The Resilience and High Demand of the Indonesian Tire Industry

by | Sep 14, 2022 | Market Research | 0 comments

How is the growth of the tire industry globally? What is the potential of the tire industry in Indonesia?

Tire Industry
Source: Unsplash

The value of the global automotive tire market was scored at USD 139.18 billion in 2015, and it is predicted to reach USD 218.87 billion by 2030 and grow at a CAGR of 3.8%. The global market is driven by the rise of vehicle production in developing countries and the tight competition among tire manufacturers. Additionally, the evolution in technology and fuel efficiency, also the increasing adoption of electric vehicles are expected to create bigger opportunities for tire market development.

However, factors such as raw material price volatility and the raising demand for retreading tires are also expected to drive the growth of the market as well. The tire market generally is segmented by seasons, vehicle types, rim sizes, distribution channels, load indexes, and regions. For the segment based on the seasons, tire products are mostly divided into summer, winter, and all-season tires.

By vehicle type, tire products are divided into passenger vehicles, commercial vehicles, and electric vehicles. Meanwhile, the commercial vehicles segment is further divided into light commercial vehicles and heavy commercial vehicles. Based on rim size, the market generally is segmented into under 15 inches, 15 – 20 inches, and over 20 inches. By distribution channels, the markets are divided into OEM (Original Equipment Manufacturer) and aftermarket. Last but not least, it is divided into up to 100 and over 100 for load index segments.

What is the largest market continence of the tire industry? Which opportunity from the tire industry has successfully expanded its market in Indonesia? Read this article to know more!

Asia is the Largest Market in Tire Industry

Asia was the first economy to bounce back from the coronavirus-caused shutdown. Despite the short-term setbacks, ongoing industrialization and economic expansion are raising personal income levels in Asia, leading to rising vehicle ownership both cars and motorcycles. This trend is creating dynamic opportunities for tire sales in the market, as outlined in the Smithers market report, The Future of Tire in Asia to 2025.

As a result of increased vehicle ownership rates, the tire replacement market in Asia will continue to grow. The Asian tire replacement market is expected to continue expanding in the future due to the rising car ownership rate. Asia is expected to account for more than two-thirds of the growth in global tire demand. COVID-19 had a major impact on 2020 tire sales, but the Asian tire market is expected to rebound by 2025, growing at an average of 3.6%. 

The Asian tire market is highly diverse, with passenger cars and light commercial vehicle tires predominating. There are also significant markets for medium and heavy trucks, buses, and special applications such as motorcycles, off-the-road (OTR) equipment, and aircraft tires.  General tires are expected to continue to account for the majority of the overall Asian tire market (84.2% share) through 2025, while significant growth is projected for aircraft, specialty, and OTR tires.

The high-performance passenger car/ light truck segment is the largest specialty tire segment by volume and price and is growing rapidly driven by the growth of a type of vehicle like CUV, SUV, and pickup truck segments in Asia. Trucks and buses are facing a somewhat subdued move as drivers become more concerned with fuel efficiency.

The premium motorcycle tire market will show the highest growth rate among specialty tires from 2020 to 2025, both in price at 6.8% CAGR, and volume at 6% CAGR. The market for premium two-wheel tires is still in its early stages in Asia, where these vehicles are primarily used for commuting. Three of the four largest tire markets in the world are all in Asia namely China, India, and Japan. 

The Increase in Vehicle Production in Developing Countries Contributes Tire Production Growth

Demand for automobiles in developing countries such as India, Brazil, and ASEAN countries is expected to grow significantly in the coming years due to increasing urbanization and industrial activity. Due to the growing demand for automobiles in the countries, manufacturers are increasingly setting up production facilities and expanding their presence in these countries.

In developing countries, automobile production is increasing due to factors such as good government policies, rising GDP, and rising consumer spending. Various incentives, such as 200% for engaging in vocational activities and tax incentives of up to 300% for conducting R&D, are offered by the governments of Southeast Asian countries to boost the region’s automotive industry.

Startups and industry leaders in many emerging markets such as e-commerce, logistic, food industry, etc., are seeing increased demand for delivery and transportation solutions, as well as increased production of commercial vehicles such as trucks, tractors, and trailers. The demand for automobile tires has increased significantly due to the increase in the production of heavy-duty vehicles.

Moreover, the growing demand for passenger cars in developing countries has led to a significant increase in automobile production in the region. Customers in developing countries such as India, Brazil, etc. are seeing significant growth in the introduction of sedans, SUVs, and heavy-duty vehicles, increasing demand for automotive tires in the region. Vehicle production in emerging markets is expected to increase significantly in the future, allowing the automotive tire market to witness growth.

