In India, there is no incentive for retreading. In fact, we are burdened with VAT and service tax, says Karun Sanghi, Managing Director, Tyresoles India. Excerpts from the interview.
As per reports, leading Chinese tyre companies are sprucing up on technology and scale to meet global norms. What is the impact of this on the Indian industry in general and on the retreading industry?
As Chinese companies improve their product quality, the competition in the new tyre business will increase. However, this will have very little impact on the retreading industry. As casing quality improves, the retreadabiltiy also improves and more tyres will be available for retreading.
Has the slowdown in auto industry helped the the retreading tyre market?
Yes, as the economy slows, new vehicle sales fall. Transporters look at ways to reduce costs and retreading increases.
There seems to be a major threat on import of tyres from China and Korea on the one hand, and bulging inventory on the other side which is paving the way for a price war. What is your take on this?
This does not have a significant impact on retreading. A new 1000x20 tyres costs an average of Rs. 20,000 and runs for an average of 50,000 kms. This gives a cost per km or Rs 0.40. A retreaded tyre costs about Rs 5,000 and runs for an average of 40,000 km so the cost per km is Rs 0.125. As tyre prices move up and down, the cost may change a little but cannot compare with retreading. So retreading will continue.
What is the demand-supply scenario for retreaded tyres?
There is substantial savings in retreading mining tyres. However mining is going through a difficult time in India. There is uncertainty with licensing, so most of our customers are not making new investments in equipment. Demand has fallen substantially.
How do you look at the competition today?
Our competition is primarily from other retreaders. Most transporters are retreading their tyres. We have to convince them to retread with us.
Is there any incentive from the government to support the retreading industry?
Retreading one tyre helps save 20 litre of crude oil for the nation. So retreading is very good for the environment. In the US, the federal government vehicle must retread their tyres. In India, there is no incentive for retreading. In fact, we are burdened with VAT and service tax.
What is the overall market for retreading, its growth potential?
We estimate the retreading market in India should be about Rs 5,000 crore per year. However, this market is extremely fragmented. An average retreader does 200-300 tyres per month, or 2,500-3,500 tyres per year. This comes to sales of Rs 1-1.5 crore. So an average retreader has a market share of about 0.02 per cent.
Tell us about Tyresoles' market share and how you expect to end this fiscal.
Tyresoles will reach sales of Rs 100 crore in 2013-14. We have started a new factory in Jabalpur last year and in Hyderabad this year. We also expect to start in Gujarat this year. We would probably be the largest retreaders in India but we have a market share of only 2 per cent.
Tell us about the core competencies and strengths of Tyresoles.
We are a tyre retreading company. We do only retreading. We do not sell new tyres. We do not sell tread rubber. We focus on helping our customers reduce their tyre cost. We work with our customer's fleet managers, study their requirements and offer solutions that will lower their total tyre cost.
What is the impact of the recent government proposal to hike import duty on rubber?
We do not import rubber so there will be no direct impact. However, natural rubber prices have started going up again in the last two months.
Tell us about the challenges faced by the retreading industry?
Retreading operates in the unorganised sector. As radialisation increases in the truck and bus segment, we expect the industry to consolidate.
What are the technology trends like, in the retreading industry?
Retreading radial tyres requires better machines and more accurate processes. So we are upgrading our factories to be market leaders in retreading of truck and bus radials.
Tell us about the plant, capacity and facilities.
We have our main facility in Belgaum, Karnataka, where we have four acre of land and dedicated plants for truck and bus tyres, tractor tyres and OTR tyres. We have a capacity of 25,000 tyres per month and are currently retreading 15,000 tyres per month. Last year we have opened a new facility in Jabalpur, MP, to retread truck, tractor and OTR tyres. Last month, we opened a new facility in Hyderabad, AP, focused on truck and bus tyres.
What are your expansion plans?
We have a specialised tread rubber plant which starts production this month in Mangalore. We also expect to start one more retreading plant in Gujarat this year. Tyresoles is expanding its geographical reach and we expect to add another 6-8 retreading plant in the next three years to cover all of India.