Ahead of this year’s edition of Automechanika Dubai, Messe Frankfurt hosted a gathering of stakeholders from the tyre industry in the Middle East to discuss major trends and developments in the segment — with a focus on the potential for growth amid both the growing demand for automotive aftermarket products and rising raw material prices.
In all, the demand for automotive aftermarket products and services in the Middle East is expected to grow by 5.9% annually to reach $17.3bn by 2020, and auto aftermarket players continue to sign up to this year’s Automechanika Dubai 2017 amid optimism over buoyant aftermarket trends and rising vehicle sales.
According to an analysis by Frost & Sullivan, while macroeconomic factors negatively impacted vehicle sales in 2016, renewed growth is predicted from 2017 onwards, and sales are expected to grow by 9% annually to reach 4.4 million by 2020 — bringing the total number of vehicles in operation to 44.5 million.
Within the aftermarket segment, there is an upward growth curve across components such as engines, parts and of course tyres. This year, more than 2,000 exhibitors from 55 countries will present to buyers and decision makers from across the Middle East, Africa and beyond.
Frost & Sullivan expects revenues from tyre sales specifically to reach $3.6bn in 2021 — rising at a compound annual growth rate (CAGR) of 9% from the market value of $2.4bn in 2016. Subhash Joshi, regional head for automotive and transportation at Frost & Sullivan, highlighted the development of new channels in the segment, such as digital sales, the improvement in the structure of regional distribution structure and the growing use of established private labels as a successful route to market, especially in Saudi Arabia.
Laying the groundwork for Messe Frankfurt’s roundtable discussion was Surender Singh Kandhari, founder and chairman of Al Dobowi Group, who explained: “Over the last two years we have experienced a bit of a downwards trend due to the rubber price going down and the over production of tyres in China.
“But since December last year the rubber price started to go up [by 30% to 40%] and we have seen a lot of changes in the market. Tyre companies in China have realised that they cannot afford to go on losing money, and so they have consolidated themselves. As a result, 2017 will be a very good year for the tyre industry, and all of the stocks in our stores have appreciated.”
Mohammed Aqel, GM, Central Trading Company, an affiliate of Al Rostamani Group, concurred: “We have had two, three years of hardship, and there have been a lot of challenges. Especially for the premium tyre brands, we face the challenge of parallel importers.
“We see influx of tyre brands that are well established because big local trade houses have invested heavily in those brands, and then someone else will come and reap the fruit of the investment that we have been doing all those years through parallel imports — buying stocks from all over the world and dumping them in our markets.”
Critically, he noted, such players work purely on the basis of price and operate with a completely different cost structure, without any commitment to the market or customer service. He added: “They don’t even care what happens to the tyre or where it is coming from.”
Aqel then turned to the subject of ESMA regulation requiring the use of RFID tags on all tyres, which the major manufacturers and distributors have invested heavily in implementing in the UAE.
Aqel said: “Lately we have seen ESMA trying their best to control the situations by enforcing the RFID, but we, personally, have not seen the benefit of the RFID, because of their inability to do the raids as expected. They told us they would be doing a lot of things that did not 100% materialise. We hope that, as a major trade house who has invested millions or maybe billions over the last 30 or 40 years in developing the multinational brands, we will [start to see] the protection that we are supposed to in return for all that investment.”