The Opportunities of Indonesia’s Tire Industry

The Central Bureau of Statistics (BPS) recorded that in 2021 the tire import of Indonesia reached USD 123.6 million, while the exports reached more than USD 1.5 billion which made Indonesia a net-exporter country for four-wheel and two-wheel tire products.

The increase in production is being driven by economic recovery not only at the urban but also at the rural level. Rural economic growth contributes to the tire demand for trucks. On the other side, motorcycle tire sales growth is happened due to the growth of SMEs. The Indonesian Tire Association (APBI) forecasts that vehicle tire production will increase by 5.52% to 75,393 units this year from 71,443 units in 2021.

On the other hand, motorcycle tire production increased by 3.69% to 78,822 units. The Indonesian Tire Association (APBI) forecasts that this year’s production of automotive tires will grow by 5.52% from 2021 to 75,393 units. In 2019, the production of car tires was 75,291 units, while motorcycle tires were 66,390 units. Currently, the Indonesian tire market is dominated by local tire manufacturers.

Local tire production is currently dominated by car tires and motorcycle tires. Tire imports are still needed for product segments that are unable to be offered or produced by local manufacturers which has a specific market and do not endanger the domestic tire industry. At the same time, Indonesia remains an investment and business development destination for the tire industry, which will strongly continue to grow with new investments into the sector and supporting sectors such as natural rubber and chemical production.

The growth of the tire industry, even during the Covid-19 pandemic, has been reflected in increased production volumes and capacities of local manufacturers in line with local product development plans, making it an important contributor to the domestic economy. However, imports are still needed to meet the needs of markets that cannot be produced in Indonesia.

The Indonesia Bridgestone Tire Company assesses that in 2021 people’s mobility to travel by transportation has increased. This is in line with the increasing demand for tires. Although not mentioned in detail, in 2021 the increase in tire sales in the market has not reached the same level as in 2019 or before the Covid-19 pandemic emerged.

Because the tire market was also affected by the second wave of the pandemic that hit Indonesia in mid-2020. Several challenges that must be faced by the tire business players this year include constraints in the form of supply of raw materials to the continuing issue of logistics problems due to the scarcity of containers and ships. There are three famous brands in the tire industry in Indonesia likes Bridgestone, Goodyear, and Michelin which will be discussed further below:

1. Bridgestone

Bridgestone was founded in 1931 by Shojiro Ishibashi with its headquarters in Chou City, Tokyo, Japan. Bridgestone is known as the second largest tire manufacturer, having 181 production facilities in more than 24 countries. Managing Director of Bridgestone Tire in Indonesia, Mukiat Sutikno, believes that Bridgestone tire sales will continue to increase in 2022 so that they can continue the upward trend.

Bridgestone tire sales are expected to grow by around 8%-10% this year.In 2021 customers start to travel more intensely so all types of tires experience an increase. The Indonesia Bridgestone sells several types of tires, including Potenza, Turanza, Ecopia, Alenza, Dueler, Techno, Duravis, and Trucks & Buses Tires. 

2. Goodyear

Goodyear was founded in 1898 by Frank Seiberling and is headquartered in Akron, Ohio, USA. Goodyear is known for its strong network sales. Goodyear has simplified the tire buying process for its customers worldwide. In the fiscal year of 2021, Goodyear generated around USD 17.5 billion in revenue. This represented an increase of around 42% compared with the year 2020.

According to PT Goodyear Indonesia Tbk. (GDYR), will not take any action regarding the government’s plan to apply customs duties on rubber tire commodities. For information, the Indonesian government has begun to review plans for implementing Customs on rubber tires and several other commodities, detergents, and fuel oil (BBM).

3. Michelin

Michelin was founded by Andre Michelin and Edouard Michelin in 1889 and is headquartered in Clermont-Ferrand, France. Michelin has been named the world’s largest tire manufacturer with 69 facilities located in more than 18 countries. Michelin has the vision to promote sustainable movement around the world.

Its portfolio includes tires of various sizes and shapes that can be fitted to every type of vehicle. Recently, Michelin has offered innovative solutions to make mobility safer and more efficient. Michelin’s worldwide revenue increased from around USD 20.8 billion in 2020 to approximately USD 24.1 billion in 2021, a rise of about USD 3.35 billion. The company’s dividend for the year jumped to USD 4.57.

Enter The Indonesian Tire Market with BRIGHT Indonesia

Because of the huge impact of the tire industry in Indonesia, of course, it takes a lot of in-depth research about the tire market in Indonesia. So, to enter the Indonesian market, you need the right local partner to assist you.

BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

  1. Provide assistance for you in expanding and developing your business by identification of potential partners.
  2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
  3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
  4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net

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