and it is likely to continue further. The opening of coal mining to commercial players has given increased impetus to the mining sector. All these are favourably aiding the growth of OTR tyres in India. According to rating agency ICRA, heightened focus on infrastructure spend, particularly in the road infrastructure segment has led to a sharp scale up in 'Construction Equipment' volumes since July 2020. “The Industry is expected to grow well with the government focus on infrastructure,” says Anshuman Singhania. He further adds, “Tyre business is highly capital intensive and OTR Industry even more. The overall returns with respect to investment is a challenge. However, this product and manufacturing requires continuous investments in R&D and plants. A fine business balance is essential as well generation of large product portfolio to enrich the mix and have participation in domestic as well as global markets. Any support in this industry would be welcome. This segment accounts for huge exports out of India as more than 90% of production out of India is exported to most advanced markets across the Globe like Europe and USA. This is a huge Foreign Exchange earning avenue for India and will go a long way in forwarding the “Aatmanirbhar Bharat” programme of the Government. I hope Government’s focus on automobile industry under PLI scheme would adequately cover this segment”.
Considering the capex plans by OTR tyres manufacturers and government’s increasing thrust on infrastructure to revive the economy, the growth gained in the Pandemic period is likely to sustain.
