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Tyre Industry – Update

Natural rubber prices are expected to remain firm in the near future which would adversely impact its user industries like tyre manufacturing. The tyre industry is facing a sharp surge in raw material costs as it consumes 60% of the rubber output in India.

The widening global demand-supply mismatch is resulting in natural rubber prices soaring to record-highs. A disruption in tapping activities in Kerala as heavy rains lashed the largest NR producing state, together with a surge in demand resulted in a rise in domestic prices.

Tyre production registered a y-o-y growth of 16% to 792 lakh units during April 2009 to January 2010. The Indian auto industry recorded its highest ever sales in FY 2010. To meet the strong demand in the auto sector, almost all the tyre companies are operating at full capacity.

Segment-wise tyre production (units: ‘000 nos)
  Apr-Jan 09-10 YoY % growth
Total Tyre Production

79204

15.7

Truck & Bus Tyre

12,245

14.4

Passenger Car Tyre

16,230

16.5

Two-wheeler Tyre

40,023

17.8

Source: ATMA

To partially offset the recent surge in natural rubber prices, tyre producers are likely to raise tyre prices for the second time in 2010. While companies such as Ceat and Birla Tyres are to hike prices by 2-5%, others like Apollo Tyres and JK Tyre have not mentioned the quantum of increase, state media reports.

Apart from a rise in natural rubber prices, the budget has proposed to increase the excise duty on tyres from 8% to 10%. Excise duty on some raw materials like Styrene Butadiene Rubber (SBR), Nylon Tyre Cord Fabric (NTCF) and carbon black, have also been proposed to be hiked by 2 percentage points to 10%.

The tyre industry has urged the government to allow duty-free imports of additional 2lakh tonnes natural rubber. This year tyre companies have imported around 1.6 lakh tonne of natural rubber, of which 30,000 tonne attracted 20% duty, while rest was duty-free.

Hence, the consumers of automotive vehicles should get ready to shell out more as excise duty increase, re-engineering for new (Bharat Stage IV) emission norms and higher input cost (metal and tyre prices) will push up price of vehicles by 1-3% from 1 April onwards.

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Categories: Tyre
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