Chinese tyre imports hurting domestic industry

Chinese tyre imports continue to hurt domestic manufacturers, especially in replacement market segment, as customers prefer low cost Chinese tyres. According to a Business Standard report, while an Indian-made radial tyre costs Rs 18,000-19,000, the Chinese variant comes for Rs 13,000-14,000.

As per ICRA Ltd’s latest report, following a 17 percent surge during FY2015, imports continued to record healthy double-digit growth (12 percent) during FY2016, driven by unabated inflow of cheaper Chinese tyres in the truck & bus radial (TBR), passenger vehicle (PV) and two-wheeler (2W) segments. 

While imports will not have any significant impact on the brand and consumer centric PV segment, pain in the TBR segment is unlikely to ease over the medium term unless stringent corrective actions are undertaken by regulatory authorities to curb the influx of cheap TBR imports, said the ICRA report.

With rising tyre imports forcing the domestic industry to operate at 60 per cent plant utilisation and posing a threat of job losses, the Automotive Tyre Manufacturers Association (ATMA) has petitioned the central government for anti-dumping duty on import of cheaper Chinese radial tyres.

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“While the overall quantum and the proportionate share of TBR imports is much lower than the peaks of FY2011 - when the domestic market was reeling under TBR capacity constraint, impact of imports is likely to be more severe during the current phase as several large domestic tyre makers have invested close to Rs 35000 crore in TBR capacities over the last five to six years,” said ICRA report.

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Imports are also forcing to tyre manufacturers to curtail their capital expenditure programmes. Domestic tyre makers have invested significant amounts in new capacities in the TBR and 2W segments, over the last several years, keeping in mind the evolving trends in the industry. Bumper profits over the past few years also provided further impetus to this trend. 

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As a result, between FY2010 and FY2016, the industry witnessed the completion of investments worth over Rs 20,000 crore, according to ICRA. However, with increasing influx of cheaper Chinese tyres and uncertain input price trends, the industry is now looking to consolidate operations and optimally utilise the recently installed capacities. “Therefore, unlike in previous fiscals, no major new capacity addition plans have been announced by tyre majors over the past few months. That said, projects worth over Rs 8000 crores (capex undertaken 2-3 years back) are expected to be completed over the next 12 months which should help tyre makers gear up to meet the likely rise in demand,” said the report.

The ICRA report anticipate a muted 6-7 percent growth in the domestic tyre market over the next three years ending FY-19. Pick up in rural expenditure with good monsoon is expected to translate into higher OEM demand for the rural centric two-wheeler (2W) and tractor segments.