India’s rising share in global automobile production and global investments in tyre industry projects are pointers to the shape of things to come in the medium and long term. While global automobile majors are making a pit stop for India, the Indian automobile, components and tyre players are reaching out to the world. According to global consultants Booz & Co, India is expected to account for nearly 50% of the increase in global automobile capacity between 2007 and 2012. Improvement in road/infrastructure and increase in rural spending are positive factors for the tyre industry. However, rise in interest rates, high inflation and increase in vehicle, fuel and tyre prices are dampeners.

Global forays

Tata Motors’ acquisition of Jaguar and Land Rover (JLR) and establishment of a 300,000 capacity motorcycle plant in Indonesia by TVS Motors at an investment of $ 100 million over three years represent two major forays by Indian companies into the global automobile sector .
Bajaj Auto, India’s second largest two-wheeler manufacturer plans to set up a 2W/2W plant in Indonesia by end 2013. The world’s largest two-wheeler producer, Hero Honda (rechristened Hero Corp after split between Honda of Japan and Hero Group of India), is set to replicate its domestic success story on a global platform.  It aims to introduce new bikes for new export markets.
According to Tata Motors, SAARC, ASEAN and Latin American regions are important markets for the Nano with strong possibility for setting up assembly lines. Taiwan-based TECO Group is keen to introduce Nano in Taiwan. Malaysian Government is in talks with the Tata’s to introduce Nano in Malaysia.

Auto component sector

In the auto component sector, Amtek Auto Ltd ($1.3bn) has bought an aluminium foundry in the UK ($40mn) and Technical Alliance with Autech Corp of South Korea for Speciality Vehicles. Bharat Forge has entered into JV with David Brown Systems, global leaders in gearbox and transmissions. Motherson Sumi Systems Ltd (@ 2.7bn turnover) has a presence in 23 countries with over 90 manufacturing facilities.
The Ruia Group (which acquired Dunlop in India in 2005) acquired two companies overseas in 2010-- Turkey’s Standard Profil and Germany’s Meteor with a combined turnover of euro 400 mn.
Foreign investments in India
In the passenger car segment, nearly all major players have manufacturing plants in India.  They include Audi, BMW, Fiat, Ford, General Motors, Chevrolet, Honda, Hyundai, Land Rover, Mercedes Benz, Mitsubishi, Nissan, Renault, Skoda and Toyota. Peugeot too is contemplating a plant in India and the discussions are in progress.
Nearly all the major global players have made their presence felt in the Indian commercial vehicle segment too. They include Volvo, Tatra, MAN, Diamler AG (with India centric Bharat Benz brand), Rosenbauer, Scania, Iveco, Hino, Isuzu, Piaggio and Caterpillar Inc.

Growth in tyre output

The steady rise in automobile capacity has aided the growth of the tyre industry in India. Growth in tyre production (2008-2010) in India outstripped the global growth. The share of passenger car tyre production in India (as percentage of total tyre production) has increased from 48% (2008) to 55% (2010). The current global share of car tyre production is 72%.
Share of medium and heavy vehicle tyre production declined from 37% (2008) to 33% (2010).  Global share of M&HCV tyre production is only 11%.
The Indian tyre majors too are making overseas forays to expand their production capacity. Apollo Tyres has acquired two tyre plants in South Africa and one each in Zimbabwe and the Netherlands. Nearly one third of its revenues come from overseas operations.
Besides, JK Tyre has acquired Tornel in Mexico and Ceat Tyres (of India) has acquired global rights of brand Ceat from Italian tyre major Pirelli for Euro 9 million.

Changing NR-SR ratio

The growth in tyre production has led to the changing ratio of NR-SR consumption in India over the last one decade. India’s NR-SR ratio which stood at 78:22 in 2001-02 shifted to 70:30 in 2010-11 while the global NR-SR ratio shifted from 42:58 to 44:56 during the same period. This shows that there is a gradual and consistent shift towards SR – a trend which is likely to continue in the future as well.