JK Tyre: Into Europe with Self-Confidence
JK Tyre & Industries has been a pioneer of radialisation in the Indian tyre market for some 35 years now and the country’s third largest tyre manufacturer, with its “JK Tyre”, “Vikrant” and “Tornel” brands, is considered a technological leader. While investment in the development and production of radial passenger car tyres during the mid 1970s has paid off and radialisation within this sector of the Indian market has grown to 97 per cent, JK Tyre & Industries has now once again positioned itself on the cutting edge of radialisation by investing a sizable sum in the local truck tyre market. And although this investment will initially serve Indian customers, the manufacturer plans the parallel expansion of its export activity and is focusing on the European market, particularly the passenger car tyre segment. Vice chairman and managing director Dr. Raghupati Singhania explained the background to this in an exclusive interview with Tyres & Accessories.
The decision makers at JK Tyre & Industries demonstrated their lack of fear towards heading in new directions back in the early 1970s when they became the first Indian tyre maker to invest in the manufacture of radials; these “had to be sold” from 1977 onwards, the choice of words used here describing the effort involved in ‘selling’ the concept of radials before the tyres themselves could be sold – the Indian passenger car tyre market had not exactly been waiting for this sort of technological innovation after all. “Much convincing needed to be done, in particular with the skeptical opinion leaders,” recalls Dr. Raghupati Singhania. Even the argument that radial passenger car tyres offer twice the mileage of crossply tyres while reducing vehicle fuel consumption, yet with a purchase price only about 25 per cent higher, needed to be rooted in the minds of customers.
When JK Tyre & Industries introduced radial truck tyres in 1999 and made considerable investments in this area, the manufacturer’s decision makers were already well versed in the role of market pioneer. At the time much groundwork was undertaken to bring the products to the market, recalls Dr. Singhania, who in addition to his position within JK Tyre & Industries is also a director of the JK Organisation. The effort needed to convince customers was, and remains, much more involved than with car tyres as all purchases in this segment are made by professional tyre customers.
Today, more than a decade later, JK can not just offer customers a good product, Dr. Singhania adds; in addition, the company is also represented in India’s metropolitan regions through its own “Truck Tyre Repair Centre” network and has also introduced a complementary retreading portfolio plus fleet contracts on a cost per kilometer basis – thereby providing “cradle to grave” tyre care.
This activity indicates that India’s truck tyre market has now reached a level of development where further progress in one particular direction is a certainty: sooner or later the market will, barring a few exceptions, be completely radialised. But has radialisation of India’s truck tyre market has reached the vital ‘point of no return’ at which development will now continue on its own momentum? “We’re standing on the brink,” shared the vice chairman and managing director during an exclusive interview with Tyres & Accessories; the “market has now gained momentum.” It may then come as no surprise, given that India’s truck tyre radialisation already stands at 14 per cent and should reach 25 per cent the year after next, that many have woken up to the financial benefits of getting involved in this sector. During the coming five years every one of the top five global tyre manufacturers – Bridgestone, Michelin, Goodyear, Continental and Pirelli – will establish a truck tyre presence in India, while local competitors will also invest in radial truck tyre technology.
Does this markedly changed competitive scenario make Dr. Singhania nervous? Just the opposite, replies the managing director of India’s third largest tyre maker. “A place exists for everyone,” he says confidently and points out something that already applies and will continue to apply in the future when truck radials further develop into completely market ready products: It is not just the product itself that “must be actively sold”, or indeed can be sold. “The market differentiator is and remains service,” he says. In this respect, JK Tyre & Industries is “absolutely confident that we will also be counted amongst the market leaders in the future,” even if the company needs to “run faster than before” to maintain this position.
This fundamental trust in the company’s own capabilities is reflected in the amount JK Tyre & Industries is investing in expanding its production facilities. This year alone the manufacturer has earmarked hundreds of millions of pounds for this purpose. Key projects include the construction of a new truck and passenger car tyre factory near Chennai (Tamil Nadu state) and the expansion of the company’s main factory in Mysore (Karnataka).
Dr. Singhania elucidates that 15 billion rupees (£210 million) will be invested in the new facility in Chennai alone. The plant’s foundation stone laying ceremony was held on September 5 and the manufacturer hopes to produce the first tyre there by the end of next year; construction work is then expected to be completed in June 2012. The company’s head office in New Delhi had originally planned for a truck tyre capacity of 200,000 units per annum, however while speaking with Tyres & Accessories the vice chairman and managing director shares that planned truck tyre capacity has now been doubled to 400,000 pieces, a decision reflecting high confidence in the market’s development potential. At the same time capacity at the Mysore factory will be increased by 200,000 truck tyres per annum. In addition to this truck capacity, the new Chennai site JK will be able to produce 2.5 million passenger car tyres a year. Admittedly, notes Singhania, the self-confidence the manufacturer shows in its market activities is not solely based upon such investments.
Importance of the European Market
While India’s truck tyre market is clearly a growth market and the European market a highly contested one, investments like those mentioned above will naturally first and foremost benefit customers in India, not least due to the attractive margins there. However, “we have in the meantime recognised the significance of the European market,” highlights Singhania, particularly referring to the passenger car tyre segment. And although Europe is not a focus market for the radial truck tyres already being shipped globally from JK in India and from China through offtake partners, the managing director of India’s third largest tyre maker makes it clear that “we want to have a presence in Europe, a foothold in the market.” Even the establishment of an own passenger car tyre factory in Europe has been considered; Singhania clarified that should this happen the company would likely acquire an existing factory rather than construct a greenfield facility. Yet although the idea has been discussed, at the moment no concrete plans to develop an own capacity within Europe exist. Singhania also refrained from naming any potential candidates whose facilities JK may have an eye on acquiring. Yet whichever way it happens, the start of extensive exports to Europe is a done deal.