Tyre prices set to increase in April

Domestic tyres prices are set to go up across all categories in April. "We will be increasing our prices by 5 per cent from mid-April across all categories," said Arnab Banerjee, V-P (sales & marketing), Ceat Tyres. This price hike will be the second one this year.

The first price hike of around 1.7 per cent by some tyre manufacturers was effected in February. Following a cut in excise duty spelt out in the Union Budget, tyre majors cut prices between 1.7 and 2 per cent in March.

While J K Tyres and Ceat have confirmed their latest price hikes, Apollo Tyres and MRF may do so soon. "The process of taking a final decision on prices is currently on," said Sunam Sarkar, chief, corporate strategy & marketing, Apollo Tyres.

Tyres made in India have a ratio of natural rubber (40 per cent) and petroleum derivatives (60 per cent). Between the last quarter of 2007 and the first quarter of 2008, average prices of natural rubber rose by 4 per cent, while synthetic rubber moved up by 18 per cent.

Prices of chemicals and carbon black hardened by 16 per cent and 11 per cent, respectively. The highest price increase was witnessed in butyl rubber at 33 per cent.

On an average, prices of raw materials have appreciated between 12-15 per cent during the first quarter of 2008.

And tyre majors have initiated a price increase of about 5 per cent.

Tyre dealers in the country have termed the impending price hikes as opportunistic and arbitrary. They say the frequent price hikes could hurt the trucking industry the most as the cargo industry is a price senstive business.

"30 per cent of the operating costs for a trucker are spent on tyres and the rest on diesel. Any increase in the inputs for running a truck would directly push up transportation costs. Whether this cost will be passed on only time will tell," said S P Singh, convenor, All India Tyre Dealers Federation (AITDF).

Tyre dealers say there's little correlation between the increase in raw materials and the prices demanded by domestic tyre manufacturers. They allege price cartelisation by the manufacturers.

But tyre manufacturers beg to differ. A case in point is 2006, when prices of raw materials fluctuated steeply.

"Despite the frequent changes in the prices of raw material such as natural rubber, which rose as much as 24 per cent to Rs 111/ kg in July 2006. We had initiated small and steady price hikes ranging between 4-6 per cent across all tyre categories in the following months," said AS Mehta, director (marketing), JK Tyre.

"And when prices of natural rubber dipped in September, we were prompt to roll back our prices by 5 per cent. While the overall price hike was 12 per cent for 2006, the effective hike was only 7 per cent for that year," he added.