Agricultural success beckons in niches
“People in this world will always eat bread and rice,“ an agricultural tyre supplier said some years ago while participating in a panel of experts. However, it isn’t just the passenger car and truck tyre businesses that are vulnerable to negative conditions; the year following the Lehman collapse, 2009, showed that the agricultural tyre business was by no means recession proof. Investments in farming equipment and in tyres for these machines collapsed, however even back then it was clear that the market must bounce back at some stage as people will always need to eat. And that applies around the world, not just here. Because global populations are on the rise – we’ve already passed the seven billion mark – there is a corresponding increasing need for foodstuffs to be grown. Agriculture is a growth industry.
As is agricultural technology. While the world supports only a finite number of arable regions, these regions are being ever more intensively utilised. This is being achieved in part through chemistry, and these days the agroindustry is accepted as its fertilisers aid in boosting crop yields and insecticides protect against pests. And crop yields are also increasing due to the use of more powerful machinery, equipment that needs to be fitted with tyres to match. In countries that have experienced the largest population growth – China and India are two examples – a great pent-up demand exists for high-power tractors, cultivation machinery and harvesters. And the tyres in these two massive countries, as is the case in many smaller emerging and developing countries, are typically simple cross-ply varieties, often traditional “herring bone” agricultural tyres. These tyres are predominantly fitted to non-powered vehicles or non-powered axle positions. The radialisation of agricultural tyre markets may be well advanced in Europe and North America, however in countries where “herring bone” tyres are frequently found this development has scarcely begun. Considerable long-term growth potential thus still exists in this market segment. Compared with the large passenger car and truck tyre market segments (see magazine for diagram 1), agricultural tyres are a niche, and even when compared with OTR and industrial tyres (which are, incidentally, also a lucrative growth segment) they only account for one third. Within the massive global tyre market, the agricultural tyre business is valued at less than £.3 billion.
Tyre majors such as Michelin and Bridgestone (with Firestone, arguably the world’s largest agricultural tyre brand) are present in mature markets with a full range, however this doesn’t yet apply in emerging regions. Despite their global aspirations, brands such as Pirelli (who is strong in South America) and Goodyear (who has already waved the white flag in America and aims to sell its European business) have already lowered their sights. Therefore, in recent years a number of companies have emerged, including Trelleborg, CGS, Titan BKT and Alliance Tire Group; these firms are specialists with strengths in other off-road segments, such as OTR or industrial tyres.
Europe’s “saturated” market
Agricultural tyres continue to be manufactured within the European Union (in Finland, Poland, Spain and the Czech Republic, for example), however little is heard about major investments in agricultural tyres here. According to the European Tyre & Rubber Manufacturers’ Association, 170,000 agricultural tyres manufactured within the EU were exported to other regions in 2010, however almost three million (non “herring bone” varieties) were imported. When including the “simple tyres” as well, the number of imported agricultural tyres reached five million units in 2010.
The value of the so-called “herring bone” tyres supplied in the EU is more than £160 million; almost £50 million worth came from India, £25 million from Turkey and £22 million from Israel. Imports of high value agricultural tyres amounted to £134 million; from this, £58 million worth came from India, £28 million from Israel and £17 million from Turkey (see diagram 2). The value of the “herring bone” tyres exported from the EU exceeded £90 million; £50 million worth of these ended up in the NAFTA countries, £15 million in non-EU European countries, £7 million in the Mercosur region and £5.4 in Africa. Exports of high-value agricultural tyres from the EU amounted to £25 million; some £7.2 million worth was sent to non-EU European countries, £5.1 million to NAFTA countries, £3.2 million to Africa and £2.73 million to the Mercosur region (see diagram 3).
In relation to agricultural tyres, the trade balance between the EU and India is of particular interest. India is the largest manufacturer of tyres for this market segment, with Balkrishna Tyres – BKT for short – the strongest player. In second place is the Indian-Israeli Alliance Tire Group (ATG), which operates two factories in India and Israel and has offtake agreements with partners in China and Taiwan. A number of other Indian tyre makers also manufacture agricultural tyres, including Vredestein’s parent company Apollo Tyres, which uses the Dutch firm’s know-how to produce Vredestein branded agricultural tyres in India. While it’s no surprise that these three well-known Indian tyre makers export high-value tyres to Europe, other familiar names are responsible for “herring bone” exports: Birla, Ceat, JK Tyre, MRF, Superking and TVS. Goodyear also manufactures agricultural tyres in India for the region. According to Eurostat, the European Union’s statistical office, in 2000 India shipped 92,000 agricultural tyres to the EU (60,000 of these were “herring bone” tyres), while 10 years later it shipped 1,361,000 tyres, 63 per cent of which were high-value tyres. The EU shipped 2,000 agricultural tyres to India.