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LATIN AMERICA EXPO
choice out of all available options. With the starting price of $120 per km, the mileage remains unknown, as it may vary from one brand to another, and even from one tyre to another. No retreading is possible and if the mileage is around 40,000 km, the eventual cost per km is $0.003, 50% up as compared to the premium brands, Romero said.
It turns out that the most cost- saving solution is using the services of the retreading plants right from the start. With a cost per casing of $50 and a price per first and second retreading cycle of $120 and $100, the customer could get a mileage of 180,000 km for only $270. This means that the eventual cost per km is $0.0015, and this is 25% lower compared to new tyres and two times lower, compared to the cheap Chinese tyres, Romero emphasised.
Retreading market will not pay for inefficiency
In addition, Hules Banda has run some research into the standards of production cost the retreading companies have to match in order to stay in business.
“Then, we ran an analysis of operational costs. What I have to say right from the start is that the market doesn’t bear inefficiency, if we are not efficient in what we are producing, generating and making, we are lost, because the market doesn’t forgive such things. So we looked into the balance, and estimated that if we have the basic costs of 100% and the raw materials cost of 50%, then we have a gross profitability of 50%. Another 6% accounts for payment for manual labour and another 6% for indirect costs,” Romero said. “If we have those costs lower, then it is great, but if they are higher it is very bad, because the market doesn’t bear inefficiency. So, all in all we have 38% profitability on sales, and then we must spend another 12% as costs on sales and 6% as administrative costs. If we pay more, we are being inefficient. The margin that the traditional plant shall have is 20% minus taxes, interest rates, as well as the amortisation and depreciation that company may have,” Romero added.
On the other hand, Hules Banda targets to cut the cost of raw materials down to 42.5% from the overall operational costs. This is the contribution of the company to the development of the retreading industry, Romero said. This is achieved through the new designs of offered products that provide the lowest weight per metre. There is also a special architecture in
each design that attains high- performance equilibrium with low weight, Romero added. All in all, the retreading company gets low- cost high-quality solutions.
Regional specific features
Retreaders in Latin America are now joining forces to face the current challenges. Romero said that there are, in particular,
industr y associations in Colombia and Ecuador that have pushed their national governments to move around and work on some measures aimed at helping the retreading companies.
Unfortunately, in many countries of the region there are still no associations of that kind, or there are no associations that are actually operating.
As for the regional focus, Brazil seems to be one of the leaders in Latin America, as the country produces on average 140 retreaded tyres per every 100 new tyres sold. According to Romero, the industry has been impacted by the current crisis, but the volume of retreaded tyres on the market is still very big. For comparison, Mexico has 45 retreaded tyres per 100 new ones, Ecuador – 30 retreaded tyres, Colombia – 25, Chile – 20 and
Panama – 15, Romero estimated. “There is only one single
retreading plant left in Panama. The others stopped operating. This is the reality we have,” Romero said, adding that things look much better in Guatemala. “They have
45 retreaded tyres per each 100 new tyres. This is one of the highest figures in Latin America and one of the biggest in the world. In Costa Rica some time ago for each new tyre sold they were retreading two, whereas now it is only 0.4, as many plants have been closed and many people are not interested in retreading any longer”.
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