Tyre Hubs in Tamil Nadu to be big beneficiary of CAPEX

 

As the Indian automobile industry revs up for a top-gear run, the Indian tyre industry is ramping up to keep pace. And Tamil Nadu, with its tyre hub in Kancheepuram, the Oragadam-Sriperumbudur auto belt is likely to be a big beneficiary of the capex windfall that is expected.

The sector has got investments of ₹35,000 crore in the past three years nationally, says industry apex body Automotive Tyre Manufacturers Association (ATMA). With focus on truck, bus and passenger vehicle radials, Tamil Nadu will be a beneficiary of the next cycle of tyre capex, say experts.

Tamil Nadu, being one of the oldest tyre manufacturing hubs, houses units that makes radial tyres for trucks, buses and cars. ” The share of radial tyres, which is estimated to be around 60% in medium and heavy commercial vehicle category, is expected to improve in future due to higher cost economies owing to superior performance. Consequently, most of the capex expansion announced by OEMs are in truck, bus radial and passenger car category, and Tamil Nadu is expected to receive a significant chunk of capex announced for FY24.

INR 4000 Crore Capex by CEAT

A big announcement has come from Ceat. Says Ceat MD Anant Goenka: “We have planned a capital expenditure of approximately ₹ 4,000 crore at our Chennai facility over the next five years. It includes approximately ₹ 2,000 crore that we have spent on our plant commissioned in February 2020. ” This investment confidence is rooted in past experience. “The company has had a very good experience in Tamil Nadu,” says Goenka. “The industries department gave us infrastructure including electricity and water, besides timely approvals that helped us commission our plant within 18months from the date of the MOU,” he says.

 Since MRF set up its first tyre manufacturing unit in Thiruvottiyur in 1946, more than 40% of the country’s tyre production has been in Tamil Nadu. Companies like JK Tyre, Apollo, Ceat and Michelin have a substantial factory footprint in the state which has good port access, logistics network and access to the auto hub of Oragdam-Sriperumbudur.

Advantage Tamil Nadu

According to industry sources, Tamil Nadu attracted more than 8,200 crore capex in the past three years . But with many of the major tyre companies looking at other sites – including Apollo investing in an Andhra Pradesh greenfield plant and JK pursuing a 530 crore capacity expansion at Banmore and another 260 crore capacity addition at Haridwar – Tamil Nadu needs to step on the gas to stay ahead of the pack.

Says ATMA chairman Satish Sharma, president, Asia Pacific, Middle East & Africa, Apollo Tyres: “TN’s technically qualified workforce, proximity to port and good road network are some of the positives, but in an increasingly competitive investment climate no state can afford to rest on its past achievements,” he says. To maintain the momentum, continued focus on factors like easier acquisition of land and overall improvement of state infrastructure would help, he says. Incremental incentives are, in fact, the refrain of most of the major tyre investors in the state.

 “It would help if industries are able to get electricity at reasonable rates and if our own suppliers are encouraged to set up manufacturing facilities in Tamil Nadu covering raw material such as synthetic rubber, rubber chemicals, steel tyre cord and bead wire,” says Ceat’s Goenka. “It will also help if the state government includes tyres within the scope of incentives available for EV manufacturers. ” Agrees Apollo’s Sharma: “Industry is looking at getting subsidies from the government for new investments in research and development. ” Government sources, however, say ‘as and-when’ incentives are on offer for tyre-related sectors like carbon black, and a cluster approach will help tyre ancillaries to qualify for state support.

There’s a reason why industry voices are unanimous about add-on incentives. Tyre manufacturers are expected to record a healthy growth led by 8%-10% uptick in commercial vehicles and 9%-11% growth in passenger vehicle segments in FY24, says Crisil. 

The Next Ramp up for the EV revolution

For tyre companies, the next ramp-up will come from electric vehicles. Says Anuj Kathuria, president (India), JK Tyre: “The tyre industry has prepared for an upcycle in the auto industry with investment commitments. We are working with EV OEMs as well to meet the demand. ”

JK, he says, is “invested in Tamil Nadu” as one of its biggest plants is in Chennai. So far, tyre investments in the state were led by the internal combustion engine auto hub in Oragadam Sriperumbudur, but going ahead, the next phase will centre around the EV hub of Hosur Krishnagiri, he says. Since Ola ancillaries have received government support, other big projects may be looking for the same.