The competition is growing across the world. Even from India the other tyre companies are following BKT's activities very closely," says Arvind Poddar, Chairman & Managing Director, BKT. Excerpts from the interview.

China's tyre industry is sprucing up its technology and capacity to global standards. What is the impact of this on the Indian industry and its export capabilities especially on BKT's performance?
The Chinese local automotive industry is going to grow rapidly till 2020, and as a result they all are ramping up their capacities to meet the demand. And if you consider exports they are largely for PCR or TBR tyres. We are in the specialty tyre category, which is specially meant for agricultural, industrial, construction, mining sectors and other off-the-road applications. These applications have been termed as Off-Highway Tyre (OHT) applications. So there is no direct competition from this origin. I don't think it is going to impact BKT. Our policy is very clear; currently we are at 6 per cent of the world market share in OHT and with the new capacity, which is going to be on board, will take us to 10 per cent. BKT's contribution to the world market share will be 10 per cent in the Off-Highway Tyres by 2015.

So what sort of capacity expansions that you will be having?
We are putting up a greenfield plant in Bhuj (Gujarat). The initial production has already started, and the total capacity will increase by 75 per cent after the full commissioning. Current capacity is about 475 metric tonne per day.

What sort of growth do you see from the Indian mining sector?
Basically there are certain mines which are already operating in India. But from time to time we also see that there are issues which come up. Government is taking up those issues and there is going to be a good growth. And if you take a closer look, Coal India does not have any impact because of the slowdown, and we are a major supplier to them. After all, let me be very frank with you, there is tremendous growth opportunity in India.

Mining industry in India is huge and with a lot of potential. Mines like Coal India are well recognised across the globe. BKT is a leading supplier to them and our products are performing very well in all mines in India. Still there are tremendous growth opportunities, with the government supporting this sector.

Has the sharp correction witnessed in the input cost of key raw materials helped to ease out the sinking market size?
The input costs have been increasing continuously, which have now come down but not to the realistic situation. But, will certainly give some breathing space to the tyre manufacturers. The raw material price correction will not directly affect the market size in any way, which has also come down in the last year.

Is there any price war lurking on the wings?

Everybody is taking price corrections because raw material price has come down; but I would not say these are price wars, rather these are price corrections.

So do we see even BKT will come to that price correction range?
Yes, depending on the market situations we have also taken some price corrections. It's very hard to give the figure. We are operating across the world; to be precise we have our foot print in 130 plus countries, so depending on the market needs, we have taken the appropriate corrections.

Do you have any plans to increase the domestic share?
The current share of Indian market is about 8 per cent. We have been increasing our activity in the Indian market, so the volume will be higher in the Indian market but the pie will remain the same. But, it will be between 8 to 10 per cent.

What is the demand-supply scenario for small and ultra large size tyres for the OTR segment?
Both have different applications, different uses, and different markets. So yes, the economic slowdown has impacted the growth prospects, but by and large there is no major impact on us. Since last couple of years, we have been focusing on these tyres and our range is being expanded up to ultra large (OTR) tyres. So, we still see a huge potential.

How strong is the BKT equity in the replacement market?
Our major sales are currently from replacement market. I would say direct replacement is about 80 per cent. However, we have a strong presence in the OEM market also, and focus has been constantly increasing for this segment.

How do you place BKT as a provider of advanced technology products?
BKT provides 2,100 different Stock Keeping Units (SKUs) for various kinds of applications. We have products from 5" to 54" rim diameter. We have products available for the traditional vehicles like implements, trailers, forklifts, etc. to the technologically advanced machines like high horsepower tractors, combines, harvestors, GPS controlled vehicles, Articulated Dump Trucks, High-Speed cranes, sophisticated port vehicles and container handlers, etc. For the high power tractors we have the latest "IF" technology tyres which can be used at low pressure on the field as well as the road.

How technologically updated is your latest plant?
As mentioned earlier, we invest a lot of money to upgrade all our plants, with latest manufacturing technology. We have been exporting globally, and as I mentioned, 92 per cent of our production is exported. Our competition is with global tyre giants, so we always have to have an edge over technology and then only we can compete with the international players in the market. If you look at all steel OTR radial tyres for mining, we are the pioneers from India. Our new plant at Bhuj would be the most technologically advanced, comparable to the world leaders.

How successful is BKT in coming out with new range?
With the latest technology and R&D capabilities, our gestation period for new product development is very short. We develop about 150 new SKUs, every year. This has resulted in a wide range of products spanning up to 2100 SKUs, which is formidable in the industry.

Is there any more capex on the anvil?
We are going to invest around $375 million in our new plant, which will be fully operational by the last quarter of 2014. This is a huge plant spread across 300 acres and with the most modern machinery. As mentioned earlier, this plant will enhance our total capacity by 75 per cent. We invest about US$50 million every year to upgrade our plant facilities.

What is the latest trend in radialisation in the OHT segment?
The future is radial. Our new plant has a major emphasis on radials. This facility will also produce Ultra large and Giant OTR tyres up to 51" rim diameter. The tyres up to 35" rim diameter in radial OTR segment are already available and apart from this, in the agriculture sector we have radials up to 54". We also have specialised radial tyres for high speed crane applications.

Is there any move in the direction of green tyres?
If you see the BKT logo, it comprises of green shades, which represents the green philosophy of BKT. The same philosophy has been adopted in our manufacturing process as well as in the products. Our products comply with all the necessary country regulations. For eg, "REACH Compliance" for European markets, which does not permit the use of certain cancer causing oils and unhealthy chemicals. All our products, whether for Europe or any other market including India, comply with these regulations. This shows our commitment for a greener world. We have windmills set-up in Jaisalmer, Rajasthan for generating "green power". We keep our plants pollution free. For eg, for mixing of carbon black (powder), we have highly sophisticated "Auto Carbon Charging" unit, which eliminated manual loading. Hence minimises the air-pollution.

Brief us on the value proposition offered by BKT?
We produce quality tyres which are benchmarked against all the world leaders. We also provide service and training even after the sales. We provide a basket of services, and that's the value proposition from BKT. As I said, our tyres are benchmarked against the world leaders on quality front. Service is another major parameter what we seriously look into.

What are the challenges you see as far as this industry is concerned?
Apart from the slowdown in some markets, the competition is growing across the world, especially from the low cost origin including India. The "me-too" companies, without the production capabilities or focus on quality, are trying for a pie of OHT segment. This disturbs the market equilibrium. But, we are and would be far ahead!