BKT All Set To Enter Passenger Car Tyres Business By This Year-End

Balkrishna Industries Ltd. (BKT), one of the most recognisable Indian tyre makers when it comes to off-highway tyres, is now expanding presence into the on-highway tyre segment. The manufacturer announced its foray into the two‑wheelers (scooters and motorcycles) and Medium & Heavy Commercial Vehicles (M&HCV) segments with new tyre range; and the company is eyeing the passenger car tyre market next as part of its expansion plans. We caught up with Satish Sharma, Senior President and Director – Business Development and Strategy, BKT, to know more about the tyre maker’s progress over the last few years, and plans for the coming months. Here are the excerpts.

Q: We’ve seen a tidal shift in the automotive business since the pandemic. How do you see the Indian automotive market growing now, and where does the market stand currently for the tyre business in India?

A: There was a residual demand and a spike in demand after the pandemic. But most OEMs have not been doing very well. Commercial vehicles in particular, and even passenger vehicles, have been at lower single-digit growth for a very long time. That was the situation up until recently, when GST was reduced. Only after the reduction in GST, following the post-pandemic spike, did we start seeing demand coming back. In between, there was very conservative growth. This is across the board. It is not just commercial vehicles. It is commercial vehicles, tractors, two-wheelers, passenger cars — everything. The entire automotive segment is seeing sustained demand.

We saw the GST change in October last year, and we are already in August now. So it has been almost 10 months. The demand has sustained itself. It has also gone through various crises, including the West Asia war, inflation and a lot of price hikes, but the demand seems to be sticking. You have made it back to the pre-GST prices on cars, but the demand has sustained its own weight.

Q: How do you see the market evolving from here, and how do you see BKT benefiting from that in the long term?

A: The industry will mirror GDP growth. If GDP is likely to grow at around 7 per cent, that does translate to the auto sector. The economy runs on wheels, so the CV categories are going to do well. With more disposable income, cars are also going to do well. The entire auto bucket, in that sense, is a secular story. It is also the fact that the transition to powertrains with multiple technologies is happening, whether it is petrol, diesel, CNG, hybrid or EV, pretty much everything is there. As long as all the technologies are allowed to play out and the consumer makes the choice, because the consumer knows what they want, I would imagine that India would do well.
One is also seeing premiumisation across the board. The average car price is now upwards of ₹20 lakh, and that segment is growing very strongly. Even in motorcycles, we are seeing growth beyond the commuter bike segment. SUVisation in two-wheelers and cars is a trend that has reached around 60%, close to 60 per cent. That again shows that consumers are seeking more presence on the road.

To take your point on the pandemic, post-pandemic travel has become a trend. Internal travel and domestic tourism have increased. People want to go out. The whole concept of YOLO — you only live once — everything has contributed to that. People are travelling out far more than they did pre-pandemic. You can also see this trend from the fact that the bus segment is exploding, as is the commercial vehicle space. So I think the overall growth story is likely to remain intact.

Given that we have gone through so many uncertainties in the near term and yet demand is sustaining, if those uncertainties are taken out, inflation is very much under control despite inflationary pressures on the economy. Core inflation is still under control from the government’s point of view, which means that this is real demand. It is not just inflation, it is volume growth. Now we are also beginning to see a lot of capacity expansion announcements being made by the industry, which shows that there is inherent confidence in the country’s growth story.

Q: From a global perspective, where does India stand from a tyre-maker’s perspective, especially when competing against China or even Vietnam, which are aggressively coming into the tyre business? How do you retain the market share that you have right now?

A: From a global standpoint, I think India is very well positioned. That is not to say that the Chinese and the Vietnamese are not. I think the whole region — East Asia — is seeing manufacturing moving from west to east. If you see the larger region, India is one of the strong contenders. China has happened, and Vietnam has been a bigger gainer not only in tyres but across various categories. Specifically in tyres, Indian tyres enjoy a higher quality perception than Chinese tyres. If you look at ethnocentricity, which plays out in the industry, you can see this in markets such as the UAE. They are very much influenced by country of origin and brands.

You have Europeans, Germans, Japanese, Koreans, Indians and then Chinese. But Chinese, from that point of view — which is not to say that you can put all companies in the same bucket — are, in the larger spectrum, not associated with high quality in the world of tyres. At least currently, they are at the bottom of the pecking order from a quality-stroke-price perspective. They sell at the lowest price, and people equate that lowest price to the lowest quality. India is, I would say, much higher than China. It tries to compete with the Koreans and position itself in the mid-tier band. It is always trying to go to the top end of the material. That journey is going to take some time. We have to be honest with ourselves and our expectations.

The fact that the Indian automotive industry has done so well means that we now have the portfolio to play in the world market. We now have radial tyres for cars and all kinds of cars. 25 years back, we had car tyres only for Maruti and Ambassadors. Those were not vehicles that were available anywhere else in the world. We were mirroring the domestic journey, just as auto components have now become a very big global area, tyres are also following that journey. The technology and manufacturing of tyres in the last decade, I think, has really deployed all kinds of latest manufacturing excellence concepts — whether it is Industry 4.0 or using the latest AI in some format.

It is a manufacturing excellence story. It has also got the natural advantage of being a low-cost manufacturing base. So, in that sense, the Indian tyre industry is going to have a strong export story. That cannot be stopped, to my mind. That is not to say that the Chinese, Vietnamese or other Asian countries will not grow. They will also. I think it is this larger region, and within this larger region, India is now staking its claim. So far, India has been a non-player. But if you see the last two or three years, the export growth has been quite handsome. It is only going to get stronger and stronger, in my view.

