'All we need from the government is control on under invoicing and smuggling' An interview with Mian Iftikhar Ahmed, Chairman and CEO Panther Tyres

Mian Iftikhar Ahmed is the founder, chairman and chief executive of Panther Tyres Limited. He is the pioneer of Bias tyre and Butyl tube manufacturing in Pakistan and is recognised as one of the leaders and mentors of the local tyre industry. He is also currently the chairman of All Pakistan Tyres & Tubes Manufacturers Association of Pakistan (APTTMA).
With a degree in Mechanical Engineering (USA), Mian Iftikhar Ahmed started his professional career in 1970. After 13 years of working with various multinational companies abroad and within Pakistan, he laid the foundation of "Mian Tyre & Rubber Company (Pvt.) Limited" in 1983. Today the company is well-known as Panther Tyres Limited.
Mian Iftikhar Ahmed and Panther Tyre Limited's achievements have been recognised by several chambers of commerce and industry; through various export trophies and in advisory capacity for assisting government in creating policies to facilitate local industry. Following is a candid conversation BR Research recently had with him:
BR Research: Panther Tyres is an old player. Walk us through the tyre industry and your role in bringing it where it is today?
Mian Iftikhar Ahmed: Pakistan didn't have any tyre industry when it came into being. Each and every tyre was imported. Bata brought in a manufacturing facility for bicycle tyres in 1962-63, which followed other local players to enter the manufacturing of bicycle tyres and tubes in Pakistan. Later in 1983-84 when motorcycles sales were picking up, I set up a plant to manufacture motorcycle tyres in the country, and also received government support. All motorcycle players like Suzuki, Honda were using imported tyres; but with us entering the market, they had the advantage of deletion rebate for sourcing tyres from us. Today, we supply tyres to Suzuki, Honda and Yamaha.
After 4-5 years of success in motorcycle tyres, we successfully added the manufacturing rickshaw tyres to the portfolio, which was followed by wheelbarrow tyres. In 1998, I took the initiative to start exporting a good quantity of wheelbarrow tyres to Europe. And after exporting for 10 consecutive years successfully, we decided to move to more value added products. In 2008, we started manufacturing tractor tyres. The government did help us in the beginning and today Pakistan is self-sufficient in tractor tyres. But then the under invoicing in imported tyres became so colossal that the local manufacturers could not make a profit. I have raised my concerns as a Chairman of All Pakistan Tyres & Tubes Manufacturers Association over the last two years and we have been going from Lahore to Karachi to meet the relevant authorities, but the 'importers mafia' has been so strong that each time they got the meetings postponed.
BRR: Could you explain in value terms how has under invoicing has been effecting the industry?
MIA: Under invoicing, smuggling, and mis-declaration has been hurting the local tyres industry terribly. The cost of a tyre that you manufacture is roughly the same in Pakistan or elsewhere like in China with only 2-3 percent variation. An importer importing say a $100 tyre from China and declaring it at $50 pays import duties only on $50, whereas when we manufacture locally, we pay all the duties and taxes on the import of raw material and other facilities and end up either selling at a loss or at equal prices, which means no profits and hence to reason to continue manufacturing. This is why the industry didn't flourish.
When the present government came to power, I once again approached them, particularly the commerce minister and the revenue minister and explained to them the issue of mis-declaration and under invoicing; the containers come through Karachi transit and get disappeared in Lahore with no track record. The key step they have taken to address this problem so far is the transfer of money through OD. This has brought down under invoiced imports by about 70 percent because of the crackdown on illegal hundi system of money transfer.
BRR: What kind of advantage are you getting from pushing out imports?
