Meseret Fekede, 26, retails tyres in her store located around Sebara Babur. She began selling tyres two weeks ago with a capital of around 150,000 Br. She receives her stock from wholesalers at a cost between 1,100 Br and 2,000 Br based on the thickness, width and diameter of the tyres. The majority of her products are sold to people who own passenger cars.
“The demand for tyres is rising in an astonishing manner,” Meseret said. “My profit margin is about 100Br from a single tyre.”
Because Meseret is new on the market, she has days when she does not sell any tyres. On other days, she sells two or three tyres per day somtimes. She buys her tyres from two different importers. She buys Apollo brand tyres from Zablon Trading, and Aeolus from Melaq Trading. Meseret’s colleagues in the tyre retail business.
The tyre market in Addis Abeba is booming along with the number of vehicles. However, wholesalers and retailers are facing challenges in taking their businesses to higher levels. Issues with tax systems and import tariffs, as well as the contraband import of tyres have been taking their toll.
One of the wholesalers who sells tyres near Qality has also admitted that the progress is obvious but there are obstacles which hinder them from moving forward.
“We have been working in the tyre market for at least 30 years. We are now moving into a better position but the tax system has been holding us back,” a business owner in the Qality area told Fortune.
Another challenge lies with their customer base. Heavy truck drivers, an important segment of the market, are not willing to buy new tyres from dealers and retailers. Rather, they travel on used tyres to Harari Regional State and Djibouti to buy new tyres.
“They do this to try to avoid paying taxes to the government,” says an anonymous tyre business owner.
The shortage of foreign exchange which is affecting all businesses has also been having an effect on tyre manufacturers, wholesalers and retailers. Shortages of Letters of Credit (LC), which enable businesses to access foreign exchange, are in short supply at the moment.
“The lack of LCs is keeping us from importing our stock on time. We expect to wait for LCs for three or four months after we register.”
The production of tyres in Ethiopia goes back to the 1970’s. Addis Tyre S.C (ATC), the first company involved in tyre production the country was established in 1973 with an annual production capacity of 60,000 tyres and 45,000 tubes.
Before the government fully transferred Addis Tyre to Horizon Plantation, about 61pc of the company was sold to the Slovak company, Matador, and which renamed it Matador Addis. In 2008, Matador sold 51pc of its shares to a Hanover tyre company, Continental Germany. It was the shares of both companies that Horizon plantation bought in 2011 for 17.9 million dollars. The company was renamed for a third time, as Horizon Addis. The Company then bought the rest of the shares (39pc) from the government.
Horizon is currently the only tyre production company in Ethiopia. The company’s tyre current production capacity is over 840,000.
“It sometimes takes us more than six months to secure foreign exchange,” says Akaleweld Admasu, the general manager of Horizon-Addis. “The lack of skilled manpower is also another challenge to the industry, there is no educational facilities which trains experts in the industry.”
The boom in the tyre and automotive industries has trickled down to all parts of the chain. Tyre stores, known locally as gomista have been particularly appreciative of the increase in new cars, and new tyres.
Getu ,28, has been working at a small tyre store, in the Haya Hulet area for the last four months. An average of 40 cars a day comes in to have their tyres filled with air, or have their tyres checked. A year ago, only 20 or 30 cars used to come in each day.
“We earn anywhere from five to ten Br from a single car. The price is not fixed. It depends on what the customer is willing to give,” said Getu. “But the increase in access to roads and growth in passenger cars has definitely helped the market to revive.”
Lisanu Molla, 59, is a taxi driver and owner, who worked as an employee before he bought his car. He gets his tyres checked every three months and buys a new set every three year. For him as a driver, the money that he spends on tyres is definitely worth it, in spite of the raise in prices across all brands over the past few years.
“Tyres are the most important part of a car because the life of the driver depends on it, he said. “Smooth tyres tell you that the driver is heading for danger.” He bought his current set of tyres for 1800 Br from a shop in the Tekelehaimanot area.
“Bridgestone is what I prefer quality-wise,” he says. “Even though the prices on all tyres have gone up, they are still reasonable for me.”
Since the first automobile was brought into the country in the 20th century by Bentley from Britain during the reign of Emperor Menelik, the use of tyres has grown in line with the number of cars. There are over 447,000 vehicles in Addis Abeba, which is 33pc higher than the preceding fiscal year. The demand for transportation in urban areas, and especially among the rapidly growing population of Addis Abeba has reached record levels, along with per capita income, which has increased five fold over the past five years, reaching 794 dollars.
Ethiopia has one of the lowest motorisation rates globally, with only six cars per 1,000 inhabitants. Due to this low ownership of vehicles, a study done by TechSci Research projected the tyre market will witness a four percent annual growth over the next five years. The trend already seems to be appearing, which is good news for retailers and manufacturers of tyres.
However, Ethiopia’s current foreign exchange shortage, and the fall in the export sector, which brings in the most foreign currency, could lead to some hard times ahead for importers and manufacturers alike. The eventual recovery of forex reserves may make the business a rewarding experience after the next few years.
A quiet boom in manufacturing in Ethiopia is already taking place. Farming and services are still dominant, backed by the export of commodities, but new industries are emerging despite all the challenges, but the country has not seen any new tyre manufacturer yet.The tyre industry has shown progress in manufacturing new tyres and importing from China, Indonesia, Malaysia and India. Currently, the tyre market in Ethiopia is valued at over 100 million dollars. With booming domestic demand and fleet size, the market is expected to reach over 180 million dollars by 2022.
The manufacturing industry in Ethiopia started a century ago with a simple processing technology that produced agriculture-based products. Currently, the industry constitutes of about 32.4pc of industrial output.
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