Q: You rightly spoke about Industry 4.0 and AI improving the manufacturing process. But we also see a lot of limitations in terms of Indian R&D or local R&D that we do on our products. What is BKT doing in terms of innovation when it comes to tyre technology?

A: Tyres, as you know, are capital-intensive and very raw-material-intensive. Everything is a stage process. Today, you have absolutely great tyres for the best of the vehicles. One cannot say that this has not come out of R&D. Yes, in terms of basic research, one can say that we have been lagging behind. But in terms of application R&D and basic engineering, without the support of anyone, we are pretty much matching. The Indian product is a global product, matching world quality levels. That is not to say that more does not need to be done. I would say it is not just the tyre industry. The whole Indian manufacturing ecosystem has been more into application products. Now is when GCCs are beginning to happen here and R&D centres of global companies are beginning to happen here. So that ecosystem is getting stronger.

Why is it that, in the last decade, one can say that manufacturing has come out great? Manufacturing has been there from the 1960s, but the last 10 to 15 years of the digital era have provided a level playing field to everyone. India is good with software and hardware components, so all of that has come into play. There is also a lot of talent that wants to come back to India — people who had gone out. There was a time when there was a lot of brain drain, but now there is a lot of talent that needs to come back. Globalisation meant that a whole lot of knowledge migration happened. So we are seeing basic R&D and basic research also beginning to happen. Again, this will keep on growing. I would say your question is right in the sense that Indian industry has been a laggard.

Now you see Indian companies with very big R&D centres and a lot of investment in R&D centres. In the workforce, you will see a lot more doctorates and a lot more people coming in with master’s degrees and so on. I think the ecosystem for R&D in India has started picking up pace. It will take time. Will it mean that Indian companies will spend more on R&D? I think the answer is definitely yes. Those budgets will also grow. There are also cases where Indians have gone and set up R&D centres outside India. So, it is a combination of all these factors.

Q: Where do you stand when it comes to recycling in general, or just retreading tyres and creating a more circular economy from an environmental perspective? What has BKT been doing, and what is the next big thing in that space?

A: In a way, India is not just a country that recycles tyres; it recycles everything. There is a value chain at every part of that recycling. Yes, today these buzzwords are there, but if we take the case of tyres, for example, you do not find any big dumps of tyres in landfills. If you take a satellite picture, for example, in the UAE, you will find heaps of tyres almost as big as oceans.
But in India, you don’t find that. Why is it so? Because the tyre is stripped, shredded and used to its very last bit. Today the whole circularity is getting more formalised. The formalisation of that process is always there. There is a point which we need to accept: we cannot say that India was not, in fact, recycling. India, by the very nature of definition, recycles everything. You can see people scavenging through even early in the morning to pick out whatever is of use. From a formalisation point of view, the Ministry of Environment has already put the entire industry as part of Extended Producer Responsibility (EPR).

That means that the industry is responsible for whatever it produces and needs to be recycled in a circular way. There are resellers which were selling certificates, etc. All of that policy is similar to plastics and other materials. But the policy is still finding its way. Every year, it is improving. We are seeing more serious players coming in for pyrolysis and so on. The case that I want to build in particular is that the first port of call should be retreading. Especially as far as the commercial vehicle industry is concerned, retreading is an area which is not enough in India and can be maximised.

India also has a very huge overloading market. So if you find discipline there, then really healthy casings are going to be better. Then you can retread them. You can take the US, for example. They retread tyres four or five times. Whereas we don’t even do it once. It is about 20-30 per cent of tyres getting retreaded. But this 20-30 per cent can become 80-90 per cent.  That is what I feel is the first thing where the government should focus.

Now that our infrastructure and road infrastructure are better, if we were to have more discipline on the loading part and move towards higher speeds and better turnaround times, then the metric of measurement of how the economy moves can be tweaked in the right way. That will save a lot of accidents, result in less damage on the roads, and allow better technology and vehicles, higher performance, and eventually casings that can be reused a couple of times. That is one aspect. The other aspect of circularity is that the industry is a very mature industry, and each company has pledged what they are going to be doing by 2030 to 2050.

Everybody is working on putting more recycled material back into the virgin product. For example, recovered carbon black, using more crumb rubber, using more bio-products and less aromatic material. All that is happening in the industry, and it is happening at a very good pace. If one were to do a serious deep dive into the subject, you will find that the industry is very much ahead of the curve. It is not behind. In terms of energy usage, the whole thing has changed to the use of more renewable energy, etc. So a lot of action on sustainability and circularity is happening. The most obvious thing, which is that we should retread our tyres more, is not happening. That is something I would think needs the attention of the Central Government as well as the industry.

Q: Is policymaking more important than execution? Can’t companies do it themselves?

A: Policymaking is always the kickstarter. It is the accelerator and the catalyst for things to happen where normally the industry was not willing, on its own, to tread that path. So, to that extent, without policymaking, no big change can happen. Change has to be in terms of technology shifts. Regulation in India is doing a whole lot, but this is a missed piece of the jigsaw.

Q: BKT has dominated the commercial vehicle space for a long time with its tyres. When do you enter the passenger car segment, and what kind of opportunity does it provide?

A: We are looking at the latter half of the second half of the year. That is when we will enter the segment. We will end up with all the segments. It is a bit early to spill out the details. We will do it a little closer to when we have to launch. But it is an exciting space, you will have to wait a little bit for that. It will be interesting, I promise you that.