MIA: Actually the advantage that we get is from the government trying to address the grey channel, which gives way for fair competition in terms of duties and taxes we pay and a level playing field, which lets local players grow. Today, the entire motorcycle tyre market is being catered by the local manufacturers; they are cheaper, guaranteed and are available in every part of the country and the government has supported us. This was the reason I gave to the people in the offices in Islamabad for my case for supporting the local manufacturers of the five segments of tyres by controlling their grey market. These include the motorcycle tyres, bicycle tyres, tractor tyres, hump tyres, and light truck and ordinary truck tyres. We don't make passenger car, truck, bus and radial tyres in Pakistan except for General Tyres that manufactures passenger tyres. I believe that their imports should be allowed till such time the local industry is competent enough or has the ability for joint ventures.
Fortunately, since the last one year, the government has been willingly listening to what I've been saying for long, and the local industry is flourishing.
BRR: How much of the OEM and replacement market for motorcycle tyres in being catered by Panther Tyres?
MIA: Local players are catering 100 percent of the demand. We are gratified to be the market leaders in motorcycle tyres in Pakistan for both the OEM and replacement market, with a share of about 45 percent. We are the biggest player and are also the largest exporters of tyres with strong footholds in Asian, Middle East, African, and European countries. Panther has been an innovative company, and our latest creation has been the earth-moving tyres (OTR tyres). This product is in field trial right now as these are big tyres and hence big investments for the buyers. Hopefully by December 2019 or January 2020, we will be bringing them for commercial sales.
BRR: Does this mean that the economic slowdown, mounting interest rates, depreciating currency, lesser number of buyers in the market is being adjusted through government control of under invoicing and smuggling? Do you see a slowdown in your revenues?
MIA: As for the first part of the question, absolutely yes. The pricing of these items is controlled by the market forces. Those who want to buy tyres will continue to buy. The good thing with so much competition locally is that prices are controlled, and players don't make ridiculous profits.
And no there has not been a slowdown in our revenues at this moment. I've noticed that sales volumes of motorcycle and tractor manufacturers have slowed down; but we haven't seen any slowdown in the replacement market.
We are ready to take challenges head on. The only assurance or assistance we seek from the government is a strict control on smuggling and under invoicing. The rest we can manage.
BRR: What is Panther's share of OEM and replacement market in its production?
MIA: It is 30 percent OEMs, and 70 percent replacement market. It is this 30 percent market that has witnessed a decrease of 10-15 percent, and it may come down further.
BRR: Do you see more potential in the exports side now that the currency has depreciated significantly?
MIA: Yes. Though the margins we make on exports are not more than 1-3 percent because of intense global competition, it is a constant feature in our company to maximize export sales. There is no tyre company in the whole of Middle East and African continent (except for South Africa), which are potential markets for tyres. OTR is desperately needed in the Middle East. That is why we are adding all segments of tyres to our portfolio. Also, our team went to Kenya a couple of weeks back to get more customers.
BRR: Then why have you not entered the passenger car or radial tyre market? Middle East is a huge market for passenger cars.
MIA: The reason why I haven't ventured into the radial or passenger car tyre segment is because there are already 5-6 big companies in the world established hundreds of years ago that are catering to the global demand for a long time. The cost of manufacturing a tyre be it in Lahore or under the brand name Bridgestone is more or less the same. But since these tyre companies are established brands, I took the wise decision to not poke those giants; I took the side track and that is why I am successful today.
BRR: What percentage of your total production is being exported? What are your forecasts going forward?
MIA: At this point, we are exporting about 7-8 percent. We are now competing globally with our OTR tyres. Same is the case with our tractor and agriculture tyres. If our OTR tyres click and if the performance is good, then I can gradually increase my price to a point where it become comfortable. That will eventually increase our export market share.
BRR: How much are your annual revenues?
MIA: Our annual revenues are about Rs 10-12 billion a year.
BRR: What is the import component of you cost of manufacturing a tyre?
MIA: 60 percent of the money used to make a tyre is imported raw material.
BRR: How many people work for Panther Tyres?
MIA: We have about 2000 people working in the plant, and 160 on managerial and engineering side. I have started a program where I'm training my own people, sending them overseas at full scholarships and full expenses paid to get them trained there to help our country.
I have had a tough time finding the right manpower to run tyre factories.
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