The slowdown in demand for new vehicles in the domestic market has delivered a blow to tyre makers including MRF, JK Tyres, Ceat and Apollo as their supplies to vehicle manufacturers dropped by as much as 70 per cent.
Import of cheaper tyres from China, widely used in the after-market, has also adversely impacted the Indian tyre manufacturers, say the Automotive Tyre Manufacturers Association (ATMA), an apex body of tyre makers.
Original equipment (OE) and replacement market are the two main segments for sale of tyres in India. According to reports, share of tyre supplies to OEs, in the wake of sustained growth in automobile production in India, has progressively increased in recent years.
“While the slowdown in the automobile sector has impacted the OE business, cheap imports and large scale dumping of tyres from China has created havoc with the replacement segment, forcing the tyre industry to go for production cuts,” said R P Singhania, chairman, JK Tyres, and also of ATMA.
All majors Indian and multinational tyre companies, which are also the members of ATMA such as Apollo, Birla, Bridgestone, Ceat, Goodyear, JK Tyres and MRF have decided to go for production cuts of varying degrees in view of slowing demand.
Paras Chowdhary, managing director, Ceat, said, “Our supplies to OEs is down by 70-75 per cent on account of a heavy cut in production announced by vehicle makers. The OE segment accounts for 25 per cent of our entire business. We have also witnessed a dip of 5-10 per cent in demand in the after-market.”
Mumbai-based Ceat, which is India’s third largest tyre company expects to post a marginal growth in the top-line by the end of the year, however, its bottom-line will come under fire and could be negative, especially after posting consecutive dips in net profit in the last two quarters, adds Chowdhary.
Export of tyres from India is also dwindling in view of overall economic slowdown and protective policies adopted by some countries.
For instance, import tariff on tyres in some Asian countries, including Malaysia, Vietnam, Indonesia, Thailand, is about 40 per cent as compared to just 10 per cent levied by India.
