Chennai: On the back of softening natural rubber prices coupled with lower crude oil prices, tyre companies reduced prices by 2-5% over the past few days, as they hope to liquidate the inventory pile up due to slowdown in new vehicle sales.
While some companies are in wait-and-watch mode, others including Apollo Tyres have announced a rollback of their last November price hike. “We have taken two price hikes in 2018 — one in May and the other in November and we have just rolled back our second price increase,” said Satish Sharma, president, Asia Pacific, Middle East and Africa region, Apollo Tyres.
The tyre industry is expecting a reduction in GST from the current 28% to 18%.
“The next GST council meeting is end of this week and the industry is expecting a slab reduction so the rollbacks and discounts are a means to get rid of existing inventory. Already tyre companies are offering 4-5% discounts but where there are bulk sales to big dealers, the discounts are as high as 20-25%,” said SP Singh of All India Tyre Dealers’ Federation.
December is typically a low wholesale month for the passenger vehicle and two wheeler industry and tyre wear and tear is also less in winter. So inventories tend to be high, he added.
Crude prices have come down from $86 to $54 therefore products like synthetic rubber, carbon black etc are all cheaper now.
Natural rubber prices are also down from Rs 135 per kg mid last year to Rs 115-120 per kg right now, said Singh.
“The adverse effects of the increase in crude, interest rates, depreciation of INR and lack of festive demand uptick has been the maximum in the third quarter. There is some comfort that the rupee has not weakened further and crude prices have softened over the last two months. This is a welcome change for the industry. We also expect demand to resume to normal levels in the near term. A decision to lower price or not is subject to competitive pressures and will be taken on a case to case basis,” said Anant Goenka, managing director, CEAT.
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