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Financial & Marketing Aspects: a study of Motor cycle & Auto Rickshaw Tyre in Bangladesh

Executive Summery This is an internship report prepared by an IIUC student while undertaking an internship program at Uttara Motors Ltd. an enterprise of Uttara Group of Companies. Uttara Group of Companies is a company that was established to serve the beloved motherland with its new invention. In order to maintain its market position, company constantly seeks for quality products. This is an exploratory research work. Although other secondary and primary date was used for the completion of this project, this is mainly a secondary data base report. The primary data was collected from existing customer while secondary data mainly from UML- Business profile.

Bangladesh witnessed rapid growth in transport industry since independence. The overall annual growth rate for the year 2007 was 13% for passenger transport. The average growth of motor vehicle in Bangladesh is 10.11% and for Dhaka City it is 9.37%. In comparison to growth rate of other industry in Bangladesh, this sector is more attractive to offer investment opportunity.


In our study I have tried to give an overview of the market and the size of potential demand for a new comer. Whether the size is feasible enough in comparison to the investment, is a subject to study under financial feasibility. It was also found that in motor vehicle tyre industry a company produces different sizes and types of tyre. If we want to decide on the feasibility of manufacturing or initially trading tyre, we have to consider the comprehensive demand of different sizes. There is no manufacturer of motorcycle tyre in Bangladesh so far. The market size is attractive and prospective. The only consideration is the variety sizes. The number of tyre required in every size may not be significant, but if we concentrate on particular sizes like, 250-18, 275-18, 300-17, 300-18 the demand is significant. If Uttara Group wants to get the market of motorcycle tyre, they have to consider the market of motorcycles imported as CKD basis. APG & Gazi already proved that local tyres could replace the imported tyre market for 400-8. Still there is a gap of significant number of tyres every year. So, there is a good opportunity of manufacturing 400-8 tyre in Bangladesh.

1.

Introduction:

Bangladesh is one of the largely populated countries where new roads are still under construction and various types of vehicles are playing on the road. So, supplying tyres for these vehicles are one of the most attractive opportunities to invest. As the capital required for this industry is high an intensive study is essential for investing in this industry. Till to date only two companies are manufacturing tyres in Bangladesh in specific sizes. But the market is mostly served by the imported tyres from different origin and different suppliers. Normally a Motorcycle or Auto rickshaw is used to solve the communication purpose. In Bangladesh different kinds of Motorcycle or Auto rickshaw are used and bajaj brand is one of them, which Uttara Group of Companies has introduced. Uttara Group of Companies was established in March 1973. This group is one of the leading industrial, trading & agency house. It represents country’s largest automobiles sector, which mainly holds the distributorship of Japanese & Indian origin automobiles. These automobiles mainly various types of basic vehicles contribute towards the fulfillment of demand of the country’s transport and communication sector. In this report I have mainly concentrated on the Super Kinag tyre which will be known as Uttara tyre. This study will identify the market aspect of marketing Super King tyre and also financial impact.


Uttara Group is one of the leading business conglomerates in Motor Vehicles industry with diversified investments in multiple industries. Uttara Group identified this opportunity and wants to have a preliminary study on the marketing feasibility of different tyres. We are talking about marketing feasibility & financial viability because the other aspects like technical feasibility is beyond the scope of this study. I hope this study will provide required outcomes for decision making for manufacturing or trading different size of tyre.

2.

Objectives

The demand for any tyre is derived from the number of vehicles sold in a year and frequency of tyre replacement i.e. how many number of tyres are sold as replacement. A large share of market relates to the new vehicles (especially Motorcycle) importers and another share lies to the only tyre importers. So, studies the marketing feasibility of different category of tyres also requires a study on the related industry and responds to the questions of followings. • • • • • • •

Number of Motorcycle & Auto-Rickshaw in Bangladesh and its growth. Yearly market requirement of different size Motorcycle & Auto-Rickshaw tyre. Market share of different brand of Motorcycle & Auto-Rickshaw. Different size of tyres used by different brand of Motorcycle & Auto-Rickshaw. Average replacement time of Motorcycle tyre. Information on the available brands of Motorcycle tyre. Pattern of tyre (For front and rear of a Motorcycle& Auto-Rickshaw).

In addition to the above mentioned requirements this study hav considered the following requirements: Market profile on 400-8 size tyre Market profile includes following data on each segment: • Present size of the market • Growth rate of the market • Price comparison • Market information regarding manufacturer & supplier.

3.

Methodology:

Both primary and secondary data is required for attaining the objectives of the study. Data on market share has been collected from company’s dealers’ conference report, which is justified, by our market survey in different location of Dhaka City.


