Iranian Tyre Industry Looks to Global Players

Iran’s vast oil-rich, semi-arid landmass stretches out across 1,648,000 square kilometres between the Gulf of Oman and the Persian Gulf in the south and the Caspian Sea in the north. Wedged between Iraq and Pakistan Iran is the 18th most populated country in the world with 67,503,205 inhabitants at the last count. Iran’s economy is marked by a great reliance on the oil sector, including petrochemical and natural gas.

A growing industry

Taking this into account, it makes sense to pay attention to the activities of industries affiliated with car manufacturing. The central government’s control of industries in Iran has been substantially reduced since the government introduced a five-year expansion programme in 1991.

Gradual elimination of governmental involvement called for the increase of multinational companies’ interest in investment in the Iranian car industry. But these investments had a slow growth thanks to rejection of Iran’s application for WTO membership.

The Iranian car industry is 40 years old while, bizarrely, the country’s tyre industry has been around for 50 years. In recent years the car manufacturing industry has taken the lead in terms of technical know-how, and is growing faster than the tyre industry. Foreign investors have increased their activities in the Iranian car market. Examples include: Peugeot and Citroen (France), Mercedes Benz (Germany), Volvo (Sweden), Nissan (Japan), and Daewoo and Kia Motors (Korea).

More technology tie-ups

From day one, development and expansion of the Iranian tyre industry has been on an upward curve. However some segments, specifically, truck and bus/light truck tyres, have lagged behind. As a result, some of them have moved forward and signed deals with Western companies for technology transfer and bilateral cooperation. The resulting new technology tyre products are expected to hit the market later this year or next year.

This is in stark contrast with the passenger car segment where more advanced and updated technology (steel-belted radial tyres, for example) are being used than in other segments.

Low capacity, high costs

However, in general, there are some other problems plaguing the Iranian tyre industry such as low capacity/scale and high production cost in all segments.

Currently, the production of heavy truck tyres continues using bias technology. Some reasons for this are as follows:

• The complicated production process of all-steel radial truck tyres.
• The high investment cost and the low profit margin.
• The price of radial tyres is much higher than bias tyres, and this price difference is enough to turn off consumers with limited annual income.
• The country’s transport fleets are also outdated

In order to improve the situation in Iran the following areas need to be addressed. The “consumption culture” needs to be improved. Promotion of radial tyres needs to be taken up by highlighting their advantages (durability, high mileage, smooth driving, high speed, regrooving, etc.). Road quality needs to be improved and expansion of highways undertaken. And in order to do this companies should enter into joint ventures with major global tyre producers.

Raw material consumption

In 2004, the tyre industry produced about 200,000 tonnes of tyres in total. Natural rubber consumption accounted for about 65,000 tonnes, which was mainly imported from Malaysia and Thailand.

On top of this, as much as 40,000 tonnes of synthetic rubber, mainly sourced domestically and produced in Iranian petrochemical plants, was used. Finally 50,000 tonnes of carbon black and 20,000 tonnes of tyre cord were consumed.

So where did all the raw materials go? The vast majority of these materials were consumed by the nine leading tyre-producing companies in Iran – Kena Tire, Iran Tire, Dena Tire Production Complex, Pars Tire, Kerman Tire, Yazd Tire, Artaville Tire Co, Kavir Tire and Iran Yasa Tire & Arubber Co.

The first company to start producing tyres in Iran was Kian Tire when it embarked on a technical tie-up with BF Goodrich. This company now produces more than 40 sizes for all types of tyres. Recently, Kian Tire has started producing tyres under the Alborz name, as a way of supporting its market share. Kian has produced about a million tyres in 2004. The company plans to increase production up to 30,000 tonnes in 2008 and 50,000 in 2011.

Iran Tire Company was founded in 1963 as a joint venture with General Tire, in Tehran. The company’s nominal capacity is 28,000 tonnes per year. Current expansion projects envisage production increases to 30,000 tonnes in 2008 and 45,000 tonnes in 2011.

Dena Tire Production Complex has a nominal capacity of 40,000 tonnes a year and was established in 1974 with the cooperation of Bridgestone, Japan. Post-Revolution, it changed its name to Dena. In 2004, it produced about 1.8 million pieces. Dena plans to increase production up to 60,000 tonnes in 2011.

Pars Tire Co began production activities in 1983 in the central city of Saveh with capacity of 40,000 tonnes a year. When it was founded in 1976, the company worked in cooperation with Pirelli. The Italian company was also a supplier and a shareholder in the company. After the Islamic Revolution, Pirelli left.

Kerman Tire reports nominal capacity of 44,000 tonnes per year. Located in city of Kerman in the south-east, it started production after the revolution with support of domestic tyre producers joining in 1993. Kerman plans to expand its production to 70,000 tonnes in 2008 and 120,000 in 2011. The company expects to roll out its first all-steel radial truck tyres (produced with the technical assistance of Continental AG) very shortly.

Located in central Iran in the desert province city of Yazd, Yazd Tire mainly produces bicycle and motorcycle tyres. Capacity is 14,000 tonnes a year, a figure that the company projects will expand to 21,000 tonnes in 2008 and 35,000 tonnes in 2011. Yazd plans to produce passenger radial tyres with technical assistance from Vredestein.

Artavile Tire Co currently produces 25,000 tonnes of tyres. The company has a production targets of 40,000 tonnes in 2008 and 75,000 tonnes in 2011.
Founded in 1997, Kavir Tire, is one of the newest significant Iranian tyre manufacturers. Like Artaville Tire, its capacity totals some 25,000 tonnes, although it is only aiming to increase this up to 45,000 tonnes by 2011.

Iran Yasa Tire & Rubber Co, on the other hand, is one of the most established Iranian tyre producers having been founded 40 years ago. Located in Shahryar near Teheran, its current production is limited to bicycle and motorcycle tyres. Capacity amounts to 15,000 tonnes/year. It plans to raise production to 17,000 tonnes in 2008 and 21,000 in 2011.

At this point it is worth explaining that when the companies mention that they plan to expand, this expansion is focused on the transfer to radial technology. And when this is the case this is done so with the assistance of well-known, international manufacturers.

Being a neighbour to Arabic Middle Eastern countries that have high consumption and limited production abilities, and being close to the demanding African market are other factors that offer golden opportunities for the Iranian tyre industry.

On top of this the Iranian government has already allocated about $400 million for expansion of tyre industry projects up to 2008. Of course, $400 million is not much if the Iranian tyre industry really means to get to the next level, but it is a step in the right direction.

T&A acknowledges the use of information presented by Dr Saeed Taghvaei at the IRSG forum in Columbo, Sri Lanka in May, as reported by Rubber Asia. Dr Taghvaei, is managing director of the Tehran-based Rubber Industries & Research Co (RIERCO)