Tyres: stacked against heavy odds

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kg, PBR and SBR have seen an increase of over 100% and about 85% each at Rs 190 per kg and Rs 170-185 per kg, respectively. Prices of chemical rubber has gone up by 30-60% and those of bead wire and steel cord have risen by 45-50% at Rs 70-Rs 72 per kg and Rs 115-Rs 120 per kg.

Even natural rubber, which is produced in India, is expected to fall short of demand as a part of the production is exported. According to the Rubber Board of India, in 2008-09, the estimated demand for natural rubber is 8.99 lakh tonne. But India produces only 8.75 lakh tonne of rubber, thus, leaving a gap of 24,000 tonne. The situation was no different last year. In 2007-08, 36,000 tonne rubber had to be imported, since the local production of 8.25 lakh tonne fell short of the demand, which stood at 8.61 lakh tonne.

“While the export of finished tyres from India is around 20% of the total production, the country imports over 40% of its raw materials. This means we are a net importer and hence at a loss when the dollar strengthens,” says a Mumbai-based analyst.

According to Atma, the tyre industry in India is estimated to clock a turnover of Rs 20,000 crore in 2007-08. But consumption of raw material, at 13,39,000 mt, stands at 62% or Rs 12,500 crore of the total turnover.

Though production of tyres grew from 63,09,738 units in April last year to 66,73,255 units in April this year, a growth of 6%, exports almost remained flat. Export growth was a mere 0.5% in April at 4,71,313 units compared to 4,69,036 units in the same month last year.

Since the rupee has appreciated by 8-10% in the last three months, export has become even less competitive and this is further slimming the margins of tyre manufacturers in India.