Secondary data has been collected from BRTA, Company’s publications, Business consulting group & Statistical Bureau Report. Under probability simple random sampling method has been utilized to collect primary data. For the ease of understanding and application simple random sampling method have selected. The researcher select potential customer, by picking up every second name from the customer list of Uttara Group. The population of this study is not general in type. Specific group/persons may need to be selection as the sample for getting the needed data. After collecting data, qualitative analysis has used. The response of the respondents has been entered into the computer for tabulation and analysis. Sampling Method: Units: Customers 7 dealer who used bajaj product Extent: The study conducted only in Dhaka City because of time & financial constrain. Sample Frame: The Company was given the customer list about last 06 months. Sample Size: In this study 70 existing customer & dealer has picked & 70 are minimum size of sample for Qualitative research. However, in some cases sample size are extended to 300 to find out exact scenario of the present market.

4.

Scope:

During conducting the research, I have got introduce with real life marketing arena. For the said reason, I had to work with retailers, dealers, tyre shop & high officials of Uttara Group. It gives a practical idea present tyre market. I have gathered relevant information regarding landed cost of tyre from commercial department of Uttara Group to assess financial viability of this study.

5.

Limitations:

Internship report usually has some limitations. This study is also limited for the following reasons: • Its sample size is limited taking in consideration a huge number of populations in Dhaka City & Bangladesh. • Researcher has limited access to the related literature review due to lack of journals available on the measured variables as well as restricted access to the internet & software based library. • The data that will be collected at a particular period. • The sample is limited in terms of its size & composition.


• The study conducted only in Dhaka City because of financial constrain. • The study do not necessarily considered IRR as different opinion of technical personnel regarding project cost. • Technical feasibility is beyond the scope of this study

6. 6.1

Findings and Analysis thereof: Company & Product information:

a) Company Profile: Uttara Group of Companies was established in March 1973. The group is one of the leading industrial, trading and agency house and also represents country’s largest automobile sector. Uttara Group of Companies is a bunch of private limited company offers wide range of multidisciplinary trading and marketing services in aimed at the fully geared to achieve a sustainable break-through in the business world. The treading sector; mainly holds the distributorship of Japanese and Indian origin automobile manufacturers and various type of basic vehicles, which contribute and fulfill the demand at a large, extend of country’s transport & communication sector. The industrial activities fairly include assembling of Truck, Buses, Autorickshaw, Motor Cycle and manufacturing of Luxury Coaches and exports of Apparels, knit wear, sewing thread. Uttara Group of Companies (UGC) is deeply committed to fulfill customer’s demand and cares about customer’s desire & taste. Placing emphasis on this important aspect UGC has initiated a new edge of business activities bridging a two-way traffic between the manufactures and the ultimate consumer in the present competitive world market. To protect valued customer’s interest, saving, safety, security, comfort and satisfaction the Group has also introduced and investment financing scheme. b)

Product information:

Government approved automobiles marketing company, sole distributor of Isuzu, Suzuki vehicles from Japan, Swaraj Mezda & Maruti vehicle from India. Parts & accessories, Sawafuji generator from Japan, Scott & English industrial generator from Singapore. c)

Product lines:

Assembling: • • • •

3-wheeler Bajaj Auto-rickshaw. 2-wheeler Bajaj Motor Cycle. Isuzu Commercial Vehicle (Bus, Truck, Pickup) Swraj Mazda Commercial Vehicle (Bus, Truck, Pickup)

Sole Distributor:

• Suzuki Vehicle • Maruti Vehicle • Isuzu Vehicle


• Swraj Mazda Vehicle • Sawafuji, Scott & English generator • Bridgestone Tyre

Manufacturer: • • • • •

d)

Knit Fabrics Knit & woven Garments Sewing Thread Pharmaceuticals Re-treading Tyre. Company’s aim:

The sky is not the limit for them but their expectations are within limit. Their imagination soars beyond conventional barriers. They share their destiny with their beloved motherland they want to serve her the better in the greater quest for nation; economic emancipation. e)

Market position & competitors:

Uttara Motors Ltd. sole distributor of Bajaj Auto Ltd. has achieved highest market share in the last financial year, achieving 53% share company had to face tuff competition. About 12 automobiles companies are involved with 2-wheeler marketing and they are offering attractive package of price and features to their potential customers. The main competitors of Bajaj are Hero Homda, TVS, Yahama etc. Beside these several number of Chinese Brand are available in this market are achieved a remarkable market share. As a heist market shareholder UGC will have to try to grip the share first position and expand their product line.

6.2.

