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SRI LANKA
“Previously, we had a franchise network but it has not been very successful in this price-conscious Sri Lankan market, where the customers demand all kinds of brands,” explained, Roshan Fernando, Project Manager, Treadedirect Lanka Ltd
Low volume, low margins for medium and smaller players
The expansion is not only confined to market leaders; the mid-level players are also planning to expand their retread operations to bring volume as an answer to counter the low margins. A few smaller players are also planning new plants whilst the others are fighting for survival. “We have already ordered a new eight tyre chamber from Coimbatore based Rajmahaal to double our capacity as volume is the only way to cope with low margins in the business,” informed K G R P Perera, Managing Director, Ruviru Dag Tyre company. Therefore, the mood is positive in the domestic retreading industry. It is growing and people have started finding retreading as a viable option to new tyres. But smaller operations are affected by the low margins in the business, the margins have come down and vary from 5 to 10 per cent. “We are focussing on surviving in the market. It is more of a survival game for us at the moment,” stated Mr Mohammed Hillim of Kandy based Crown Tyre Retreaders.
Market controlled by big five
The two market leaders are self- reliant while others are sourcing
tread either from the Indian tread makers Treadsdirect or MRF, or from local tread suppliers. It has been recorded that Sri Lanka has about 35 retreading plants while the Sri Lanka Tyre Retreaders Association has 32 members. “A 75 – 80 per cent majority of the market is controlled by Richard Pieris, AMW, 3K, Autoways and Sumidag,” informed Ananda Caldera.
The Retreaders Association is lobbying for a complete ban on the import of old tyres into the country. The government has already banned the entry of 15- 20 year old tyres. “We are also lobbying for an import duty waiver on tyre retreading machinery and rubber chemicals to manufacture compounds,” Ananda said. When asked about the achievements of the association, Ananda recounted, “The Government levied taxes of 12 Rupees over the export of Natural Rubber and we are asking for a further hike in the next budget. VAT on electricity has also been withdrawn at our request.”
India’s Rajmahaal is the biggest machinery supplier to Sri Lanka
Interestingly, the retreading industry is completely dependent on machinery from Indian suppliers and kudos goes to Coimbatore based Rajmahaal, which has an almost complete grip over the Sri Lankan retreading industry. Rajmahaal has some kind of presence in almost every plant in Sri Lanka.
DIMO Caters to Vehicle Aftersales Market
Diesel & Motor Engineering PLC (DIMO) has been in the automobile business for seven decades with interests that include vehicle dealerships of global brands in Sri Lanka besides being into agriculture and construction machinery, power engineering and lightening solutions, infrastructure projects etc. DIMO has a small tyre retreading
are not keeping the same pace. Moreover, tyre retreading is not the company’s core business, it seems DIMO is focussing on other more lucrative business in its portfolio. DIMO has the capacity to retread 1,000 tyres per month and is operating at almost a fifth of its capacity. "We are retreading about 200 tyres per month and offering it
DIMO's plant is under utilised despite a good start five years ago. However the market dominated by large dealerships has restricted the market for retreading by limiting the margins
unit in the corner of its headquarters in the Sri Lankan Capital of Colombo. The company has drastically scaled down its retreading operation owing to rising rubber prices. “The rising rubber prices have been shrinking the margins in the retreading business. Now it has become unviable to operate," explained Sanjeewa Wickramarathna, Technical Executive, Tyre Department, DIMO. He also complained that DIMO does not manufacture treadliner and so has no control over the pricing. Tread makers keep on increasing the prices, whereas, retreading prices
as a service to our clients buying vehicles from us," Sanjeewa said. Previously, DIMO was doing outside business and retreading around 1000 tyres per month.
DIMO started retreading about 5 years ago and was buying tread from MRF initially. Interestingly, DIMO says that it shifted to Treadsdirect on the recommendation of Michelin for whom the company also has a new tyre dealership. The company has a strong base in Sri Lanka’s automobile industry having dealerships spreading all over the country including major towns like Kandy and Galle.