Tyre makers raise prices for third time this year

Leading tyre companies have increased prices in the beginning of the month — a part of the third round of price increase that was earlier decided by these companies.

Prices have been raised by three-four per cent across the board, putting pressure on vehicle owners and transporting companies. Tyre prices were increased four-seven per cent in January and three-four per cent in May.

According to the top managements of major tyre companies, the price increase was inevitable because of the sharp rise in prices of raw materials, especially natural rubber (NR). NR prices have gone up by 25-30 per cent in the first five months of the current year. This could be compensated only by raising prices, they said.

“We are not happy to raise prices for the third time in a row, but there is no other way out,” they said.

Apollo Tyres has increased prices by 3.5 per cent across the board. Sathish Sharma, chief, manufacturing and marketing, said only a 20 per cent price hike could have fully compensated the company for the rise in costs, but that could not be done at one go.

So far, this year, our prices had risen by 10 per cent, he said. He added the raw material price index of tyre manufactruers had risen 15 per cent in the current quarter as against a 13 per cent increase in January-March.

The increase has seriously affected the companies as 65 per cent of the raw material used to make tyres is rubber. Raw material prices account for 70 per cent of the production cost.

A S Mehta, director, marketing, JK Tyres, said the company had raised prices by 11 per cent in the current year, the latest 3.5 per cent increase being from this June. But, he added, the increase in the price of natural rubber had not been fully absorbed yet.

The current price was arrived at when the rubber price was Rs 140 a kg. But NR is now around Rs 170 a kg.

Prices should be increased by 11-12 per cent for full absorption of the raw material price increase, said industry players.

Along with NR, prices of carbon black and caprolactum are rising, leading to lower profits for tyre companies. Profits of all leading tyre companies dipped in the last quarter of 2009-10. Mehta said 50 per cent rubber was being consumed by the non-tyre sector and a large number of rubber-based small and medium enterprises were facing a serious crisis.

In spite of repeated appeals by rubber-based industries, the government is not intervening due to the political might of rubber growers.

The industries should be ensured adequate supply of NR, but in the domestic market, the supply-demand gap is widening. So, duty-free import of 200,000 tonnes rubber was urgently required, said company sources.

The hike in the price of caprolactum due to the increase in the price of crude oil has led to a sharp rise in the cost of production of nylon tyre cord. Mehta said tyre companies were facing strong resistance from end users, especially from transporting companies.

So, a full absorption of the additional cost of production is yet to happen. So, more price escalation could not be ruled out unless there was a paradigm shift in the government policy on rubber imports, said industry players.

(business-standard.com)