Literature Review:

a) Transport sector in Bangladesh: An adequate and efficient transport system is a pre-requisite for both initiating and sustaining economic development. Investment in improving transport efficiency is the key to expansion and integration of markets-sub-national, national and international. It also helps generation of economies of scale, increased competition, reduced cost, systematic urbanization, export-led faster growth and large share of international trade. The transport system of Bangladesh consists of roads, railways, inland waterways, two seaports, maritime shipping and civil aviation catering for both domestic and international traffic. Presently there are about 80,915 of paved roads. Bangladesh witnessed rapid growth in transport industry since independence. The overall annual growth rate for the year 2007 was 13% for passenger transport. Even then the transport


Intensity of the Bangladesh economy is considerable lower than that of may developing countries. Number of motorized vehicles in Bangladesh and in Dhaka City is shown in the following table (As registered in BRTA) Year 1999 2000 2001 2002 2003 2004 2005 2006 2007

Bangladesh 552,001 580,765 623,275 678,152 737,400 786,602 852,480 932,785 1,054,057

Growth (%) In Dhaka 5.21 7.32 8.80 8.74 6.67 8.38 9.42 13.00

229,184 246,441 267,006 287,973 303,215 324,686 351,465 385,428 422,370

Growth (%) Remarks 7.53 8.34 7.85 5.29 7.08 8.25 9.66 9.58

Table 1: Total number of Motor Vehicles in Bangladesh & in Dhaka City The average growth of motor vehicle in Bangladesh is 10.11% and for Dhaka City it is 7.95%. In comparison to growth rate of other industry in Bangladesh, this sector is attractive. If we consider the fifth five-year plan of the Government, the growth of road transport is more emphasized over rail and inland waterways. Completion of Dhaka Eastern By-pass, Mongla/Khulna-Northwest corridor, Asian High Way will offer additional prospect to invest in transport sector. The actual number of motor vehicle in Bangladesh (Specially motor cycle) may differ from the number registered under BRTA for the purpose of the study we will consider the data of BRTA. b) Tyre for motor vehicle: Every year new demand for tyres is created for the new vehicles, which may register, or not in our country. On the other hand there is a demand for tyres for existing vehicles as replacement of old tyre. The replacement depends of kilometers ran by the vehicle, loading, condition of the road etc. So total demand for tyres is demand for new vehicles and the demand for existing vehicles. A large number of tyres required for these entire vehicles are supplied mostly by Indian, Indonesia, Japan, China, Thailand and some other countries. Apex Polymer Group is pioneer in manufacturing of motor vehicles tyres in Bangladesh. Thy started with tyres for 3-wheeler (Auto Rickshaw) and successfully took the place of imported tyres up-to


their capacity. Another renowned company Gazi Tyres started their production and commercial supply of Auto-Rickshaw tyre in the year 2000. With the success in first motor vehicle tyre Apex Polymer Group focused on other sized and eventually they identified the light truck category. They started to produce 750-16 and so far they have obtained a good faith in customer. Till to date there is no manufacture of motorcycle tyre in Bangladesh. So the prospect of manufacturing motor vehicle tyre in Bangladesh is still an attractive arena to search. Motor vehicles tyres are imported under certain H.S. Codes. We have concentrated on following motor vehicles tyres: H.S. Codes

Description

4011.20.20 of a kind used on busses or lorries of rim size 15 and above namely 560-15, 59015, 640-15, 670-15, 710-15 (All ply Rating), 700-15 (6-8 PR), 600-16, 650-16, 700-16, 750-16 (7-8 PR) 4011.40.00 of a kind used on motorcycle

6.3

Motor Cycle sector:

Motorcycle is the single most used personal vehicle in Bangladesh. According to recent data of BRTA a total of 525,751 motorcycles registered in Bangladesh and among them 1,73,637 motorcycles only in Dhaka City upto the year 2007. The actual number plying in the roads may be higher, as in border areas some motorcycles are used without registration and some other with fake registration. For the purpose of the study we will consider official data as a basis of study. The total supplies of motorcycles are based on import. Some of them are imported as CBU (Complete built-up) and some as CKD (Complete knock down) i.e. imported as accessories and assembled locally. A list of importers is presented in appendix-I. a) Market share of different brands: Different brands of motorcycles are running on the road from different origin. Average life (Replacement time) of a motorcycle from Japan origin in higher that Indian origin. The market share of different brands shows the picture of the number of motorcycle running on the road and certainly not the reflection of present sales. BAL (Bajaj) HERO HONDA TVS YAMAHA LML

