Off-road riders: The GCC off-highway tyre market
PMV talks to some of the major suppliers of off-highway tyres into the Middle East to assess the demand and the trajectory for the segment in the current market climate
The market for tyres is nothing if not a reliable one. Vehicles need tyres, and every active vehicles is going to require replacement tyres sooner or later. Tyres are no luxury, and short of entire fleets being parked off to the side, as was the case after 2008, the demand will be there.
It is therefore unsurprising that a report by TechSci Research, entitled ‘UAE Tyre Market Forecast & Opportunities, 2019’, anticipated a compound annual growth rate (CAGR) of 11% through to 2019. The report also highlighted that advancements within the sectors of mining and construction have heightened demand for commercial and off-highway vehicle tyres across the emirates of Abu Dhabi, Sharjah, and Dubai.
More surprising, though perhaps in part a function of the profitability of the consumer segment, is the infrequency of efforts by major tyre brands to address the off-highway segment directly. Bucking this trend, however, is India’s Balkrishna Industries (BKT), having singularly dedicated itself to the off-highway segment.
BKT is currently an OEM vendor for heavy equipment manufacturers like JCB, John Deere and CNH Industrial, and the bullish claims by the company are that it accounts for as much as 5% of the global sales of off-highway tyres.
And while the company’s range across the segment is extensive, it last year launched a 27.00R49 range (a popular size in mining) to fill one of the few remaining gaps in its giant off-highway tyres and help propel its market share to 10%, and raise revenue from $850m to $1.4bn.
Pertinent to these ambitions, BKT recently inaugurated a 121ha facility in Bhuj, Gujarat that represents an investment of roughly $500m by the company — with the capacity to produce 140,000 tonnes of tyre products a year and potentially double BKT’s production by 2017.
Commenting on the market, Rajiv Poddar, joint MD of BKT, notes: “The Middle East requirement is dominated by the construction segment, though mining, stone quarry, port operations and material handling also form a big part. We see markets like Qatar, Kuwait and the UAE as the major demand drivers this year.”
BKT is focusing on its range of all-steel radial off-highway tyres, including those for rigid and articulated dump trucks, wheel loaders, motor graders, reach stackers and straddle carriers.
Poddar details: “Construction consumers are driven by cost effectiveness and reliability, so these products need to ensure the highest machine utilisation at optimal cost — especially since the drop in oil prices and regional unrest have impacted the business potential.”
While the oil prices lend unpredictability to the market, 2015 presented a backdrop of broadly expansionist activities by tyre manufacturers and vendors. Al Habtoor Motors, the distributor for Sumo Firenza across the GCC, appointed Mohammed Omer Kabli Trading as its first dealer in Saudi Arabia, and Bridgestone appointed Zantrak International as its first distributor in Iraq.
Juma Al Majid, the distributor of Yokohama tyres in the UAE, meanwhile commissioned a showroom in Sharjah for products including up to 30" radius off-highway tyres, in an expansion of its tyre service centre network.
Michelin, in a similar vein, opened the first Michelin Truck Service Centre (MTSC) in the Mussafah industrial district of Abu Dhabi through its distributor, Central Motors & Equipment (CME) — an Al Fahim Group firm.
Michelin opened the first MTSC in the region back in 2009, but has expanded the network since to include 21 tyre-fitting and maintenance facilities across the UAE, KSA and Oman.
A key feature of the latest 900m2 facility is its advanced machinery and equipment, including a computerised truck-tyre alignment machine, truck-tyre balancing and repair machines, and a range of other tyre-related services for trucks.
Highlighting the various developments in building and transport in Abu Dhabi, as well as infrastructure in the Western Region, Oussama Jlailati, Michelin brand manager, says: “We continue to see demand for truck tyres and servicing since opening the truck service centre last year, and the clearest trend is the increased number of heavy-duty vehicles on the road.”
Moving forward, Michelin has plans to build upon its truck service centre network. Jlailati notes: “In line with our strategy and goals for 2016, we are expanding our portfolio further, as we are currently only partially covering some of the segments for off-highway applications.”
Intent on staying ahead of the curve, BKT is investing 5% of its top line into R&D activities every year. And according to Poddar, the need to adapt the product to local needs applies all the more for off-highway requirements. He notes: “Over the years we have constantly adopted and worked on more variants to suit specific needs.”
As an example, he notes: “We have provided our 18.00R33 SR45 tyres for the rigid dump trucks in Omani cement mines, where they have successfully and substantially lowered the cost of operation. Due to the strong carcass, the impact damages in these tyres is negligible.”
Alongside its R&D spend, BKT constantly reviews its existing products with a view to further improvement. Poddar recounts how BKT recently reviewed an agricultural tyre, and realised that with a slight adjustment the cost would increase by about 10%, but give the end user 20% more life — so the change was made.
Nevertheless, BKT is not positioning itself as a premium brand. Poddar explains: “You have premium products by manufacturers such as Michelin and Bridgestone, and then you have Chinese brands. However, there is a gap in the middle of these two for a quality product, but a more reasonable value-for-money offering — and costed per hour, or costed per kilometre, we can deliver the lowest total cost of ownership.
“Our strength is to provide a consistent product, and so we conduct 450 mandatory checks from raw material to finished product — on every tyre that we manufacture — to ensure that quality product reaches the customers.”
To combat the competition at a variety of price points, Michelin has plans to bring tier 2 and tier 3 products to compete in the market — so that at tier 3, its premium brand can compete with the Chinese tyre brands in Abu Dhabi.
Moreover for Michelin, aftersales service is an equally important part of the sales pitch. Jlailati explains: “We identify best-in-class tyre and servicing dealers in the market from our own network to transform their workshops into certified Michelin Dealers. This means there will be a greater supply of professional and certified outlets for the brands we represent, such as Pilot Advocate and Tyreplus.”
And indeed, in the last three years alone, Central Motors & Equipment and Michelin have invested over $5.45m into constructing facilities in Abu Dhabi, the UAE and across the region.
And it is working, as Jlailati explains: “We have seen a steady influx of customers servicing at our MTSC branch, and inbound requests for our mobile van to assist clients in remote areas.”
Michelin is now looking to penetrate new segments with its new tyre tiers, tyre dimension varieties and by venturing into unpotentiated geographical regions, like the Western Region.
Poddar adds that the Middle East is witnessing constant demand for newer construction machines, and that in response BKT is adding new sizes to its all-steel range to suit the demanding conditions of this region.
While optimistic, projecting forward Poddar highlights that some players may have to face up to the harsh realities of the depressed market. He explains: “BKT has a strong customer base which finds the product highly reliable, but looking at the whole off-highway segment, there are now many unorganised players in the market, and going forward we see more consolidation happening in this segment.”