KSA TIRE MARKET ANALYSIS

A tire is a ring-shaped component that encloses the wheel’s rim, in order to transfer a vehicle’s load from the axle through the wheel to the ground. It also provides traction on the surface it travels. A variety of rubbers are used in the production of a single standard tire. There are two types of tires available namely non-pneumatic tires and pneumatic tires. The non-pneumatic tire is manufactured from solid rubber and plastic compounds and is not supported by air pressure. These tires are typically used for lawn mowers, scooters, and other types of light industry vehicles including carts, trailers, etc. On the contrary, pneumatic tires are flexible, hollow-shape rubber tire, and are maintained their shapes with air pressure. These tires are manufactured from synthetic rubber and rubber, wire, fabric, carbon black, and other chemical compounds.

The KSA tire market is estimated to be valued at US$ 3,431 million in 2021 and is expected to exhibit a CAGR of 11.8 % over the forecast period (2021-2028).

Recent Developments:

In February 2021, Al-Amoudi Co. Ltd., agents of “Toyo Tires Japanese and Korean Nexen Tires” in the Kingdom of Saudi Arabia, introduced its new “Platinum Warranty” for a period of 3 years on all its products.

In March 2021, The Ministry of Commerce and Industry has shut four tire recycling factories in Riyadh, Jeddah and Khamis Mushayt (Saudi Arabia) for violating quality and safety regulations.

In March 2019, German tire and technology company, Continental AG opened its first office in Jeddah, Saudi Arabia.

Statistics:

Figure 1. KSA Tire Market Value (US$ Mn), By Province, 2020

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Western province held dominant position in the KSA tire Market Value in 2020, accounting for 40.12% share in terms of Value, followed by Central, Eastern, Northern and Southern, respectively.

KSA Tire Market- Drivers

High growth of the automotive sector is expected to drive growth of the KSA tire market during the forecast period. Light commercial and passenger vehicle segments have witnessed a significant growth in the recent past. According to Coherent Market Insights’ analysis, in 2011, 15.35 million units of passenger and light commercial vehicles were registered in KSA, which increased at a CAGR of 8% and reached 20.93 million units in 2015. As a result of this, the demand for tires in the country is expected to increase in the near future.

Rapid industrialization and construction activities are expected to propel the KSA tire market growth over the forecast period. In 2014, the government of KSA announced development plans as a part of its Vision 2030, thereby emphasizing the development of manufacturing and construction sectors in the country. According to Coherent Market Insights’ analysis, the total GDP of the manufacturing industry increased from US$ 4 billion in 1975 to US$ 45.6 billion in 2013. Rapid industrialization and high growth of the construction sector have increased the demand for commercial vehicles in the country. As a result of this, the demand for commercial wheel-tire has increased significantly.

Market Opportunity

KSA automotive and automotive parts markets are majorly driven by imports from other countries around the world, as there are very few if any, manufacturing units in the region. Increasing vehicle parking in the region, in turn, is expected to create significant growth opportunities for global and local tire companies to set up manufacturing plants in the region. Supportive government policies such as 100% ownership of plant, equipment, projects, and other property by global players with lack of personal income tax, value-added tax, sales tax, land tax, property tax and maximum 20% tax on corporate profit further have created conducive environment market players.

Generally, steel is used to make tires durable. However, vehicles traveling on tough terrains require stronger and durable alternative. Kevlar is a specific type of aramid material, which is five times stronger and durable than steel and has a similar weight. Furthermore, Kevlar provides greater sidewall resistance to cuts and abrasion and is more resistant to punctures. Thus, integrating Kevlar instead of steel into tires is expected to provide major growth opportunities in the near future.

Market Trends

Various OEMs in the market such as Goodyear, Michelin, and Bridgestone are focused on adopting nanotechnology for production of tires. It helps to significantly reduce wear and tear of tires. Moreover, these tires are majorly preferred in KSA due to the extreme testing that tires are subjected to.

New regulations by Saudi Centre for energy efficiency (SCEE) mandate all distributors, agencies, and manufacturers to produce/sell fuel-efficient tires in the region by 2018. The rule is applicable to imported tires as well.

Key Takeaways of the Graph:

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• The On Road held dominant position in the market and accounted for 91.24% share in the KSA tire market in 2020. The segment is expected to reach US$ 6,932.35 million in 2028. This is owing to increasing demand for four wheeler vehicles.
• In 2020, the Aftermarket accounted for the largest share of 71.91% in the KSA tire market and is expected to be valued at US$ 5,478.4 million by 2028.

Market Dynamics- Restraints

Strict regulatory policies regarding used tires are expected to hamper the KSA tire market growth during the forecast period. The Saudi Ministry of Commerce has prohibited the sales and import of used tires. This is done to reducing increasing traffic accidents in the region attributed to the use of low-quality tires. Moreover, the ministry has banned sales of overhauled tires for use in vehicles other than those they were originally manufactured for. This is expected to adversely affect the used tire market in the region. Furthermore, Saudi Arabia standard organization (SASO) mandates that a certificate of conformity is required to import of auto aftermarket parts. Shipments arriving without a certificate of conformity are rejected at the Saudi port of entry. It is also crucial for the labelling and marketing of any product imported into Saudi Arabia.

High cost associated with tire, especially in commercial vehicle segment, is expected to restrain growth of the KSA tire market over the forecast period. The price of tires used for commercial vehicles such as trucks, trailers, Lorries, and more is very high. The average price of a commercial truck tire set is around US$ 100-130. Although these tires are long-lasting, initial investment, especially for a small transporter, is significantly high.

Competitive Section

Key players operating in the KSA tire market are The Bridgestone Group, Hankook Tire Company, Apollo Tires Ltd., Michelin Group, Toyo Tire & Rubber Company Ltd., Goodyear Tire and Rubber Company, Yokohama Rubber Company Ltd., Pirelli & C SpA Company, Cooper Tire & Rubber Company, and Continental AG.

Key Developments

1. Key companies in the market are focused on capacity expansion, in order to enhance the market presence. For instance, in February 2018, Yokohama Rubber Company Ltd. announced to invest US$ 60 million in its Yokohama India Pvt. Ltd., in order to double the annual capacity for tires.
2. Major players in the market are involved in mergers and acquisitions, in order to gain a competitive edge in the market. For instance, in November 2019, Cooper Tire & Rubber Company expanded its ownership in its joint venture by acquiring 100% shares from Trabajadores Democráticos de Occidente (TRADOC).