Tyre prices to rise 7% from May-June.

Due to the steep rise in natural rubber (NR) prices, tyre companies have decided to raise prices by 7 per cent across all categories. The rise may be effective from May-June.

“This will be the second hike in this calendar year as it is unviable to continue production at such high rates,” said Neeraj Kanwar, chairman, Automotive Tyre Manufacturers Association (Atma) and managing director of Apollo Tyres.

He added that Apollo Tyres would raise its prices by May or early June. The ideal increase should be around 20 per cent if the company is to continue production without losses, but that would not be possible because of market resistance.

“As an industry, we cannot absorb such a huge increase in NR prices, the main raw material. Several small and medium units are on the verge of closure and the condition of tyre makers is getting worse day by day,” Kanwar said.

NR prices have increased by 300 per cent in the last two-three years, but the average cost of production remained same for the period at Rs 50-55 a kg. The current price of benchmark grade RSS-4 is Rs 170 kg. This increase cannot be absorbed by the industry and thus, they will have to pass it to consumers.

In January, tyre prices were increased by 5-7 per cent across all types and the rollback of the excise duty cut in April caused an additional 2 per cent duty on the products. So, in a span of four months, tyre prices increased 7-9 per cent.

Also, the gap of 100,000 tonnes in the production and consumption of NR is the main reason for the rise. The government should allow duty-free import of at least 100,000 tonnes in order to fill the gap and control the rise in prices. As the market is bullish, hoarding and speculation also worsen the situation further. So duty-free import can provide some relief to the rubber-based industry.

Source : Business Standard