New Delhi: The demand for Off Highway Tires (OHT) has reached an all-time high due to strong requirements from both domestic and international markets. Driven by mechanisation, urbanisation, large-scale investments in public and private infrastructure and increased construction activities, the country is emerging as a global manufacturing base for OHT.
These tires are used in heavy duty trucks and vehicles for off-road activities such as mining, agriculture, logistics and construction. The increasing use of off-road vehicles such as excavators, special purpose vehicles, telescopic handlers, dump trucks and tractors is also fueling the OHT business.
In addition, the demand for made-in-India off-highway tyres is also increasing in Europe and North America. This has pushed the tire industry’s export figures to a record high of over Rs 21,000 crore in FY22. Across various tire categories, OHT exports have grown by 46.52% in value from INR 8,842 crore in FY22 to Rs 12,955 crore in FY22. fiscal year 21.
The business potential for OHT is huge. Domestic tire companies are increasing production capacity for high-performance, highly reliable and all-weather off-road heavy-duty application tyres. Moving beyond SUV and electric vehicle tyres, OEMs are increasing R&D investments on OHTs for strong and durable side walls, as well as self-cleaning connectors to increase pull force.
India’s off-highway tire market stood at 10.81 million units in 2021. As per the BlueWave Consulting report, the market is projected to have a demand of 19.17 million units by 2028, with a CAGR of 8.5%.
A major part of the domestic demand is from the construction equipment sector. It is on the verge of becoming the second largest globally by 2030. The overseas market is also turning to India to fill the void left by established tire manufacturers.
Well-known tire companies such as Michelin and Pirelli are exiting OHT in the US and European region. Their new focus is on SUV, EV or motorsport tyres. According to Rajiv Budhraja, Director General, Automotive Tire Manufacturers Association (ATMA), for every tonne of production, the margin of PCR tires is 20% to 25% higher than OHT. That’s why some major manufacturers are skipping it.
“This has created space for high quality moderately priced tyres in the export market, giving Indian tire manufacturers an opportunity to fill the void,” he said.
A series of anti-dumping duties on Chinese tires by Europe and the US over the past 3-4 years have also worked in favor of Indian companies. “Global anti-China sentiment and the ‘China plus one’ factor have helped Indian players a lot. Hence, Indian tire manufacturers are formulating their special export strategy in these two areas,” said Budhraja.
the big movers
Balkrishna Industries, a leader in off-highway, agricultural and industrial tyres, which sells under the BKT brand, is looking to deepen its presence in both domestic and export markets. The Mumbai-based company expects its domestic market share to reach 12%-15% from the current 6%-7% as it sees growing demand for its agriculture sector offerings.
Currently BKT derives about 80% of its revenue from exports, with domestic sales accounting for the rest. The tire maker is increasing manufacturing capacity by 26% to 360,000 tonnes by the end of FY13 at its plants in Bhuj, Gujarat and Waluj in Maharashtra.
CEAT Managing Director, Anant Goenka said in a recent analyst call that the OHT segment of the company is growing as planned. He said that out of the Rs 750 crore development capital expenditure for FY23, priority would be given to the more profitable OHT segment. The Mumbai-based tire maker claims that its existing OHT range caters to 80%-85% of the agricultural sector’s demand.
Goenka said, “We are currently working on around 67 tonnes per day which will go up to 80 tonnes per day by October at our Ambernath plant, which mainly manufactures radials for OHT.” The company is planning to invest up to Rs 200 crore for expansion of the Ambernath plant for OHT.
Another major player, JK Tire, sold OHTs worth around Rs 300 crore last year. “In the domestic market, the construction and mining sectors are opening up in a big way to boost this segment. We are looking for markets like the US and Latin America for exports.
Promoted by the Mahansaria family – and a new entrant in this segment – the company intends to invest INR 1,652 crore in a greenfield OHT facility in Gujarat.
Among OHT types, bias tires still hold the largest market share at 48% due to their low cost and high demand across the country. On the other hand, the export market has shifted almost entirely to Radial in the OHT segment for advanced applications. Now with only 40% of radial OHT production, companies are able to meet only a fraction of the export demand.
Even local markets are increasing the use of radial tires in the construction/mining sectors. Many players supplying extensively in the international markets will have to focus on the domestic market as well.
Another constraint is not having enough capacity to meet the huge demand. Companies are trying their best to increase OHT production but it is still not enough. The tire industry is already operating at 85%-90% capacity. Any increase or expansion in production is time-consuming. Experts fear that companies may miss out on real-time demand.