The KSA tire market has been facing significant challenges due to fluctuating raw material prices in the recent past. Tire manufacturing requires large amounts of raw materials such as natural rubber, nylon, carbon black, and petroleum-based chemicals. However, the prices of these raw materials tend to witness high volatility in line with global commodity price trends. For example, the prices of natural rubber increased sharply in 2021 due to reduced supply from top rubber producing countries. Similarly, crude oil prices witnessed a substantial rise during the same period thereby increasing input costs for vital petrochemicals. This made tire production expensive for manufacturers in KSA. The fluctuating prices create difficulties in business planning and impact the margins of tire companies. It also discourages investments towards capacity expansions plans. Unless effectively mitigated, unstable raw material costs can negatively impact the long-term growth prospects of the KSA tire industry.
Market Opportunities: Expansion of E-Commerce Platforms
The growth of e-commerce platforms in KSA presents significant opportunities for the tire market to expand its reach. Online shopping has gained tremendous popularity among the young population in recent times. Various international and local e-commerce companies such as Noon, Souq, and Danube are rapidly growing their market share in KSA. This has provided tire brands an alternative sales channel to boost sales volumes. Setting up an online store allows companies to market and sell tire products across KSA in a cost-effective manner. It also helps optimize inventory levels through advanced analytics of sales data. Further, e-commerce removes geographical barriers problem and allows smaller cities to be tapped. This would be instrumental in the tire companies' goals to increase sales from outside top cities. If leveraged properly, the widespread adoption of e-commerce can drive higher profitability and support distribution network expansion for KSA tire market players.
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