Nepal Retreading Industry: Dependent on India

Nepal is a small country in the Indian sub-continent and it is heavily dependent on its larger neighbours for most of its requirements. It has a large retreading industry considering its small size, and it too is almost entirely dependent upon Indian tread makers for its supply of retreading materials and pre-cure tread.

It is estimated that the majority of the rubber comes from the leading Indian tread brands such as - Elgi, Indag, Midas,Vamshi, Poddar and MRF.

Indian companies Elgi and Indag have among the largest franchisees in this market supplying them with both tread and machinery. While a Kerala based company, Hi-tech, is amongst the largest suppliers of retreading machinery to independent Nepalese retreaders. A typical Nepali retread shop uses the most basic machinery.

On average, a retread shop retreads between 125 - 200 tyres in a month. When asked about the sustainability of a unit at such a low volumes, Harioshwer Poheral said, "The break-even point in our retreading industry is very low. A unit could probably survive with turnover as low as 100 tyres per month." Therefore, typical Nepalese retreading units have low volumes, few workers, basic machinery and operate in a small covered space with shed for an office. The majority of the 300 retread shops across Nepal use the precure version as the traditional hot process is currently in decline. "About 200 retreaders registered with the Nepal Tyre Resoling Association use the cold process as more and more clients are asking for precure retreads. So, the greater volume, maybe as much as 90 per cent, is dominated by pre-cure. Only around 100 retreaders remain using the hot process and they may not have much of a future as the market moves increasingly towards precure." explained Mr Y Pokheral, President of Nepal Tyre Resoling Association. It has not taken precure long to shake hot cure out of its market position. In the forty year history of Nepalese retreading cold cure was only introduced 12-15 years ago and already it has almost completely replaced hot cure, according to Mr Saroj Shrestha of Pancha Kumari Cold Retreading Pvt Ltd.

Independent estimates suggest that the Nepalese new tyre market stands at around 30,000 tyres per annum, of which, 60 - 70 per cent are retreaded at least once.

Most of the new tyres come from India or China and a small amount also are contributed by the local state owned company, Gorkhali Tyres. Recently, Lumbini, the only privately owned tread maker and retreader entered into tyre manufacturing.

The large number of small retreading shops also indicates the high level of acceptability of retreading in Nepal. It is recognised that getting a tyre retreaded is a good business proposition. "A new Indian tyre would cost Nepal Rupees 25,000 - 26,000, whereas, a tyre can be retreaded at the maximum 6,000 - 6,500 and as low as 5,000 Nepal Rupees," said Chandralal Shrestha, Director, Amleshwor Group.

However, the Nepalese industry is reeling under the a series of long power cuts and infighting amongst the political class of the country. "Long hours of load-shedding is a major problem as most of the productive hours are lost in the power cuts, which go on for as long as 16 hours. In those circumstances we can only work on generators, but that makes it expensive to run our small retreading operations," stated Pokheral. Apart from that, growing resentment against the present government which had instilled great expectations on the Nepali populace makes for an uneasy business environment.

The industry is tired of calls for closures and strikes at the slightest provocation from one political grouping or another. Moreover, the retreading industry is also worried about the shrinking size of individual market shares with the increasing number of people joining the sector. "Our potential is shrinking day by day as more and more people are joining the trade. Three more have entered after we set up our plant here on Pokarel," explained Mohan Babu Khadka of Sworup Tyre and Tread Industries.

Issue 2009/2