KOLKATA: Come April, vehicle owners may have to shell out a little extra for tyres. With natural rubber prices northbound, tyre makers are mulling a price hike to improve margins. While companies such as Ceat and Birla Tyres have decided to hike prices by 2-5%, others like Apollo Tyres and JK Tyre are closely tracking the market before taking a final call on the quantum of increase. If tyre makers indeed go in for a price hike next month, it will be the second successive hike this year. Tyre companies had increased prices in January.
“It’s likely that we may have to increase prices by 2-4% in April. The hike will be across all categories of tyres. A sharp rise in input costs is forcing us to review the existing price structure and go in for an upward revision,” said Arnab Banerjee, vice-president (sales & marketing), Ceat.
Incidentally, apart from a rise in natural rubber prices, finance minister Pranab Mukherjee has proposed to increase the excise duty on tyres from the current level of 8% to 10% in the Union Budget. Excise duty on some raw material, such as Styrene Butadiene Rubber (SBR), Nylon Tyre Cord Fabric (NTCF) and carbon black, has also been proposed to be hiked from 8% to 10%.
The country’s natural rubber consumption and its imports rose in February on account of the highest-ever auto sales in a month, which kept up the demand from the tyre sector, the Rubber Board data revealed. While consumption rose by 7% to 77,500 tonnes in February, imports were up 323% to 10,236 tonnes. The rise in consumption in February 2010 compared to last year is due to the higher demand from the tyres sector, especially from the truck and bus tyres segment, a Rubber Board official said. The Indian auto industry recorded its highest-ever monthly sales in February this year at 11,29,783 units against 8,37,017 units in the same month last year.
Birla Tyres is also following Ceat’s move to increase prices. “All tyre companies are reeling under the steep rise in input costs, particularly natural rubber. In addition to this, a 2 % rise in excise duty coupled with the inverted duty structure has compelled tyre companies to opt for a price rise. We, at Birla Tyres, have also decided to increase tyre prices by about 3.5-5% across the board,” said Deepak Tandon, director, Kesoram Industries. Birla Tyres is a division of Kesoram Industries. Birla Tyres’ unit III at Uttarakhand recently started commercial production of truck radial tyres.
When contacted, Sunam Sarkar, chief financial officer, Apollo Tyres, said: “The company is looking to raise prices in the near term; however the quantum of increase is yet to be decided.” Vaishali Jajoo, a research analyst at Angel Broking, said: “India’s growing auto market will drive a healthy 9% CAGR for the tyre industry going ahead.”
Source : The Economic Times