Market Assessment for an off-highway Tyre Manufacturer wanting to enter the North Indian Farm Tyre Market
Our client was involved in the business of manufacturing an extensive range of ‘off-highway’ tyres for agricultural, industrial, construction and earth moving applications, primarily for export markets. The company had focused on an innovation strategy, constantly finding profitable niches and servicing them. Since 1988, the company has moved from the OEM centric market for two wheelers and jeeps, to the replacement market for LCVs, to its present focus.
Given that agricultural tyres were a part of its export product lines, the client wanted to make an assessment as to whether it would be feasible to enter the Indian agricultural tyres segment primarily due to the size of the Indian market, which incidentally was 15 to 20% of the world market. Also driving this objective was the recent capacity expansion one of its plants, from 12,000 - 25000, creating one of the largest capacities in the region. This also allowed for potential economies of scale and a freight advantage due to its proximity to the main northern markets, the most mechanised agricultural belt in India. The client engaged Universal Consulting to conduct a feasibility report.
We examined two key market segments – the OEM and the retail format. We conducted extensive primary research across Punjab, Haryana, Rajasthan, Gujarat, UP and Delhi states and met with 249 farmers, tyre dealers, OEs and OE dealers to understand the following:
- Consumer preferences, unmet needs, dynamics in the purchase of farm tyres
- Competition: number of players, margins offered, prevalence of grey market
- Assess the importance of brands
- Retail formats single / multi brand, single / multi product line
- Range and pricing of products
- Response to a new brand, willingness to buy and at what price
- Distribution network of existing players and possible options for the client.
The client received a report that stated, based on the research and analysis, that it would not be feasible for the client to enter the retail market due to the following reasons:
- Absence of a strong brand in India
- Given the limitation of the product range (i.e. only tractor tyres), it would be increasingly difficult to have any measure of power with the dealers – other major players had already established relationships with dealers for a wider range of products. The distributors keenness to substitute those relationships with that of the client would require significantly higher margins to be meted out
The client also received a financial model that we built to back-up our conclusion. On the OE space, we outlined options for deploying a service model which would be critical for this market segment.