Q: What are you views on the present industry performance for passenger vehicles, commercial vehicles and two-wheelers?
Karma: In passenger vehicles I don’t see a problem. It will remain at the same level. It will go up and down based on product launches as people have a tendency to buy new products. Commercial vehicle will continue to grow as the new norms are coming in from the next year. The year after there will be emission norms. This will enable the purchases of commercial vehicles depending on the budget announcement on infrastructure, and the flow of funds. The need for the movement of building materials like sand and cement for infrastructure projects will act as a growth catalyst.
Mining is another sector whose growth is long overdue owing to a lot of issues which were being settled. Several policy issues have been resolved. The mining sector is driven by the overall demand for coal and iron ore. To that extent this sector is subdued. However, in the last quarter, we have seen some small movement in resource prices. If it goes up it will be a huge boost to commercial vehicle industry and tyre consumption.
Q: Do you work with OEMs for new product development?
Karma: We mainly do new product development for PCR tyres because tyres are designed to match the need of the car. For example, a tyre has to be designed for a fuel-efficient car like Kwid. We have designed a tyre which can give a low rolling resistance which helps in increasing the mileage. We have designed at least 3 tyres with Maruti at its platforms to match the way the new cars run. The engine, the chassis and the tyre need to work in harmony to prevent any resonance and have a smooth ride meeting the conflicting requirements of rolling resistance, grip and fuel efficiency. However, things are different in the CV segment where we lead. We manufacture tyre on the basis of the market requirement and give it to OEMs. However, we customise marginally based on the demand from OEMs.
Q: When do you plan to enter two-wheeler tyre market? What are your plans?
Karma: We are entering the market as soon as you blink your eye. We will manufacture the tyre at our new Kesoram facility, and Laksar, Haridwar. We will be manufacturing more than half million tyres and will sell through aftermarket and OEM channel. At present we have 400 dealers and by next year, there will be 500. We will distribute two-wheeler tyres through the existing network. We will recast the marketing strategy to reach the customers faster.
Q: CV industry is picking up and so how do you see tyre industry evolving in both OE and aftermarket?
Karma: Yes, there are challenges with imports. Our plant in Chennai is a best- in- the class manufacturing facility in the world. Now we are taking over the Kesoram tyre facility from Birla in Haridwar. The acquisition is at the final stage. In Kesoram, we would be manufacturing 60,000 tyres a month. Our current capacity stands at 200,000 a month. There will be big demand for radial tyres in the coming years for commercial vehicles.
Q: Where is your R&D facility? What kind of investment have you made?
Karma: We have 3 R&D units, each in Faridabad, IIT Chennai and a small unit in Kankrolli, Udaipur, the Hari Shankar Elastomer Institute. We have a new R&D facility in Mysore created investing Rs 40 crore. It has a world-class testing equipment.
Q: Your outlook on Chinese tyre manufacturers and their pricing?
Karma: This is a much talked about topic. Forty percent of the replacement market has been taken up by the Chinese tyres now. We are not saying that we should not have Chinese tyres in the market. There has to be some sensibility to the prices at which you can produce and sell tyres. But some of them produce good tyres and good tyres do not sell cheap. They will increase the price if their product is good. There are a few opportunistic companies which will last 2-3 years and fall off. But a good tyre manufacturing company will stay.
In the US, if the import market share increases by 2% you can file import restrictions. Chinese tyres market share has grown by 25% in Indian market in 2015-16. Now they have up to 40% market share but no one moves. They still feel that tyre industry is not losing money but do you think we should come to a level when industry starts losing money before you look. Authorities cannot peep into accounts to see who is making profit.
Companies make profit for the value they provide to their customers. But they should be concerned about the fair play of business. The response that you get from the government is not right. I hope there will be some policy restriction on Chinese tyres, may be within the next 6 months. The prices at which Chinese tyres are being sold are just not real. But good Chinese tyres will stay as there are a few Chinese brands that have entered into the distribution network and they will stay.
Q: What are your thoughts on GST?
Karma: GST will come. It will be fantastic to see it as so much money and time is locked-up in transactions. If you reduce transaction time and simplify taxation, it will benefit everybody. It must come quickly and it should come in a form which is not bureaucratic. It should help release working capital into the system. It is at least 23% of our GDP and saves lot of logistic, documentation and bureaucratic costs. It may take time to stabilise.
Q: What has been the growth numbers of JK Tyres?
Karma: Last year, net to net across we have grown small because of the price drop. When you see revenue numbers, we have grown less than 5% but when you see in number of tyres, our sales are more than the industry average.
Our growth has been led mainly by passenger car and truck tyres. We have grown substantially in both the segments. Our growth in segments like MHCVs and heavy commercial vehicles has been more than 2527% which is the industry growth in new vehicles. In replacement tyres, growth has been flat because of Chinese tyres. Bias tyres growth has dropped in the same number as of industry. Exports have dropped due to sharp price cut and competition from Chinese Tyres.