2005-2006 12,953 18,775 4,268 2,100 1,450

2006-2007 23,084 19,443 4,947 3,800 840

2007-2008 38,998 24,930 5,600 4,000 0


2005-2006

5%

4%

11%

33%

47%

2006-2007

7%

9%

2% 45%

37%

2007-2008

8%

5% 0%

53%

34%

BAL

HERO HONDA

TVS

YAMAHA

LML


b) Motor Cycle Tyre: Till to date there is no manufacturer of motorcycle tyres in Bangladesh. The total market is served by imported tyres of different origin. There are a wide variety of motorcycles in the country. Tyre sizes vary also with the model of motorcycles. Again sizes of front and rear tyres also vary in a particular motorcycle. So, a cautious study is required to decide on the feasibility of motorcycle tyre. During the study we identified a large variety of motorcycle tyres in terms of there sizes, brand and origins. A table has been attached in appendix-II; you will be able to get a picture of variety of brands, tyres sizes, tyre brands from that table. c) Demand for Motor Cycle Tyres: Demand for motorcycle tyre is derived from the number of motorcycles. While motorcycle is imported on CBU basis there is no opportunity of supplying a new tyre for those motorcycles. But when motorcycles are imported, as CKD basis there is a potential market for supplying motorcycle tyres for those motorcycles. From the survey it was found that the replacement time of motorcycle tyre (though depend on frequency of use) is 24 months. So, the demand of tyre as replacement is not negligible. So, the demand for motorcycle le tyres can be calculated as follows: Yearly demand D = No. of motorcycle x 2 x Replacement multiplier Year

Total Motorcycle inNo. Of Bangladesh Required

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

232,181 246,795 271,204 300,251 321,347 346,288 389,514 440,620 525,751 627,326 748,525

464,362 493,590 542,408 600,502 642,694 692,576 779,028 881,240 1,051,502 1,254,652 1,497,051

Table: Yearly Requirement of Motorcycle Tyres

Tyre

Adjusted replacement factor (20%) 371,490 394,872 433,926 480,402 514,155 554,061 623,222 704,992 841,202 1,003,722 1,197,641

for Growth Rate 6.29 9.89 10.71 7.03 7.76 12.48 13.12 19.32 19.32 19.32


So, the projected demand for motorcycle tyres (in quantity) is 11,97,641 pcs by the year 2009. Sizes of motorcycle tyres vary with the model of motorcycle. Front and rear tyre in the same motorcycle also varies. From the survey it was found that for some specific sizes there are higher demands. If we calculate the total demand according to size the number is not impressive enough. But if we concentrate on particular sizes the demand is significant. Summary of Front Tyre Size Sl No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Total

Tyre size 90-18 225-17 250-17 250-18 275-17 275-18 275-21 280-18 300-10 300-17 300-18 350-10 Others

No. of samples 3 18 20 90 15 82 5 4 3 7 40 4 9 300

Percentage

Table: Result of sample survey on size of Motor Cycle front Tyre

1.00 6.00 6.67 30.00 5.00 27.33 1.67 1.33 1.00 2.33 13.33 1.33 3.00


30% 25% 20% percentage 15% 10% 5% 0%

Series1

1 2 3 4 5 6 7 8 9 10111213 Tyre size

As front tyres of motorcycles, demand for 250-18 and 275-18 is high. There is also some demand for 300-18. Summary of Rear Tyre Size Sl No. Tyre size No. of samples 1 250-17 25 2 250-18 27 3 275-17 36 4 275-18 57 5 300-10 4 6 300-17 47 7 300-18 73 8 350-10 4 9 410-18 6 10 Others 21 Total 300 Table: Result of sample survey on size of Motor Cycle Rear Tyre

Percentage 8% 9% 12% 19% 1% 16% 24% 1% 2% 7%


80 60 Percentag 40 e 20 0

250-17 250-18 275-17 275-18 300-10 300-17 300-18 350-10 410-18 Others

Share of Rear Tyre Size

Series1 Series2

1 2 3 4 5 6 7 8 910 Tyre Size For the rear tyre different sizes were found as momentous like 275-17, 275-18, 300-17, 300-18. As we can see from the above analysis that 250-18, 275-18, 300-17, 300-18 are mostly used tyre sizes both in front and read position. d)

Market Share of Motorcycle Tyre According to Brands

A lot of brands were found in Motorcycle tyre market. As the number of brands is so high, it is insignificant to identify share of any particular brand. Same brand is also coming from different origins. Among the brands, Bridgestone, Dunlop, MRF, Golden Boy, Goodyear are occupying the share of market respectively. The reason behind wide range of brands is tyres are mostly imported along with the motorcycle, where the brand becomes insignificant.

e)

Market Share of Motorcycle Tyre According to Origin

The data collected from the study shows that the motorcycle tyres are coming mostly from India. Japanese tyres are occupying the second position in the market. Among other countries Pakistan, Indonesia, Korea, China are supplier of motorcycle tyre respectively.


Sl No.

