UAE Retreading Industry Coping with Evolving Scenario

The United Arab Emirates is among the most promising retreading markets in the Middle East and the biggest in the Gulf Co-operation Market (GCC). The 25,000 a month strong retread tyre market is facing amongst the biggest challenges of the slowdown in the recent past. The current slowdown is mainly due to the failure of the state-owned real estate company Dubai World, which is the biggest investor in Emirates building infrastructure. The 27 retreaders in the UAE have a mixed reaction to its effect on their businesses, while for some it is business as usual, a few are really down, whereas others are optimistic about a rebound in the near future.

The fortunes of the retreading industry in the UAE are directly connected with the construction boom and the slowdown in some of the biggest and most important projects has directly impacted upon the industry at a time when elsewhere the global economic scenario is picking up. This is a new challenge for the UAE economy. It is recognised that Dubai is the worst effected while other Emirates are still in a better position as they are not just dependent on tourism and construction - regarded as the mainstay of the Dubai's economy. Ninety percent of the retreading industry in the Emirates is controlled by Indians.

These retreading companies are mixed, either joint ventures with local partners or independent Indian ventures which have migrated to the UAE. As much as 75 per cent of the tread rubber being used in UAE is sourced from Indian companies. This, of course, is due to the high degree of Indian ownership of retreading ventures in the UAE. Among the popular tread brands are Tolins, Midas and Cochin Rubber plus Malaysian rubber from Goodway and Suntex. Despite the ongoing challenge the retreading companies are expanding in search of new opportunities. Some of them are positive about the future and expecting the normalization of the business scenario by the end of 2010. Some companies like Al Dobowi feel that it is more a correction of market forces.

"We strongly feel that the UAE market is not as down as has been widely felt", says thinks Harjeev Kandhari, Managing Director. "For example previously the market was at 150 points and during the boom time it went up to 300 points but even after the ongoing financial crisis the market has only come down to the 200 point level. We feel that the market is correcting itself rather than contracting".

Whilst players like Metro Tires are finalizing plans to start another unit in the middle of 2010. Tolins is setting up a base in the UAE to market its brand more aggressively. "We are looking for greater acceptance of the Tolins brand in the UAE as well as in the whole region," asserted K V Tolins of Tolins Tread.

On the other side of the coin majors like Universal are feeling the heat as production has dropped considerably after the recent financial crisis. "Our production has dropped to merely 100 tyres per day compared to about 175 before the crisis," complained Anil Shetty of Universal Tyres.

Apart from the ongoing crisis, the smaller retreaders are also coping with the pressures of the adoption of the new standards of ESMA, which makes it mandatory for the retreading companies to acquire certifications like ISO and GSO. The retreading companies intend to go for the required certification but are still looking for a clearer policy towards retreading as the new tyre dealers are lobbying the government against the industry due to the increasing popularity of retreading in the UAE. The authorities are slapping on heavy penalties if it is found that a burst tyre has been retreaded. "The UAE requires almost 25,000 retreaded tyres a month and if those tyres are not retreaded, they would create a real environmental problem for the government," complained Sam Thomas of Al Khaleej. Retreading companies seek clear policy about the future

Issue 2010/1