Tyre makers not to cut prices

Natural rubber price falls but companies say it is not enough

Automobile tyre manufacturers are unlikely to cut prices despite the recent fall in the price of natural rubber, which constitutes almost 40 per cent of the total raw material cost.

Tyre manufacturers contend that when the price of natural rubber shot up to a 10-year high of Rs 66.50 per kg in June 2004, only 50 per cent of the hike had been passed on to the end users.

According to industry sources, major tyre manufacturers had revised the prices in the original equipment and replacement market as many as five times in the last 18 months, which resulted in 7-10 per cent increase in prices. The pressure on input costs eased a bit when the price of domestic natural rubber fell to Rs 52 a kg last month.

Tyre manufacturers, however, said the current price of natural rubber was still high as compared to the Rs 30-40 per kg price band prevailing in the last decade.

Paras Chowdary, president of the Automotive Tyre Manufacturers Association and managing director of Ceat Ltd, said, "Though the price of natural rubber has eased a bit, the prices of other crude oil-based inputs like nylon tyre cord, carbon black, rubber chemicals and synthetic rubber remain high. In the last one year, the prices of major crude-based inputs have risen by as much as 20-40 per cent."

Sunam Sarkar, chief (strategy and business operations), Apollo Tyres, said, "The recent fall in natural rubber prices from the July high will, of course, provide some respite. One must also take into account that the landed price of natural rubber is about 13 per cent higher than this. However, despite the fall, the benefit to the industry will not be substantial compared to last year, given that year-on-year the natural rubber price rise is about 10 per cent."

Natural rubber accounts for the single largest input cost for tyres (40 per cent). But a wide range of crude oil-based inputs constitute almost 50 per of the raw material cost. The balance 10 per cent is made up by miscellaneous inputs like steel.

Apart from the price revision, buoyant automobile sales have also helped the industry recover part of the high input costs. Players across the industry are currently engaged in cost cutting.