Tyre firms to hike prices afresh

Bottomline hit seen minimal as rubber spike passed on to end-users.

Domestic tyre manufacturers are set to increase prices afresh over the next couple of months following the unabated surge in rubber prices. The recent hike of 1.5-2 per cent was announced by all tyre majors at the start of this month.

Over the last 13 months, tyre prices have gone up in tranches by 15 per cent for the OE segment, and 7 to 8 per cent for the replacement market, which mostly comprises truck tyres.

During the same period, the price of natural rubber (RSS-4) surged by 58 per cent from Rs 52 a kg in January 2005 to Rs 82 a kg last Friday.

Manufacturers, however, said the impact on the bottom line would be minimal, as the increase was being passed on to customers through regular price hikes.

Paras Chowdary, president of the All India Tyre Manufacturers Association, said, "The price is not as much a concern as the availability of rubber itself. Owing to heavy showers in Kerala during the peak tapping season (November to January), we estimate production to decline by at least 10 per cent. Prices continue to increase even as we enter the lean season, which means that it is unlikely to come down in the near future."

According to Alex K Mathew, senior research analyst at Geojit Financial Services, part of the pressure on price was owing to heavy buying by China in the international market.

"In the last 120 days, the price of rubber has moved up from Rs 55 per kg to Rs 82 now, which is still lower than Rs 88 per kg in the international markets. Traders are more keen to export," Chowdary added.

A K Kinra, finance director of J K Industries, said, "The bottomline of tyre companies will not be affected. Apart from the local demand for tyres, the export market was also turning out to be very lucrative - in terms of price realisations."

He added that in the last two years, domestic price realisations have moved up by 12 per cent, while it has increased by 20 per cent in the export market.