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Challenges for Chinese and Indian tyre producers
To stay competitive and avoid being locked out of the European Union and the US markets, Chinese and Indian tyre producers need to monitor these markets on an ongoing basis in order to keep abreast of anticipated changes in the regulatory landscape, says Nicolas Pechet, Vice President of China operations of Global Intelligence Alliance, a strategic market research and advisory group having expertise and coverage of over 100 countries.
At a time when Chinese and Indian tyre companies are catering to booming domestic markets on the back of robust economic growth, they are also looking out for mergers and alliances that would give them greater access to sophisticated markets in the West. Any successful market penetration attempts, however, can end up in failure if strategic decision-makers do not have access to effective market intelligence, particularly in the context of rising tariff and non-tariff barriers in industrialised countries.
"With the help of timely market intelligence, decision-makers can better understand their markets, keep close track of competitors and realise customer needs," says Nicolas Pechet, Vice President of China operations of strategic market research and advisory group, Global Intelligence Alliance.
"As a result, they can formulate better- informed strategic plans, adjust their products and production plans and improve customer services ahead of their competitors," he told Polymers & Tyre Asia. "Many global tyre manufacturers monitor their key markets on an ongoing basis all year round and commission market intelligence research on specific topics. These can range from conducting market sizing studies and customer surveys to assessing the impact of new regulations or competition."
Similarly, market intelligence can be extremely valuable for both foreign and local tyre manufacturers in China and India. Both these countries offer great potential but the domestic markets are already becoming more and more competitive. Changes with customers, suppliers, distributors and regulators happen rapidly here.
Says Pechet: "With the help of timely market intelligence, decision makers can better understand their markets, keep close track of competitors and realise customer needs. As a result, they can formulate better-informed strategic plans, adjust their products and production plans and improve customer services ahead of their competitors."
On a global basis, especially in the context of rising cost, tyre manufacturers can make better decisions on import and export destinations, on how to optimise purchasing resources and whether to relocate manufacturing facilities to low cost countries with high demand.
They should also study Western consumer expectations on product and services and adjust their product lines by learning from advanced Western manufacturing processes, either through joint ventures or other types of partnership, to shorten the lead time in technology transfer, he said.
Trade barriers
Pechet said tariff and non-tariff barriers in industrialised countries are just one of many market conditions that tyre manufactures should be monitoring.
In 2009, India's Apollo Tyres acquired premium Dutch tyre manufacturer Vredestein Banden BV as part of an effort to increase Vredestein's global value in the coming years. A move like this also allows Apollo Tyres to make inroads into the European market and overcome some of the tariff issues.
"Prior to the acquisition, they would have needed to conduct comprehensive market intelligence to ensure that they would have a good fit across their entire spectrum of R&D, products and people to manufacturing and markets," he said.
To effectively respond to the tightening of environment regulations by the European Union and United States, such as enforcement of tyre labelling and chemical restrictions, there is a need to be on top of the situation. These regulatory measures might hit the competitiveness of the tyre industry. Tyre manufacturers in China and India should leverage market intelligence to develop products and processes that would ensure their competitiveness.
"Manufacturing operations and processes take time to change. This means that to stay competitive and avoid being locked out of EU and the US markets, tyre producers need to monitor these markets on an ongoing basis, in order to keep abreast of anticipated changes in the regulatory landscape," said Pechet.
Changes can be detected in a number of ways, he said. "You just need to know what to read, where to look for clues and who to talk to on an on-going basis".
When asked what were the main sources of market intelligence that tyre companies in China and India could use for building brands and competitiveness in the global marketplace, he said market intelligence could help in building brands and staying competitive. But it is a long process. It depends on good product quality and customer service, large promotional activities, broad distribution channels, product innovation and sound supply chain management.
"Chinese and Indian tyre manufacturers can easily gather intelligence on their own through their own sales teams and by attending trade or by visiting consumer shows and seminars," he said.