Origin

No. of samples

Percentage

1

China India Indonesia Japan Korea Pakistan Others

32

5%

324

54%

60

10%

91

15%

37

6%

51

9%

5

1%

2 3 4 5 6 7

600 Table: Market share of Motor Cycle Rear Tyre

Others Pakistan 1% China 9% 5% Korea 6% Japan 15% India Indonesia 54% 10%

Overview of Market Price of Motor Cycle Tyre According to Origin & Brands: Size 250-18

275-18

Brand MRF Dunlop Bridgestone Panther Sino MRF Dunlop Bridgestone Panther Sino

Origin

India India Japan Pakistan China India India Japan Pakistan China

Price 1,100 1,140 1,850 1,180 770 1,200 1,265 2,100 1,300 1,000


300-17

300-18

India India Japan Pakistan China India India Japan Pakistan China

MRF Dunlop Bridgestone Panther Sino MRF Dunlop Bridgestone Panther Sino

1,400 1,275 2,300 1,300 800 1,400 1,275 2,300 1,300 900

Table: Market Price of Motor Cycle According To Origin & Brands Market Price of 275-18

Sino

1,180

1,850

Japan

India

1,140

India

1,100 Sale Price

Dunlop Bridgestone Panther

Pakistan

770

MRF

China

Brand

Dunlop Bridgestone Panther MRF

Brand

Sino

Market Price Of 250-18

Series1

China

Pakistan

Japan

1,000

1,300

2,100

India

1,265

India

1,200 Sale Price

Series1


2,300

Japan

India

India

1,275

1,400 Price

6.4

Sino

1,300

Dunlop BridgestonePanther

Pakistan

800

China

Pakistan

MRF

China

Market Priace of 300-18

Brand

Dunlop BridgestonePanther MRF

Brand

Sino

Market Price of 300-17

Series1

900

1,300

2,300

Japan

India

India

1,275

1,400 Price

Series1

Auto Rickshaw Or Three Wheeler Tyre

400-8 tyre specifically used on a particular vehicle Auto Rickshaw, mainly used as a passenger transport. In some rural areas a special type of vehicles namely “Nosimon� used both for passenger transport as well as goods transport also uses such tyres.

Al these vehicles were two-stroke, which pollutes the environment in a high rate. Up to 2000 such vehicles were imported and the market was growing. As the concern for pollution was increasing and there was a movement against environmental pollution world-wide, in 2001 Government imposed bar on importing two-stroke vehicles. A four stroke Auto-Rickshaw with same tyre size replaced the two-stroke vehicles and the market again began to increase from 2002. So the demand for 400-8 tyres still prevailing and increasing, but the source of demand switched to four strokes from two stroke. Demand for 400-8 Tyres According to BRTA a total of 129,758 Auto Rickshaw were running all over the country upto 2007, among them 13,521 Auto Rickshaw running in Dhaka City. At the end of 2003 Government removed 26,429 two stroke three wheelers from Dhaka City. However, these twostroke auto rickshaws are running in the nearest district of Dhaka. The scenario can be more depicted from the following table:


Year

Total Auto Rickshaw in Bangladesh

Growth rate

1999

75,612

2000

78,747

4%

2001

79,144

1%

2002

84,623

7%

2003

98,479

16%

2004

107,453

9%

2005

112,330

5%

2006

119,228

6%

2007

129,758

9%

-

2008

141,436

9%

2009

154,165

9%

While looking into this table we have to consider: Demand for Auto-Rickshaw all over Bangladesh is increasing on an average 7.07% For Dhaka City the demand is fluctuating, the government ban significantly affected the number of vehicles in 2001 but again it begin increase from 2002. As two stroke vehicles removed from Dhaka City in 2003, the total number of vehicles dropped in 2003. After removing the two stroke vehicles from Dhaka City, Chittagong has also removed two stroke vehicles, which is again replaced by four strokes Auto-Rickshaw. Uses of Auto-Rickshaw in rural and semi urban areas are increasing with the development of new roads. It was found from the study that on the average a tyre is replaced with 4 months in Dhaka, Chittagong and other urban areas where the roads are in better shape. But for other areas the areas the average replacement time is 3 months. From the considerations above we may conclude that there is a fixed market for 400-8 tyres as replacement demand and the growth opportunity will remain around 7%. The demand for 400-8 tyre may be calculated as; Demand for 400-8 tyre D = No. of vehicles x 3 tyres per vehicle x replacement Multiplier Year Growth Rate


Total Auto Rickshaw in No. Of Bangladesh Required 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2009

75,612 78,747 79,144 84,623 98,479 107,453 112,330 119,228 129,758 141,436 154,165 26,429

Tyre

226,836 236,241 237,432 253,869 295,437 322,359 336,990 357,684 389,274 424,309 462,496 79,287

Adjusted for replacement factor 30% 294,887 307,113 308,662 330,030 384,068 419,067 438,087 464,989 506,056 551,601 601,245 103,073

0% 4% 1% 7% 16% 9% 5% 6% 9% 9% 9% Two stroke

Table: Yearly Requirement of Auto rickshaw Tyres b)

Demand & Supply Gap

As an ambitious projection there is a demand for 704,318 tyre per year by 2009. As we mentioned earlier Apex Polymer Group (APG) and Gazi Tyres of Bangladesh are manufacturing 400-8 tyres. So far they have obtained the faith of customer through quality, price and availability. Apex Polymer Grkoup has switched their focus on bigger tyres from 400-8 but still they are producing and selling 400 tyres a day with their full capacity. On the other hand Gazi is delivering 200 tyres every day with the utilization of full capacity. Following table shows the demand situation in 2009. If APG and Gazi supplies to their full capacity, still there will remain a gap for 494,318 tyres in 2009. The total gap is being served by imported tyres mostly from India and partly China.

