Research Articles

The Auto Tyre Industry

Research Department,
Bangkok Bank Public Company Limited.

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2) The other main market for auto tyres consists of the market for tyres imported from abroad and the market for tyres produced in Thailand and exported.

• In the past Thailand had to import all auto tyres it used. But after local production started in 1964, the volume of imported tyres declined steadily. Now, only about 5 per cent of the total auto tyre market value is accounted for by imported tyres (about Baht 1,000 million a year). Most imported tyres are high-quality radial tyres which are low-profile tyres designed for use by high-performance and high-priced sports cars and luxury cars from Europe and the U.S. They are exclusively sold to up-market consumers. Dunlop, Michelin, Pirelli, Yokohama, Riken and Cobra are among the most popular brands. Imported tyres from Japan lead the pack with over 40 per cent of total import value, followed by tyres from South Korea, the U.S., Germany, France, Italy, Austria and Indonesia in that order.
• Auto tyre producers in Thailand began exporting tyres to foreign markets in 1969. At first, exports were made to solve oversupply problem. Both the export volume and value were minimal. Even by 1990, total export value of auto tyres was only about 14 per cent of the total value of the entire tyre market. Since then however, tyre exports have climbed steadily. Not only auto tyres made in Thailand are of standard quality but production cost also stays competitive. Tyre producers in Thailand, especially the newer ones, have also made considerable effort to find foreign markets that can absorb their products whenever domestic demand slackens. Currently, Thailand's auto tyre export accounts for about 40 per cent (some 8,000 million baht a year) of the total market value. In volume, it comes to around 10 million units annually. Major export markets for Thai auto tyres are Japan, the U.S., Taiwan, Hong Kong, Australia, Burma, Pakistan, Germany and Italy. Producers which are leading exporters are Bridgestone, Siam Tyre Group and Goodyear with market shares of 55 per cent, 30 per cent and 14 per cent respectively.

An Analysis of Strengths, Opportunities, Threats and Weaknesses of the Auto Tyre Industry

From a study done recently with available information and data, an analysis can be made as follows :-

1) Strengths

          1.1 Thailand is now the world's biggest producer of natural rubber, the basic raw material for tyre manufacturing.

          1.2 Thailand has a steadily growing market for motor vehicles. The number of automobiles is now about 7 million. Having an expanding domestic market for motor vehicles is a good, solid foundation for the auto tyre industry.

          1.3 Thailand is an automobile production base for the Asian and other regional markets of several auto makers of the world. This has resulted in an expanding OEM tyre market.

          1.4 Thailand's major tyre producers are co-invested the world's leading auto tyre makers (Bridgestone, Michelin and Goodyear), considerably strengthening the investment, technology and marketing aspects of Thailand's auto tyre industry.

2) Opportunities

          2.1 Both domestic and export tyre markets have plenty of room for further growth.

          2.2 Having world-class auto tyre markers co-investing in Thailand's auto tyre industry has greatly increased opportunities for Thailand in overseas markets.

          2.3 The fact that Thailand has become an automobile production base of several automobile makers of the world, which has already benefited the OEM market, will be a catalyst for the expansion of the REM market as well. This is because motorists, when buying new tyres to replace the worn or damaged ones, tend to stick to the same brand and to the original technical specifications.

          2.4 Thailand's major auto tyre producers, which are co-invested with the world's leading tyre makers, enjoy the advantage of having new technologies(the results of parent company's research and development) transferred to them, thus opening up new opportunities in the OEM market and, later on, benefiting the REM market as well.

          2.5 Thailand's auto tyre producers still enjoy low manufacturing cost compared to producers in developed countries. Thailand's auto tyre industry's labour is just as highly skilled but less costly.

3) Threats

          3.1 Thailand's shipping (merchant marine) business is troubled by high cost and frequent delays, presenting a threat to Thailand's auto tyre producers which are looking to the distant tyre markets in the U.S. and Europe. The shipping problem limits most tyre exports to markets within Asia.

          3.2 The truck market in Thailand still largely uses the bias ply tyres whereas export markets for truck tyres are mainly radial ply tyre markets. Unless the domestic truck market uses more radial tyres, radial tyre production in Thailand cannot expand much.

          3.3 Thailand's major auto tyre producers, being joint ventures, have to follow the policies of auto tyre makers like Bridgestone, Goodyear and Michelin. One of the policies is to make Thailand a production and export base for passenger car tyres and Indonesia a production and export base for truck tyres. Pushing for a change is not easy for Thailand to do.

          3.4 The government still does not support the proposal to reduce taxes on new, highly priced machines which must be imported. These machines are needed by the major tyre producers as competition in the OEM market becomes fiercer.

          3.5 Import duties imposed on production factors of the auto tyre industry are higher than those of other ASEAN countries. This makes raw material cost for Thailand's tyre manufacturing higher than other ASEAN tyre producers.

4) Weaknesses

          4.1 Apart from few major tyre producers, most of Thailand's medium-sized and small producers are short on capital, technology and marketing ability.

          4.2 Future competition in the auto tyre market will shift more and more toward technology and quality of the products, making it difficult for most of Thailand's producers, which are medium-sized and small, to develop themselves and become competitive.

          4.3 Thailand still imposes higher import duties on raw materials for auto tyre production as well as on finished auto tyres than other ASEAN countries. This not only makes tyre production cost higher but also overprotects local tyre producers. If Thailand must open up the auto tyre market in accordance with the AFTA agreement, the local auto tyre industry is likely to find itself less competitive.

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