Inflationary pressures in the domestic arena and lower import duties have boosted import of tyres from China, which comes at a much cheaper price compared to Indian tyres. Tyre supplies from China, mainly radials, would grow multi-fold to 15,30,000 tyres by the end of this financial year, from just 15,600 tyres imported in 2001-02, says Automotive Tyre Manufacturers Association (ATMA), the apex body of tyre manufacturers in India.
Additionally, Chinese share in total imports will rise to 82 per cent this year from just 29 per cent seven years ago. As of today, India is the third-largest importer of cheap Chinese tyres globally.
Due to the onslaught, Indian tyre-makers including MRF, JK Tyres, Apollo and Ceat, which have been facing steep input prices, have lost shares in the domestic market to cheap Chinese tyres.
Chennai-based MRF, India’s largest tyre-maker explained that it has lost about 15 per cent share of the domestic market to Chinese players. The company has further clarified that it would not be feasible for them to cut tyre prices to match the competition due to increased costs.
To highlight the prevailing difference in pricing, a pair of radial tyres made in China costs Rs 24,000-25,000 in India, even after adding relevant import duties, this is 28 per cent cheaper than Indian tyres, which are priced at Rs 31,000-Rs 32,000.
ATMA has asked for anti-dumping investigations and imposition of duties on China on import of radial tyres. India had imposed a similar anti-dumping duty on bias-ply tyres in June 2007.
Chinese companies has been able to sell radial tyres at lower rates in the Indian market because of the very low cost of manufacturing in that country, and also due to under-voicing the imports and selling them without paying the required value added tax (VAT) here. In addition China has huge capacities of radial tyres.
Experts also say that prices of raw material in China has remained unaffected despite a surge seen in India recently, enabling them to produce tyres at cheaper costs.
In its pre-budget memorandum, ATMA has urged a complete waiver of customs duty on raw materials which are not being manufactured in India. Similarly, the association has asked for reduction in duty on raw materials where domestic production is acutely short of requirements of the industry.
“Being a raw-material intensive product, the impact of input cost increase on tyre industry, particularly in the last 18-24 months, has been significant. Also, the tyre market is facing the challenges of demand slowdown coupled with significant increase in tyre imports, with a substantial percentage of such imports from China being dumped into the country. For the budget 2009-10, our foremost request is for rationalisation of customs duty on key raw materials to increase competitiveness of the industry,” said R P Singhania, chairman of ATMA and JK Tyres.
A number of raw materials used by tyre industry including styrene butadiene rubber (SBR), butyl rubber and polyester tyre cord are not manufactured domestically and are only imported.
Indian tyre companies have recently warmed up to the idea of radial tyre technology. Radials provide higher safety, increased fuel-efficiency, better performance and ride quality than bias ply tyres.
