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Business News/ Money / Will CV radial tyres gain traction?
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Will CV radial tyres gain traction?

Will CV radial tyres gain traction?

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While 98% of tyres used in passenger cars are radials, the shift to radials has been very slow in CVs. Automotive Tyre Manufacturers Association (ATMA) data shows that only 18% and 8%, respectively, of light commercial vehicles and trucks and buses run on radials. A key reason for this could be the low demand for these tyres in trucks, given their prohibitive costs. Radial tyres are 15-20% costlier than bias-ply tyres and this factor has overshadowed their advantages of lower fuel consumption, improved safety, longer life and greater comfort.

Analysts expect the transition to be smooth too, as the timing is appropriate. Buoyant sales numbers and improvement in industrial production along with better road infrastructure have led to higher volumes in the T&B segment. Around 18 months ago, while there was a buzz on radialization in this segment, the slowdown in the economy had made companies defer plans. According to an analyst, “In the interim, growth in the tyre industry would be shared by both bias and radials, ensuring near-full capacity utilization in the former segment. But, as radialization gains momentum, tyre companies will have to contend with excess capacities in bias."

For now, the only threat is from rising rubber prices, which will lead to higher costs. The past two months have seen rubber prices rise by 50% compared with April, due to supply shortages. The onus is also on the CVs original equipment manufacturers (OEM) to fit radials on the assembly line, which is how the shift happened in passenger vehicles.

Convincing fleet owners of the long-term benefits of radials will play a key role in this transition. Gradually, it will lead to a shift in the replacement market too. The effect on the profit of tyre companies, of course, would be positive, since radials enjoy margins that are about 2 percentage points higher compared with bias tyres in the OEM segment. The differential would be even higher in the replacement market.

Write to us at marktomarket@livemint.com

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Published: 14 Dec 2009, 11:12 PM IST
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