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Business Reporter
ZSE-Listed National Tyre Services says volume and bottom line expectations for the six months to September will not be met as the company continues to lose out to informal tyre sales and fitness dealers who have taken a sizeable chunk of the market space. The effect of the informal tyre sales is so huge that in the first quarter to June NTS volumes declined by as much as 20 percent on the same period last year.

NTS managing director Mr Kennedy Mandevani told shareholders at an annual general meeting on Wednesday that there is a lot of competitive activity as barriers to entry into the tyre market are very low. This has resulted in new entrants every day most of whom are informal and do not pay tax obligations to Government compared to formally registered businesses which are forced to run high overheads.

“We have tended to see a lot of informalisation of the tyre business not only in the resale of tyres but we have also seen that creeping into the fitness area. A lot of cars are being attended to under trees and in homes. What it means is the fiscus is losing out,” said Mr Mandevani. The informal players offer some unique services not offered by the big players and this has attracted customers.

“The cost of doing that business is low because you don’t pay rent to anybody. However they are offering a service to the customer in terms of convenience in location and in terms of hours of doing business. Some of them do not close at all when our branches are closed. So they are offering something that we need to take into account,” said Mr Mandevani.

To correct this, Mr Mandevani said NTS is rolling our several initiatives one of which is cost cutting. “We are looking at all opportunities in the business where we can reduce costs because if we are going to meet competition head on and reduce pricing whether it’s a promotion or a normal trading period we need to reduce costs. Otherwise our margins will be hurt. So cost reduction is a key activity in the name of protecting our margins,” he said.

The company is looking also at launching other budget brands following a good performance by the two introduced recently. NTS is also looking at squeezing extended terms and discounts from suppliers bother locally and externally and hope to pass on the benefit to the consumers.

“We are talking to our suppliers to say please come to the party, we are not alone in this one. They have to be part of the equation. In fact we have made a decision that from all our suppliers those who do not buy from us will have to re-look elsewhere. So we want a partnership between our suppliers and us,” said Mr Mandevani. The tyre company is also looking at adapting its distribution footprint riding on the outlets launched two years ago which have extended opening hours and are open during holidays. More such outlets will be launched.

NTS is considering re-branding its image and improving the turnaround time, reducing it to about seven days from between 10-15 days. “We are looking at re-branding and modernising our branches to end up with a better feel because most of our branches are looking tired and we need to change that image. We are also looking at the possibility of improving on the turnaround time from the time a casing arrives into our premises we retread it and it goes back to the customer.

“At the moment the average is 10 -15 days. We would like to see if we can reduce that to seven days,” said Mr Mandevani. The company will also run promotions to pump up sales in the quest for market share.