Particular

Quantity

Total demand for 2009 (3 Stroke)

6,01,245 103,073

704,318

Total demand for 2009 (2 Stroke) Locally supplied: Apex Polymer Group Gazi Total Local Supply

140,000 70,000 210,000


494,318 Supply Gap for 2009 Table: Demand & Supply Gap 400-8 tyres c)

Market Share of 400-8 Tyre According to Brand:

A lot of brands were found in 400-8 tyre market. To get the real picture samples have also been collected from Dhaka City where Auto rickshaws are running. Sl

Brand Name

Origin

1

Dunlop

India

17

8.50

2

BKT

India

18

9.00

3

Triangle

China

16

8.00

4

Gajah Tungal

Indonesia

11

5.50

5

Ceat

India

21

10.50

6

Gazi

Bangladesh

15

7.50

7

Hussain (Apex)

Bangladesh

27

13.50

8

MRF

India

59

29.50

9

Others

16

8.00

200

100

Sample Qty

Percentage

The two local brands Gazi & Hussain (Apex) are occupying 21 % market share. The imported portion is mostly by MRF brands. Like motorcycle tyres India is the largest seller in 400-8 market.


Market Share of 400-8 Tyre according to Brand

Others Dunlop 8% 9% BKT 9% Triangle MRF 8% 29% Gajah Tungal 6% Ceat Hussain (Apex) Gazi 10% 13% 8%

Overview of Market Price of 400-8 Tyre According to Brand: Brand

Origin

MRF

India India

Dunlop Apex

Japan Pakistan

Ceat

India

Gazi

Price 1,450 1,200 920 950 1,300

Market Price Of 400-8 Tyre According to Brands 1,600 1,400 1,200 1,000 800

Series1

600 400 200 -

6.5

MRF

Dunlop

Gazi

Apex

Ceat

Distribution Channel for Motorcycle & Auto-Rickshaw


Manufacturing quality tyre may not be the ultimate goal until & unless ensure better distribution channel to deliver the product to end user hassle free. One of the major concerns of the end-user in Bangladesh is the lack of proper repair facilities. Any manufacturer or distributor of tyre who has up-to-date repair facilities in main cities will have competitive advantage over competitors’ satisfied customer based. Customer will be happy because they know that distributor cares for their tyres. If at ant time it gets punctured or damaged it can be repaired professionally but latest technology through reliable vulcanier. Furthermore, repair business will complement company’s current line of business.

Manufacturer: Uttara Group Of Companies Co. Owned Retails Outlets

60 Dealers

End- Users 6.6

Financial Viability:

In our study I have tried to give an overview of the market and the size of potential demand for a new comer. Whether the size is feasible enough in comparison to the investment, is a subject to study under financial feasibility. It was also found that in motor vehicle tyre industry a company produces different sizes and types of tyre. If we want to decide on the feasibility of manufacturing or initially trading tyre, we have to consider the comprehensive demand of different sizes. However, in this report I feel it appropriate to provide financial viability statement of trading various type of tyre rather manufacturing as investment required for tyre manufacturing plant is high & another factor for consideration which is a subject of Technical Feasibility. Landed Cost of different size of tyre: Sl

Particulars

Tyre size

400-8 a

FOB Benapole.

300-18

$ 7.25 $

300-17

6.50 $ 6.50

275-18 250-18 $ 6.00 $ 5.85


b

Freight/ Carrying 3% on (a)

$ 0.22 $

0.20 $ 0.20

$ 0.18 $ 0.18

c

C & F value (a+b)

$ 7.47 $

6.70 $ 6.70

$ 6.18 $ 6.03

d

Insurance 1% on (a)

$ 0.07 $

0.07 $ 0.07

$ 0.06 $ 0.06

e

CIF value (c+d)

$ 7.54 $

6.76 $ 6.76

$ 6.24 $ 6.08

f

PSI Commission 1% on (e)

$ 0.08 $

0.07 $ 0.07

$ 0.06 $ 0.06

g

CRF Value (e+f)

$ 7.62 $

6.83 $ 6.83

$ 6.30 $ 6.14

h

Duty 25% on (g)

$ 1.90 $

1.71 $ 1.71

$ 1.58 $ 1.54

i

18.75% VAT on (g)

