Rising oil prices is taking its toll on tyres, literally. With prices of butyl rubber going up by over 117% after last September?a direct fallout of high crude prices?and even the transportation cost rising with the recent hike in oil prices, the domestic demand for tyres would come down, say industry experts and analysts.
?Crude prices are hovering at an all-time high. This will bring down the overall growth of the domestic tyre industry by 1-2% in the first quarter,? says Rajiv Budhraje, director-general, Automotive Tyre Manufacturers? Association (Atma). According to Atma, the industry had estimated a growth of 10% in 2008-09 vis-?-vis 811 lakh units that were sold in 2007-08. This was a growth of 10% over 2006-07 at 515.85 lakh units and a robust growth of 57.22% in production since 2002-03 at 515.85 lakh units.
?There has been a series of tyre price hikes from the second half of last year due to high input costs. This has collectively led to an overall increase of 8-10% rise in prices over the last 10 months. Despite a marginal dip of 2-3% in March when the duty on natural rubber was lowered, tyre prices continue to be over 8% higher than the same period last year. This has further dampened the sentiments,? adds a Mumbai-based analyst.
While prices of butyl rubber has gone up from Rs 145 per kg in September 2007 to Rs 315 per kg in June this year, natural rubber prices have gone up by 40% to Rs 133 per kg as against Rs 95 per kg in September last year.
?The overall recessionary trend in the industry due to unavailability of finance, especially in the commercial vehicle segment, is expected to further pull down the total tyre sales in the country,? says an industry expert, adding that the phenomenon is expected to continue at least till the festive season sets in when some action is likely to happen in the auto sector.