Falling car sales puncture tyre companies’ hope of revival

KOCHI: Tyre makers pinned their hopes on the last quarter of this fiscal for a turnaround after the downturn in automobile sales deflated their expectations of benefiting from the slump in prices of natural and synthetic rubber.

“So far, the performance of the tyre industry has been poor compared to previous year. The festival season has been a disappointment. We are hoping that a turnaround in the economy will lift sales in the last quarter,” said Swaranjit Singh, materials director of JK Tyres.Natural rubber prices have been on the decline for the past one year in tandem with the global trend, while synthetic rubber became cheaper last month following the fall in crude oil prices.

However, the sluggish demand for tyres has kept the industry from benefiting on account of lower cost of its main raw mate rials. Several carmakers have been offering discounts since Diwali to increase sales since the festive-rush did not materialise as expected, and some of tyre makers followed suit. In the circumstances, tyre makers are currently keeping a low inventory.

“The profitability of the companies is now good with a reduction in the cost following the fall in rubber prices. But sluggish demand has been a problem,” said a senior executive from a leading tyre maker, requesting anonymity. Besides passenger cars, the sale of two-wheelers also decelerated in October. Tyres are made of 70% natural rubber while synthetic rubber accounts for the rest.

“Synthetic rubber prices have come down 15% with fall in butadiene prices.Most of it is imported and the landed cost comes to ` . 110 per kg,” said Mohinder Gupta, president of All India Rubber Industries Association. So far, prices of some of the synthetic rubber varieties like SBR and BR have come down while the cost of other types like EPDM is still high.

“The varieties of synthetic rubber, which are not manufactured in India, should be allowed to be imported dutyfree,” said Gupta.

– India Times