General Tyre eyes export avenues

FATF curbs on smuggling, US duties on Chinese companies open opportunities

KARACHI:

In a corporate briefing held on Tuesday, General Tyre and Rubber Company Limited (GTRCL) revealed that the company is looking for export opportunities in Africa and Dubai.

According to Taurus Securities, the company is currently only exporting to Afghanistan. After it obtained the E-marking certification, however, it has started exploring the African and Dubai markets as well.

Chinese manufacturers, however, still have better margins due to low freight expenses and economies of scale. To gain market share, the company is expected to sell its products at lower margins initially to secure the export market.

GTRCL’s current annual capacity stands at 2.4 million tyres, of which 1.6 million are for automotive and motorcycle tyres, with current utilisation at around 50%.

The company produces tyres in sizes and patterns that cover almost 70% of those in demand in Pakistan. Most of the carbon black used as a raw material, however, is imported as local sources do not meet the quality standards.

Former chairman of the Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM), Abdul Rehman Aizaz said, “The financial action task force (FATF) imposing restrictions on Pakistan to curb smuggling, along with the US imposing high duties on Chinese companies, together have created a somewhat conducive environment for tyre manufacturers to invest in export-oriented sections.” Another company with big investments in the category is Service Long March Tyres (SLMT) – the first company in Pakistan to manufacture all-steel radial tyres.

SLMT has been designated a Sole Enterprise Special Economic Zone by the Pakistani government. The facility, which has a targeted annual production capacity of 2.4 million tyres, is being developed in three phases: phase one with an annual tyre production of 0.74 million, phase two with 1.2 million, and phase three with 2.4 million.

During its first 10 years of commercial operations, SLMT is expected to contribute around Rs23 billion (approximately $140 million) to the national exchequer in the shape of custom duties, sales tax, and income tax. The company is currently exporting to the US and plans to expand to the European Union and Brazil.

It expects to generate annual exports of around $70 million in its first year of commercial operation, eventually increasing to $300 million.