$ 1.41 $

1.26 $ 1.26

$ 1.17 $ 1.14

j

AIT 3% (g)

$ 0.23 $

0.20 $ 0.20

$ 0.19 $ 0.18

h

Clearing 4% on (g)

$ 0.30 $

0.27 $ 0.27

$ 0.25 $ 0.25

i

LC 1%, SOD 5%, Total 6% on (a) $ 0.44 $

0.39 $ 0.39

$ 0.36 $ 0.35

j

ATV 1.5%

$ 0.11 $

0.10 $ 0.10

$ 0.09 $ 0.09

LANDAD COST (G to M)

$ 12.01 $ 10.77

Converted to Taka @ 68.35

821

736

$ 10.77 736

$ 9.94 $ 9.69 679

662

This projected profit & loss account have prepared with certain assumptions, which are at the end of this statement. It is projected that net operating profit on sale for the year 2009 is 22% & net profit will be 19%.


Projected Income Statement For the year ended 31 December 2009 Projected Sales

Note

Taka

% on sales

Dealer

4.1

79,270,516

Showroom

4.2

172,729,963 252,000,479

Less: Projected Cost of Goods Sold Opening Stock

-

Purchase

1.03

196,231,597

Closing Stock

2

15,094,738

Projected Gross Profit

70,863,620

28%

Less: Projected Operating Cost Salaries & other benefits

3

7,462,000

Postage & telegram

293,177

Conveyance

250,000

Car allowance

180,000

Corporate management fees

300,000

Carriage outward @ Tk. 15/pc

3,524,818

Advertisement Expenses (.25% on sale)

630,001

Godwan rent (16 units @ Tk. 20,000)

320,000

Electricity bill

192,000

Traveling & Conveyance

400,000

Bank charge

90,000

Printing & Stationary

225,000

News papers & periodical

23,808

Uniforms

16,000

Office Expenses

384,000

Depreciation

480,000

Projected Operating Profit

14,770,804

6%

56,092,816

22%

Less: Projected Non Operating Cost Audit fees

10,000

Dealer commission (4.75% on sale)

3,765,350

Annual dealer incentive (.25% on sale) Bank interest

Projected Net Profit

Assumptions:

198,176 5.2

4,688,321 8,661,847

3%

47,430,968

19%


1. Uttara Group will purchase Super king brad tyre from India & purchase price on FOB at Benapole. 2. Total Market demand will be 1,497,051 pcs for 2-wheeler for both front & rear type tyre. Respective size front tyre market share will be 73% & rear tyre will be 68%. It is assume that Super king brand will captured 9% share of both type tyre totaling 94,988 pcs. However, in case of 3-wheeler market demand of super king brand tyre will be at lest 1,40,000 pcs. It is considered that dealer sale will be 40% & 30% for 2-wheeler & 3-wheeler tyre respectively. Minimum re-order level is considered one month only as lead time of supplying tyre from Super King Company is 15 days. Working capital will be provided from bank loan containing 12% interest. Total working capital will be Tk. 39,611,067 includes 02 months purchasing cost & operating expenses along with fixed assets cost of Tk. 32,00,000.00. Corporate management fees will be Tk. 25,000.00 per month for providing commercial & show room support by Uttara Group.

Summary of Findings: a) Average demand of Motorcycle tyre for the year 2009 is 11,97,641 pcs which means this sector is more attractive to offer investment opportunity. Supply gap of Auto-Rickshaw tyre for the year 2009 is 4,94,318 pcs. Total demand of Motorcycle tyre according to size may not be impressive but if we concentrated on particular size like 250-18, 275-18, 300-17, 300-18, the demand is significant i.e. more that 69% of total demand. Market share of Motorcycle & Auto-rickshaw tyre according to origin are mostly captured by Indian tyre and it is easy for new investor to introduce Indian brand tyre.

h) Quality tyre may not be the ultimate goal until & unless ensure better distribution channel to deliver the product to end user hassle free. Any manufacturer or distributor of tyre who has up-to-date repair facilities in main cities will have competitive advantage over competitors’ satisfied customer based. It was found from the study that marketing of Indian brand tyre (Super King) is financially viable considering net operating profit for the year 2009 is 22%. There is no manufacturer of motorcycle tyre in Bangladesh so far and in case of Auto-rickshaw still there is a gap considering two manufacturers. So there is an opportunity for manufacturing tyre, which is a subject of Technical Feasibility.


