CEAT looks to grab opportunity in replacement tyre market growth fuelled by PV sales

Tyre maker CEAT Ltd is looking to cash in on the growth of passenger vehicles sales in India, which will boost demand in the replacement market going forward, according to the company Managing Director & CEO Arnab Banerjee.

The company is also gearing up to enter the passenger vehicles (PV) and truck and bus radial (TBR) tyre market in the US in the first quarter of the next fiscal, with an eye on making its international business one of the growth engines.

"Four million cars means immediate translation into replacement demand in the next two to three years. So it is a very good trajectory. The Original Equipment Manufacturer (OEM) trajectory is boding very well for the replacement market," Banerjee told PTI. He was responding to a query on the impact of the growth of PV sales in India on tyre makers.

In 2023, PV sales in India touched a record high at 41.08 lakh units, growing by 8.3 per cent over the previous year driven by SUVs, which accounted for almost half of the total dispatches from manufacturers to dealers.

Banerjee further said, "What is even more heartening is that we are gaining share in the replacement market, inch by inch, not in a dramatic manner.

Even if it is a decimal gain in a quarter it is a good share gain. We want to achieve market leadership in PCUV (passenger cars and utility vehicles), in a growing segment." The two other trends of electrification and premiumisation also augur well for tyre makers, he added.

"Half of the cars (PVs sold) are SUVs. The tyres are larger in size with higher margins. They are margin accretive. We are quite bullish on passenger vehicle tyres. We are investing heavily in R&D and in marketing as well. Yes the (PV) market growth is good news for the tyre industry in general and for CEAT in particular," Banerjee said.

The PVs tyre segment can be a growth engine for the company in the next two to three years as compared to truck-bus radials and two-wheelers in the domestic market, he said, adding the segment will also be a growth engine in the international market as well.

"We are very small in the international market. Although our scale is quite big, in the context of the market size we are small. So the scope for growth is high," he said.

On international expansion plans, Banerjee said, "We are launching in the US in Q1 (of next fiscal). So it will be a big play in the overall topline growth of CEAT in times to come. The US launch will be PCUV and TBR. We are already present in the agri radial there. So, there will be three categories which will be there in the US soon."

When asked for the outlook for the remaining part of the ongoing fiscal, he said, "We expect the replacement market to be better in February and definitely in March. January is a low month because of winter."

In terms of category, he said, "We intend to continue pushing for market share in our passenger categories. OEM definitely will be better in Q4 hopefully, because we will keep getting approvals." As for the international markets, he said there are some headwinds in Europe because of the recession.

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