India and China are the only two countries in the world that can consume the entire indigenous production of natural rubber. In India, although the raw rubber industry has remained pretty much the same over the years, the consumption of rubber is growing in proportion to the growth of the nation’s economy. The quantity of rubber produced currently meets just 50% of the requirement of the rubber industry. The rest is met by imports from countries like Thailand, Vietnam and China who produce a substantial quantity of rubber. However, in these east Asian countries, there seems to be more supply than demand.
Kerala rubber industry is a leading producer, contributing almost 90% of total natural rubber production of India. The rubber plantation sector in India produces over 630 hundred thousand tonnes of natural rubber, and there is a projected production of more than one million tonnes for the future. This has helped in the radical and rapid growth of the Indian rubber industry.
The quality of Indian rubber products has been globally accepted as exports have been growing at more than 20% YOY for the past more than ten years. Experience of entrepreneurs in rubber product manufacturing catering to a large domestic market, availability of quality technologists (made available from more than 40 institutes catering only to rubber technology) and low cost of experienced labour (which is now rapidly changing) are other positive factors.
Usually, the price of rubber goes up with the price of fuel. However, this phenomenon has been missing in the recent past.
The Indian Tyre Industry
Rubber is a significant component in the manufacturing of a tyre. There are three categories of rubber used in the manufacturing process viz. natural rubber (NR), styrene-butadiene rubber (SBR) and polybutadiene rubber (PBR).
The global tyre industry has been witnessing a shift in tyre manufacturing activity, with Asia carving a much larger piece of the pie concerning the number of plants. Almost 60% of the global tyre plants are located in Asia today.
In India, 50% of rubber is consumed by the automotive tyre sector. The Indian tyre industry is an integral part of the auto sector. It contributes to ~3% of the manufacturing GDP of India and ~0.5% of the total GDP directly. The industry has almost doubled from ~Rs. 30,000 crores in 2010–11 to ~Rs. 59,500 crores in 2017–18. The Indian tyre industry has been under raw material pressure for the last two years. The manufacturers say that they do not get rubber in the kind of quality that they want. Therefore, they are forced to source their requirements by going in for imports.
Tyre exports are estimated to grow by 8–10% over the next three years led by stable demand and increased acceptance of Indian tyres in overseas markets, both in terms of quality and pricing. It was around 9% in FY 2018.
The US and EU countries are the top potential markets for exports, and the driving factor would be the government signing trade agreements with these countries, which can provide concessional tariff for tyres.
So far as the consumption of rubber products is concerned, India is far from attaining any saturation level. This is another factor leading to tremendous growth prospects of the industry in the years to come.
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