Conclusion: Investment required for tyre manufacturing plant in manufacturing tyre is high. Ensuring quality up to the market and maintaining quality is another factor for consideration which is a subject of Technical Feasibility. It was found from the study that one particular brand may not satisfy the customer every time. For a new comer as manufacturer creating the first impression is very important. In our study we have tried to give an overview of the market and the size of potential demand for newcomer. Whether the size is feasible enough in comparison to the investment, is a subject to study under financial feasibility which is also required for making decision. It was also found that in motor vehicle tyre industry one company produces different sizes and type of tyre. The reason is the major portion of the initial investment and raw materials for all sizes are common. So if we want to decide on the feasibility of manufacturing tyre, we have to consider the comprehensive demand of different sizes. There is no manufacturer of motorcycle tyre in Bangladesh so far. The market size is attractive and prospective. The only consideration is the variety of sizes. The number of tyre required in every sizes may not be significant, but if we concentrate on particular sizes like, 250-18, 275-18, 300-17, 300-18 the demand is significant. If Uttara Group wants to get the market of motorcycle tyre, they have to consider the market of motorcycles imported as CKD basis.

APG & Gazi already proved that local tyres could replace the imported tyre market for 400-8. Still there is a gap of significant number of tyres every year. So, there is a good opportunity of manufacturing 400-8 tyre in Bangladesh though initially it is appropriate for trading business to set-up brand image. For any investment decision in manufacturing tyre we have to consider the long term plan of the Government. Any strategic Change by the Government may change the scenario of the market significantly as the Government changed for Auto-Rickshaw Market. Projected notes to the accounts 1.01 Yearly Rear Tyre Demand Sl Tyre size Percentage No. 1 2 3 4

250-18 275-18 300-17 300-18

9% 19% 16% 24% 68%

1.02 Yearly Front Tyre demand

Total Mkt Demand Size wise Demand 748,525 748,525 748,525 748,525

Super Demand

67,367

6,063

142,220

12,800

117,269

10,554

182,141

16,393

king


Sl Tyre size Percentage No. 1 2 3 4

250-18 275-18 300-17 300-18

Total Mkt Demand Size wise Demand

30% 27% 2% 13%

748,525 748,525 748,525 748,525

73%

5

400-8

Super Demand

224,558

20,210

204,597

18,414

17,466

1,572

99,803

8,982

546,424

49,178

704,318

140,000

1.03 Size wise demand & Pruchase Value

Sl Size wiseSize wise Demand Tyre size Purchase Qty (Y) Price No. Demand (Y) (M) 1 2 3 4 5

250-18 275-18 300-17 300-18 400-8

Total 2

26,273

2,189

28,463

662.39

31,214

2,601

33,815

679.37

12,126

1,011

13,137

735.99

25,375

2,115

27,490

735.99

140,000

11,667

151,667

820.91

234,988

19,582

254,570

Closing Stock on 31.12.09

Sl Tyre size Stock Qty (M) No. 1 2 3 4 5 Total 3

250-18 275-18 300-17 300-18 400-8

Price

Stock Value (M)

2,189

662.39

1,450,262

2,601

679.37

1,767,140

1,011

735.99

743,724

2,115

735.99

1,556,312

11,667

820.91

9,577,300

19,582

15,094,738

Salaries & other benefits GM (01 person @ Tk. 70,000) Executives (32 persons @ Tk. 14,000) Security guard salary (16 pesons @ Tk. 3,500)

910,000 5,824,000 728,000 7,462,000

4

Sales

king


Sl Tyre size Size wise Sale (Y) Sale Price No. 1 2 3 4 5

250-18 275-18 300-17 300-18 400-8

Total

Sale Value

26,273

1,050

27,588,909

31,214

1,150

35,888,375

12,126

1,200

14,548,320

25,375

1,200

30,443,707

140,000

1,025

143,531,168

234,988

252,000,479

4.1 Dealer Sales

Sl Tyre size Dealer Sale (Y) No. 1 2 3 4 5

250-18 275-18 300-17 300-18 400-8

Total

Sale Price

Dealer Sale Value

10,509

1,050

11,035,564

12,485

1,150

14,355,350

4,850

1,200

5,819,328

10,150

1,200

12,177,483

35,000

1,025

35,882,792

72,995

79,270,516

4.2 Show room Sales

Sl Tyre size Size wise Sale (Y) Sale Price No. 1 2 3 4 5

250-18 275-18 300-17 300-18 400-8

Total

15,764

1,050

16,553,345

18,728

1,150

21,533,025

7,276

1,200

8,728,992

15,225

1,200

18,266,224

105,000

1,025

107,648,376

161,993

5.1 Loan

172,729,963 Taka

Purchase cost (2 months)

32,705,266

Operating exp. (02 month)

3,164,079

Office Equipment & furniture

3,200,000 39,069,346

5.2 Interest on loan Loanable amount Interest on loan @ 12%

Sale Value

39,069,346 4,688,321

Motor cycle & auto rickshaw tyre“financial & marketing aspects a study  

This is an internship report prepared by an IIUC student while undertaking an internship program at Uttara Motors Ltd. an enterprise of Utta...

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