Ceat Case Study

1.Products and Services

Products

CEAT has inner tubes, flaps &  the widest range of tyres in all categories such as

• Passenger Tyres - Cars, Motorcycle & Scooter tyres Auto-rickshaw tyres.
• Farms Tyres - Tractors, Trailers etc
• Heavy duty tyres – Heavy-duty Trucks and Buses, Light Commercial Vehicles, Earthmovers & Forklifts.

Service

Unconditional warranties (on non-manufacturing defects) up to 50% wear on all PCR sizes for purchases made from 1st April to 31st March 2011 Mode of replacement: The tyres will be replaced on pro-rata basis. Customer will be charged for the wear, to the extent of use.

Conditions:

1. The PCR tyres under this offer will be replaced for non-manufacturing defects on pro-rata basis within a period of 2 years from the date of manufacture or up to 50% wear whichever is earlier.
2. Non-manufacturing defects covered, which make the tyre unserviceable, are: Run flat, Concussion, Rim digging, Scoring, Non-repairable through cuts.
3. Repairable injury, serviceable injury, intentional damages, severe one side wear & misalignment wear will not be covered under this warranty policy.
4. CEAT Technical Service Engineer’s findings will be final binding for claims presented.
5. Claim tyres under this policy will be accepted only after verifying proof of purchase by customer.

2.Industry eco system

• All categories of tyres can be exported freely.
• All categories of new tyres can be imported freely. No WTO Bound Rates for tyres and tubes.
• Imports of Second hand/Retreaded tyres (major categories) is restricted under EXIM Policy and can be done against an import licence.
• Tyres imports under Regional Trade Agreements (Asia Pacific Trade Agreement, Indo-Sri Lanka, SAFTA, India-Singapore, ASEAN, India-Malaysia etc) allowed at preferential rates of import duty.
• All tyre industry related raw-materials can be imported freely (under OGL).
• Tyre Industry delicensed in September, 1989.
• Natural Rubber (NR) principal raw material of Tyre Industry, is in the 'Negative List` (i.e. not eligible for any concession in Custom duty) under various Trade Agreements, i.e. India ASEAN Free Trade Agreement, India Sri Lanka Free Trade Agreement, South Asian Free Trade Agreement (SAFTA), India Malaysia Comprehensive Economic Cooperation Agreement (CECA), India-Singapore Comprehensive Economic Cooperation Agreement and India-South Korea Comprehensive Economic Partnership Agreement (CEPA).

• Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and BalkrishnaTyres are some of the other significant players in the industry.
• While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres.
• The sector is raw-material intensive, with raw material accounting for 70% of the total costs of production.
• Total production figures in india is 1520.32 lakh tyres & total production of tyres in all categories: 1520.32 lakh (2015-2016)
• Current level of radialization includes 95% for all passenger car tyres, 60% for light commercial vehicles and 78% for heavy vehicles (truck and bus)
• Restrictions were placed on import of used /retreated tyres since April 2006
• Import of new tyres& tubes is freely allowed, except for radial tyres in the truck/bus segment which has been placed in the restricted list since November 2008
• Total tyre exports from India is 84.56 lakh.(Nos)(2015-16)
• The major factors affecting the demand for tyres include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, radialization, retreating and exports. 
• The natural rubber is currently exhibiting an upward trend in the last few months .While Natural Rubber (NR) prices trended up in Q4 2015-16 following policy measures, they are currently trading higher at Rs. 150-160 (per kg) levels.
• The Indian tyre industry revenues grew at a moderate 3.4% YoY during Q3FY2017 after the major impact of demonetization. The industry-wide revenue growth is estimated at 4-6% by the end of FY2017. It also adds that the profit margins are likely to remain at elevated levels with bearish outlook on rubber and crude oil prices.

3.Competition:

• At present there are 40 listed companies in the tyre sector in India.
• Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVS-Srichakra, Metro Tyres and BalkrishnaTyres are some of the other significant players in the industry.
• Market is dominated by few large players, with MRF remaining the leader: Over the years, MRF has been the dominant player in the country (estimated based on turnover) by virtue of its strong product capabilities apart from focused branding efforts backed by a deep distribution network panning across India and steady exports.
• Several players (Apollo, JK and CEAT in particular) have challenged its market share in recent years through prudent brand management backed by sizeable investments in product development / capacities. Global majors like Goodyear and Bridgestone have also increased their share in India in recent years.

4.Levels of channels

CEAT has three level distribution structure. The company has divided the sub-        continent into 33 regions with a local office for every region. The factory supplies         goods to the RDCs (Regional Distribution Centers) and from these RDCs the goods are transferred to 112 CFAs (Carrying and Forwarding Agents) which act as godowns for distribution to the dealers. In few cases, the RDC supplies tyres directly to dealers. There is only one DDC (Divisional Distribution Center) this is at Nashik and is used for Storage and Assembly of tyres, Tubes and Flaps from the Nashik plan[pic 1]