The share of radials in truck tyres has increased to 52 per cent in FY18 from low single digits in 2007.
ET Intelligence Group: India’s largest maker of tyres for buses and trucks, JK Tyre & Industries, is likely to benefit from the revival in demand for commercial vehicles (CVs) and the tangible shift by the country’s cargo fleet to the higher margin and longer lasting radial tyres.
JK Tyre’s sales volumes could rise 15-20 per cent in FY19, compared with 9 per cent in the previous fiscal. Brownfield expansion of the Cavendish Tyre business of BK Birla group, acquired by JK in 2016, should aid volumes. The expanded facility will start contributing in phases from July this year.
Similarly, two-wheeler makers Bajaj Auto and Hero MotoCorp should also give JK Tyre additional volumes. It supplied two-wheelers tyres in the replacement market so far, but new orders from two-wheeler makers to supply 2.5-3 lakh tyres every month will increase capacity utilisation at the tyre maker’s unit dedicated to scooters and motorcycles.
JK Tyre is investing Rs 275 crore in the brownfield expansion of Cavendish for truck bus radial (TBR) tyres. After expansion, the installed TBR capacity will increase to 13.8 lakh tyres a year at the end of FY19 from 7.4 lakh presently. The expansion is quite cost-effective, cost a third of the replacement value.
Incremental volumes from the brownfield expansion will be easy to market as the company’s current TBR facility is running at full utilisation. The share of radials in truck tyres has increased to 52 per cent in FY18 from low single digits in 2007.
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Sales volumes for CVs are likely to remain robust in the current fiscal year because of the pick-up in infrastructure, mainly from road construction. Leading CV makers have forecast volume growth of 10-12 per cent for FY19. Furthermore, the drop in the import of Chinese TBR tyres will aid local volume growth.
Analysts expect tyre sales volume growth of 22 per cent each year in FY19 and FY20, while the replacement volume growth is seen at 5.4 per cent in the same period. Buoyancy in commercial vehicle sales is likely to support volume growth of JK Tyre, which has more than 30 per cent share of the TBR market.
