Research Articles

The Auto Tyre Industry

Research Department,
Bangkok Bank Public Company Limited.

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Thailand's auto tyre industry began in 1964, when the Siam Tyre Company started its auto tyre production and became the country's first maker of auto tyres for the domestic market. Since then several other auto tyre producers have joined Siam tyre. The auto tyre industry has consistently benefited from a strong backing from the government. It has always been on the list of industries which receive investment promotional privileges. The committee for the development of the motor vehicle industry has also included auto tyres on the list of parts for passenger cars and small trucks which must be locally produced. These incentives coupled with high import duty imposed on imported cars and the fast growth of Thailand's market for passenger cars and small trucks during the past several decades have been a boon to the local auto tyre industry.

Even though production of cars and trucks experienced a slowdown when the economic crisis hit Thailand in 1997-1998, the industry has begun to recover since 1999. Apart from supplying the domestic market, Thailand's auto tyre producers started exporting tyres to foreign markets in 1969 and the rate of export growth has risen steadily since then.

The Structure of the Auto Tyre Industry

Today there are about 20 auto tyre producers in Thailand with a combined production capacity of 16.38 million tyres per year. Seven of the producers are large firms and their combined capacity makes up about 85 per cent of the industry's total. The rest are the medium-sized and the small producers. Additionally, there are firms which re-thread old tyres. They total around 80.

Thailand's auto tyre industry can be divided into three segments.

1) Major producers which are joint ventures. They are co-invested by the world's leading auto tyre makers. The plants are equipped with modern, high- quality machineries and use technologies of the co-invested tyre makers. Technicians are sent by the tyre makers to give production advice and solve problems. Marketing policies are formulated jointly. Thailand's major tyre producers are :-

• Siam Tyre Group or Siam Michelin Group Company Limited, which is a joint venture between the Siam Cement Group and the Michelin Company, France's major auto tyre maker. Siam Tyre Group operates three plants. One is in Phra Pradaeng district on the outskirt of Bangkok. Another is in Nong Khae district of Saraburi Province. And the third is in Laem Chabang industrial estate of Chonburi Province. The three plants have a combined capacity of about 4.83 million units per year.
• Bridgestone tyre Manufacturing (Thailand) Company Limited is a joint venture between Thai investors and Bridgestone, a major tyre maker of Japan. Bridgestone (Thailand) operates two plants, one in Rangsit, Pathum Thani Province, near Bangkok and the other in Nong Khae district of Saraburi Province. The two plants have a combined capacity of about 6 million units a year.
• Goodyear (Thailand) Company Limited, which is a joint venture between Goodyear Company, a major tyre maker of the U.S., and a group of Thai investors. Goodyear (Thailand) has a capacity of 1.95 million units per year.

2) Truck and bus tyre producers. These are the medium-sized producers which make the bias ply tyres for trucks and buses. The leading producers include the Otani Tyre Company Limited, Deestone Company Limited, Siam Karn Yang Company Limited and the Far East Rubber Company Limited. Theses producers turn out medium-quality and high - quality tyres for domestic market and export markets. Some like the Otani Tyre Company has begun making high - quality radial ply tyres for trucks and passenger cars.

3) Small producers which make low - quality tyres and re - thread old tyres. Low-priced bias ply tyres and re-thread tyres are largely for markets in Thailand's neighbouring countries with common borders. Together these producers number about 80 and can be found in all regions of Thailand.

Market Structure

Thailand has only three major auto tyre producers but they have a firm grip on the biggest share of the market. The auto tyre market itself can be split into two markets, one for domestic consumption and the other for export.

1) The domestic market accounts for about 55 per cent of the total sales of auto tyres (about Baht 11,000 million out of about Baht 20,000 million of total sales per year). The biggest share, around 45 per cent, is held by Bridgestone (Thailand). Siam Tyre Group's market share is 30 per cent and Goodyear (Thailand) 15 per cent. The remainder is shared by other producers. The domestic market for auto tyres can be subdivided into the so-called OEM (Original Equipment Manufacturing) and REM (Replacement Equipment Manufacturing).

• The OEM is the market for the auto assembly plants in Thailand which assemble mostly passenger cars and pickup trucks. The auto tyre producers are contracted by the auto assembly plants to make tyres according to the technical specifications and grades of various models of cars and pickup trucks. The business is in fact the result of the Ministry of Industry's requirement that tyres are one of the parts which must be locally produced. So the growth of the OEM market really depends on the number of cars and pickup trucks assembled each year. The OEM accounts for about 15 per cent of total market value or about Baht 3,000 million a year. In volume, it is around 2.45 million units annually. Bridgestone (Thailand) again holds the biggest slice of the OEM pie, about 60 per cent, followed by Siam Tyre Group at 25 per cent and Goodyear (Thailand) at 5 per cent. The remaining 10 per cent is shared by the rest of the producers.
• The REM market is where automobile users purchase new tyres to replace the worn or damaged tyres. This is a big market, accounting for about 40 per cent of the total market value or about Baht 8,000 million a year. In volume, the total sold is around 6.55 million units annually. Competition is fierce in the REM market. Siam Tyre Group has the biggest share (40 per cent) followed by Bridgestone (26 per cent), Goodyear (22 per cent) and the rest of the producers (12 per cent).

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