CHENNAI: Rubber prices have been primarily responsible for the profit margins of tyre companies despite a sharp decline in demand from original equipment customers – namely vehicle manufacturers. Although the Indian passenger vehicle industry has been stuck in first gear with car companies offering huge discounts and even taking production cuts to clear dealer inventory, tyre companies have more or less reported good quarterly numbers riding on the back of low global prices of its main input – rubber. Rubber prices started falling from January 2012 and hit a low of Rs 160 per kg in January 2013. Since then, though, it has been on the rise and is now in the range of around Rs 190-195 per kg which is near the January 2012 price level. Of late however rubber prices have been southward bound again so much so that rubber growers are now demanding an import ban. According to tyre industry sources rubber prices are now down to Rs 159/kg which is around the same level as the January low.
According to the All India Tyre Dealers Federation (AITDF) domestic tyre prices “despite having drop in last one & half month by Rs 30 per kg to Rs 159.00 per kg remain still Rs 10 per kg higher than the international prices”. Tyre dealers are therefore demanding a price cut since tyre companies have in the recent past hiked prices on account of rising cost of natural rubber. “Two years ago the domestic tyre makers brought about punishing tyre price hikes during the period when rubber price touched Rs 240 per kg to the tune of 26%-30% for all categories of tyres,” said SP Singh, convenor AITDF. “At that time both rubber growers and tyre makers benefitted from indiscriminate price rise of rubber and tyres. In between, the rubber price has touched a low of Rs.160 per kg in last 12 months, which now is prevailing at Rs.159.00 per kg. No government agency has come up with any cogent cost related reason which supports the astronomical rise in the domestic rubber price to Rs 240 per kg. and arbitrary hikes in tyre prices.”
Tyre companies for their part say natural rubber is only one of the inputs in tyre production. Vikram Malhotra, VP-sales & marketing, JK Tyres had earlier said, “Natural rubber is not the only raw material that is critical to tyre manufacturing. We’re importing synthetic rubber and oil and forex fluctuation is beating us with the 20% slide in the rupee. We have taken a big hit in both the first and second quarter due to the forex situation.”
Source: India Times
