Demand/ Growth Drivers of the Industry:

1) Industrial and freight activity

The truck and bus tyre segment accounted for 19% of tyres produced in India. Every
truck/bus manufactured generates a demand for seven tyres. In addition, the price of a truck
tyre is significantly higher than that of a passenger car tyre (roughly 10 times). Thus the
demand multiple emanating from the commercial vehicle segment is highest in value terms.
2) Personal purchasing power
As the economy booms and disposable incomes in the hands of the Indian middle- class
burgeon, the sale of passenger cars has been witnessing an upward swing over the past
decade. Since tyre sales are directly linked to car sales, both through OEMs and the
replacement market, the tyre industry has witnessed a corresponding increase in its sales
figures.
3) Automobile sales
The demand from the OEM segment is a derived one and directly correlated to the level of
automotive production. The recent Slowdown in automotive industry and global economic in
general negatively impacted the Indian tyre industry.
4) Export of tyres
5) New type of energy efficient vehicles in the market

Challenges
Highly capital intensive:
The tyre industry is highly capital intensive and the level of technological expertise
required is also highly specific. One requires roughly Rs 400 crore to set up a radial
tyre plant with a capacity of 15 Lakh tyres and around Rs 150-200 crore, for a cross-
ply tyre plant of a 15 Lakh tyre-manufacturing capacity.
Fluctuation of exchange rate:
As most of the tyre companies are expanding their operations around the globe there
is a widespread impact of sharp currency fluctuations. In simple terms, it shrinks the
receivables of exporters and makes life easier for importers as the prices of imports
get cheaper. A sharp fluctuation in the currency hits the small and mid-cap companies
harder than their larger peers, as the larger players can manage the situation through
actively managing (hedging) the currency and working with the scale. Eg. Balkrishna
Industries' approximately 90% revenues are generated through exports and the
Company also imports lot of its raw materials and capital equipments; it is exposed to
high risks due to currency fluctuations.
Pricing Pressures:
The tyre industry in India is a highly competitive sector with a very cut throat
competition among the leading players. Any rise in raw material costs would result in
pressure on the realizations and though the players vouch to increase the prices, due to
competitive pressures, they have not been able to pass on the entire increase to the
consumers.
Low price dumping from other countries like china