Ceat Sets Out Expansion Plans

Ceat Limited has outlined a £76 million capital expenditure plan spread over the next three years. The plan includes setting up of two greenfield plants, one for radials and the other for speciality tyres. This is a more ambitious plan than previously reported, as the company was expected to establish a single plant where all the above-mentioned activities would take place.

The radial plant, at an investment of £40.4 million, will have a capacity to produce 7,000 car radials and 700 truck radials a day. The speciality tyre plant will enable the company to further grow its OTR business. The company will fund the plants via a mixture of borrowings, internal accruals and money generated from selling real estate assets.

The company is currently exploring a number of options in India’s western and southern states of Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Tamil Nadu and should have final plans drawn up by April. The radial facility is likely to be located in Maharashtra, closer to the customer base.

The truck radial market in India is still a mere drop in the ocean. Out of the 800,000 truck tyres sold very month, only 25,000 are radials. Of this Ceat sells about 1,000. However, truck radialisation is slated to increase from the current 5% to 40 % over the next ten years. By then, Ceat intends to secure its position in the truck radial market. Currently, it outsources truck radials from Pirelli’s plant in Egypt and has arranged deals to obtain another 2,000 from the Italian major’s factory in China. It has also tied up with a manufacturer in China to outsource another 5,000 truck radials. “We will already be selling about 20,000 truck radials, before we actually set up our own hub,” commented Chowdhary.

Ceat is considering the possibility of some kind of joint venture with an overseas partner. “The company is currently exploring options of a technical tie-up for its radial plant but if it does not materialise, we will look at hiring technicians from abroad and going ahead with our plant,” said managing director Paras K Chowdhary.