Tyre firms may raise prices again as raw material costs pinch more

Another round of tyre price increase is possible, as the price of natural rubber (NR) is rising to new highs.

Onkar S Kanwar, chairman of Apollo Tyres, said rubber prices had increased by 150 per cent in just 12 months and the tyre industry was finding it tough to cope.

Tyre prices have been raised thrice this year, making these costlier by 10-12 per cent. Kanwar said Apollo Tyres was trying not to pass on the additional burden to customers but was unsure for much time this could be done.

“We are discussing the issue with various automobile companies and trying to convince them of the negative impact of NR price increase on tyre production. Apollo Tyres in 2009-10 had earned 15 per cent of its total revenue through the OEM (original equipment manufacturers) segment. The NR price increase is likely to have an adverse impact on the quarterly results of the company,” he said at a press conference.

He said the company had planned for further expansion of factories in India and abroad. It will invest Rs 700 crore in the current financial year in India,Rs 300 crore for the new project in Chennai, Rs 200 crore for the one at Perambra in Kerala and Rs 200 crore for the Baroda plant. Apollo is also seriously considering a proposal to commence operations in another Asian country.

Apollo will also invest $30 million (Rs 140 crore) for expanding operations in South Africa through its subsidiary, Apollo Tyres South Africa (previously known as Dunlop Tyres). The company has four manufacturing units in that country. For expanding the European operations of Netherlands-based Apollo Vredestein, ¤6 million (Rs 36 crore) will be invested in the current year. The Dutch company was acquired in May 2009.

Total expenditure on capital in 2009-10 was Rs 7.9 billion, with a total production of 1,190 tonnes daily. The company had turnover of Rs 8,120 crore last year, 62 per cent from India, 24 per cent from Europe and 14 per cent from South Africa. It has started production of winter tyres (snow tyres), being the first Indian company to produce these. The new plant in Chennai, with Rs 2,300 crore investment, had started production four months earlier and would produce 16,000 passenger car tyres and 6,000 truck-bus radial tyres every day by the end of this year, he added.