Friday, September 24

Tire industry lacking investments despite growing demand

Currently, the market size for automotive tires has almost reached Tk5,000 crore from Tk3,000 crore in 2015

With an increasing number of vehicles both commercial and personal, the demand for tires is increasing at a rate of an average of 9% a year, according to industry insiders.

On account of rising automobile sales, foreign investments and government support in the form of relatively lower import duties, the tire market shows a huge potential– especially for local entrepreneurs and this industry still remains largely dependent on imports.

At present, the country imports tires from various parts of the globe, from countries like India, Japan, China, Indonesia and also from a few European brands.

There are a few tire manufacturers coming into the market but most are involved with producing tubes and tires for bicycles, rickshaws and auto-rickshaws.

Currently, the market size for automotive tires has almost reached Tk5,000 crore from Tk3,000 crore in 2015. This proves how and why the market for tires is becoming lucrative for domestic and international players.

At present four local companies are making light automotive tires taking advantage of the surging market that once fully relied on imports a little more than a decade ago. Gazi Group, Meghna Group, Rupsha Tyre, Apex Husain and a few others are manufacturing tires for light trucks, microbuses, minibuses, motorcycles, auto-rickshaws and easy bikes.

Gazi Tyres, a concern of Gazi Group, is a leading manufacturer of tires in the country producing all kinds of tires except for that of private vehicles. Rupsha tyres started their operation back in 1991, producing bicycle tires and tubes.

Other companies, such as CEAT, have also recently opened up a manufacturing plant here in Bangladesh. CEAT is originally an Indian brand that is setting up a state of the art tire manufacturing facility after going for a joint venture with one of the largest conglomerates of our country A K Khan Limited.

The plant has cost them a huge amount of investment of about Tk424 crores. According to CEAT AKKHAN limited, they plan to export 30% of the production back to India, reducing the trade deficit with the country.

The plant is going to provide 500 direct employment and is estimated to create another 300 to 400 indirect employment once it runs in full swing, it is estimated. The manufacturing plant which was supposed to be up and running by now is yet to start its construction as the entire project has been stalled due to the pandemic. According to a company insider, it will take another two to three years to go into production.

Quite naturally, the tire market is dominated by the commercial vehicle tire segment which takes about 80% of the total demand for the product. Most of which (more than 50%) is being met by non branded Chinese tires which are often low quality but cheap.

Another huge chunk of the market share is taken over by MRF Tyres, which is an Indian brand. On the other hand, for private vehicles, consumers tend to go for more expensive Japanese, Thai and US brands such as Yokohama, Dunlop and Maxxis respectively.

One of the biggest obstacles to manufacture tires in Bangladesh was the scarcity of raw materials, which is assumed to change soon. As rubber, the main raw material used to make tires is currently setting a strong foothold in its production in the country. Reports say rubber production is growing at an average rate of 20.61% annually.

The tire manufacturing industry is still lacking behind as the sector needs huge capital investments. Despite the increasing demands of the product. To put things in perspective, right before the pandemic (in 2019) around 480,000 units were in demand annually for heavy vehicles and private cars alone– 99% of which is being met through imports.

In total Bangladesh imports more than Tk1,000 crore on importing more than 15 lakh tires from various countries mentioned above.

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