Good events to start with include the Beijing International Automobile Exhibition, the Shanghai International Exhibition on Plastics and Rubber industries, as well as other international trade shows.
Other sources include patent databases, industry-specific media like Polymers & tyre Asia, technical specifications publications, competitor websites or press releases from other companies related to the tyre industry. On the other hand, commissioning strategic research on customers, competitors and distribution channels etc. is also useful.
Citing an example Pechet said that an automotive supplier approached GIA to benchmark their products against the global competition. Through a combination of secondary and primary research, including in-depth interviews with industry experts such as OEMs, suppliers, universities and research institutes, his consultancy provided a detailed benchmarking and SWOT analysis report that allowed this company to make a number of key decisions that impacted their brand and competitiveness significantly.
Emerging trends
Giving his analysis of the key trends that would have a defining influence on mobility issues in the coming ten years for which tyre and automobile makers should be ready, Pechet said it is all about high growth. China has the largest volume of automobiles in the world and is expected to continue to grow at 15% to 20% over the next two years. There is strong support from the Chinese government, especially under policies such as the "half tax on vehicle purchase" and "automobile subsidy for the rural areas".
The replacement tyre market is expected to be boosted over the next five years. He said: "Massive infrastructure, massive increase in penetration of automobile across the country and massive congestion are likely to ensue in Chinese cities, all of which will affect demand for tyres. Major improvements in air and train infrastructure and other means of public transport will curb demand, but only slightly."
Indian infrastructure is lagging behind China substantially. "However, we expect continuous improvement and build-out as well," Pechet said.
"We expect ultra compact cars to make a huge impact in India and China, where companies are pushing these to the masses who can only afford the cheapest cars. We also expect Chinese and Indians will become addicted to their cars just like Westerners have." Image problem
Looking at the global scenario, Pechet has interesting observations to make about the struggle of China and India to overcome stereotyping as low-cost, low- quality manufacturing countries.
Whether that struggle would be successful drew both yes and no answers from him. "Intensified competition will force change upon the industry. On one hand, it will force Chinese and Indian tyre manufacturers to produce higher quality tyres."
In India, companies such as Apollo, BKT, CEAT, MRF and JK are likely to turn their attention to export products in order to expand their markets and will, therefore, need to adjust their product line-ups.
"From the demand side, there are already segments of highly wealthy individuals in both countries who demand the very best but this is still a limited market. China for example, is now Rolls Royce's largest market outside of the UK," he pointed out.
"There are hundreds of millions who can only afford to buy the cheapest and ultra compact cars," the market analyst said. China and India will not emerge with any ultra high-end brands of its own in the coming decade, but will continue to push locally developed quality but low to mid-range vehicles, he felt.
Small-scale tyre companies, in order to stay competitive in the low-end market, will still produce cheap and lower quality products to meet the huge demand, Pechet said, analysing the market trends in China and India.
However, the challenges are many and surviving the competition requires quality and credible market intelligence for decision makers to map out successful strategies.
Author: Nicolas Pechet is Vice President and Head of Global Intelligence Alliance China.
This article and others from GIA's China practice can be found at Global Intelligence Alliance Insights and Analysis under Articles
About the Author
Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
Please visit Global Intelligence Alliance for more strategic market intelligence.
Obama got rid of Van Johnson, but what about the rest?
Van Johnson looks, on the surface, like he quit and is removed from Obama but not true. Van Johnson is still a board member at the Apollo Alliance....you know that group of lefties that wrote the stimulus bill that Harry Reid, Nancy Pelosi and others rubber stamped into law...along with Obama and Bush.
President Obama is taking this country down a socialist path while doing an unprecedented power grab for the Executive branch of government. Your congressmen are to write laws....not some leftie group.
Tell Obama to change his mind and return us to a path that will make America great once again. No one, not liberals and not conservatives are going to be happy when Obama fully implements his communist agenda.
I wish they would all quit ,Obama included!!
Garci ft Oschino - Rubber Band Gwap Produced by R5 Fiyah Of Alliance Music Group