Yangon Tyre fends off competition for more growth as demand rises

Yangon Tyre, a homegrown tyre maker, wants to grow its local market share as demand for rubber tyres rises in tandem with various types of vehicles in Myanmar.

“As more infrastructure is developed and existing road conditions improve, there will be less need to replace damaged tyres, but the number of vehicles on the roads will nevertheless increase,” Dr Htin Kyaw Oo, CEO of Yangon Tyre, told The Myanmar Times during an interview.

With its second factory in Bilin now up and running, Yangon Tyre is already producing tyres for passenger vehicles and small trucks. This year, the factory began manufacturing tyres for bicycles and capacity is now up to 600 per day from 200 before.

The company is also finalising plans to expand its product range to include tyres for tractors and motorcycles. Currently, tractor tyres are mostly imported, but with demand rising from the agriculture sector, it’s time to start producing domestically, Dr Htin Kyaw Oo said.

Notably, although world famous brands like Michelin and Bridgestone are currently being used in the local market, the companies have yet to open manufacturing facilities in Myanmar. That puts Yangon Tyre in a promising position. With foreign production of tyres standardised for a global market, Dr Htin Kyaw Oo reckons Yangon Tyre has a good chance of capturing more market share by custom-making tyres that meet local requirements and which are priced at more affordable levels.

“The local tyre makers are able to understand better the needs of local users and custom-make tyres to suit domestic road conditions. This will give us an edge over the foreign tyre makers,” he said.

First local brand

Besides Yangon Tyre, there are two other local tyre brands: privately-owned Sapanan Brand Tyre in Mandalay and Tristar Tyre, which is run by state-owned Myanmar Economic Corporation.

Yangon Tyre is the first domestic brand to open for business, combining Taiwanese technology and locally-produced RSS-1 grade rubber to produce steel-belted radial tyres for large vehicles. It imports chemicals and other raw materials from Thailand, Indonesia, Vietnam, South Korea and Taiwan. Almost all its tyres are distributed locally via six wholesale distributors, while 5 percent of production is exported to Malaysia and Papua New Guinea.

The company started out in 2000 making and distributing tyres under the Myanmar Tyre and Rubber Industrial (MTRI) brand for state-owned Thaton Tyre Factory. At the time, capacity was limited and the industry relied hugely on imported tyres from India, Dr Htin Kyaw Oo recalls.

The company opened its first factory in 2008 at the Shwe Pyi Thar industrial zone and commenced production under the Yangon Tyre brand in 2010. In 2014, it leased its second factory in Bilin from the government to expand its product range to tyres for bikes and tractors.

Dr Kyaw Htin Oo said both factories were launched with funds from his own pocket. “I invested my own money to start the business in 2000 and reinvested the earnings since then to open the second factory,” he said.

It hasn’t always been smooth-sailing over the past 18 years though. “Electricity is essential for this business. As power cuts occur quite frequently here, this doesn’t just result in losses but also damage to machinery, which are computerised. We cannot install UPS backup for these machines and sometimes the machines can be down for days,” Dr Kyaw Htin Oo said.

Competition by regional rivals for market share of steel-belted radial tyres has also been intense. Based on Dr Kyaw Htin Oo’s estimates. “Even if you add up all the locally-produced steel radial tyres, including Yangon Tyre, it will only make up one tenth of the market,” he said.

Right strategy

Clearly though, Yangon Tyre has been able to continue growing despite the odds. Dr Kyaw Htin Oo said the secret to survival is getting pricing right. Compared to the tyres made in Thailand, Yangon Tyre’s products are at least 15pc cheaper, he said. Meanwhile, they are priced within the same range as those made in Vietnam. However, China-made tyres are still cheaper.

“Both the price and quality are intertwined. Our tyres cannot be too expensive because the international brands are of better quality even though they have a higher price. We are targeting demand for good quality tyres at lower prices. Compared to most overseas brands, our tyres are generally cheaper but the quality can also rival some of them,” he said.

Another strategy is by offering warranties. “We penetrated the market mainly by providing warranties as this gave customers a reason to rely on our brand,” said Dr Kyaw Htin Oo. For example, customers get a free replacement tyre or a new one at a discounted price, depending on the damage done to the original tyre.

“Our strategy to capture customers is by offering good quality tyres with warranties which are at the same time cheaper than the international brands,” said Dr Kyaw Htin Oo.

With imports getting dearer due to the appreciating value of the dollar, demand for locally made vehicles and tyres is expected to continue rising. That places Yangon Tyre in good stead for future growth.

Source: Myanmar Times

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