With the growth in the domestic automotive industry at a steady climb, notwithstanding a slight slump at present, a tyre retail franchise business model has the scope to rake in good profits for entrepreneurs in India
India’s tyre market is estimated to grow at a CAGR of over 9%, in value terms, during 2017-2022. The major driver for the expanding tyre market of India can be accounted to the hastening sale of various segment vehicles among citizens due to the introduction of a wide variety of new vehicle models in the domestic market as well as growing purchasing power among the citizens of the country. In India, the market is currently being driven by the increasing radicalization of tyres, especially in buses and trucks.
The tyre industry consists of a vast consumer base; they are used in all type of vehicles which include passenger cars, buses, military vehicles, motorcycles, trucks, etc. The demand for tyres is primarily catalyzed from two end-user segments – OEMs (original equipment manufacturers) and the replacement segment. The replacement market currently dominates the tyre market, accounting for most of the total sales. Demand by the OEM segment is driven by new automobile sales trend, whereas the replacement market is linked to the usage patterns and replacement cycles.
The market for tyres is quite concentrated in India with the top 10 manufacturers accounting for around 80% of the total market. MRF, Apollo Tyres and J K Tyres currently represent the top players in this market.
Trends Affecting Growth of Industry
India has emerged as one of the world’s most competitive tyre markets due to the vast availability of raw material (natural rubber) and ultramodern production facilities. The county is known to be an appetizer of invention and implements new technologies and products, and the tyre industry is no exception to this. The concept of ‘green tyres’ is becoming a paradigm of the country’s competitive edge. This new category of tyres is now being widely accepted in India, and it is expected that in the coming years, the demand for green tyres will outperform the overall passenger tyre demand in the country.
The widespread presence of a well-established network of dealers and distributors is enhancing the market share of renowned tyre companies in India. Companies like Apollo and J K Tyres have started expanding their dealership reach throughout India among Tier III and IV cities as well to better fulfil consumer demand.
Requirements of a Tyre Franchise
The initial investment required for a tyre franchise in India would range from Rs 15-30 lakhs depending on the city with space requirement of 500-1,500 sq. feet. The cost of interiors would amount to Rs 6-7 lakhs, whereas the investment in stock would be Rs 5-10 lakhs. The operational expenditure of an average tyre retail franchise would be Rs 1.5-2 lakhs, with another Rs 80,000 to Rs1 lakh allotted to the salaries of three sales staff and one general manager of the outlet. The ROI for such a business model could take up to 18-24 months with a 7-10% mark-up on inventory sold and a specified rate of royalties paid to the franchiser.