Tyre manufacturers offer discounts to counter domestic slowdown, imports

Aarti Shetty in Mumbai

“Tough times don’t last, tough tyres do”. But times are really tough for the Rs 8,000 crore domestic tyre industry players, where manufacturers are forced to offer discounts ranging between 10-20 per cent. For one, the offtake of almost all varieties of tyres has been sliding by the day, thanks to declining sales of automobiles, low and heavy commercial vehicles. The only saving factor is the rising sales graph of two wheelers.

Add to this the rising demand for imported tyres, permitted since early 2000. Tyre dealers say the monthly imports of tyres is of around 4,000-5,000 tyres. In a sluggish domestic tyre industry the rising demand for imports is a cause for concern, On an average, overall tyre prices have come down by around 10 per cent.

Companies like Goodyear, Bridgestone, Apollo, MRF, Ceat and JK tyres are currently offering discounts or have slashed prices to lure customers away from imported brands. For instance, Goodyear is offering a 10 per cent discount to dealers, automatically reducing its tyre price by around Rs 500. Apollo Tyres is offering a discount of nearly Rs 1,500 on a set of truck tyres. Other domestic players too have reduced overall prices by around 5-8 per cent. Tyre imports are slowly but steadily posing a threat to the domestic players, feel tyre dealers. Until two years back, tyre imports were not allowed in the country. But today, around 50,000 tyres are imported in the country annually. Internationally well known brands like Pirelli’s, Kumho, Falken, Yokohoma, Continental and Michellin are making their presence felt in the country, on account of superior durability, finish, warranty period for manufacturing defects and better service facilities.

Says Lalit Jogani, director of Premji’s- a tyre dealer, “Imported tyre brands come with a warranty and are better than Indian tyres in terms of technology and services. These brands are also priced on par with Indian tyres and therefore have an edge in the market over Indian brands”.

He further elaborates that Indian tyre companies have yet to gear up to face the competition. Indian companies have to ensure better service facilities and better technology to consumers.

But industry sources claim that dealers are pushing imported brands to customers, as margins on these are higher. Admits another tyre dealer on the basis of anonymity, “Margins are better on imported brands. We get a margin of 2 per cent on an Indian brand, while on an imported brand we get a higher margin of 5 per cent”. Therefore it is not surprising that dealers prefer pushing foreign brands to eager consumers.

Says a dealer retailing only Indian tyre brands,”Chinese tyre brands which are nearly 25 per cent cheaper than Indian brands like GT and Ling Long have hit the domestic market”. Although, they cannot compete with Indian brands in terms of quality, customers prefer these brands in order to minimise costs, he says.

According to tyre dealers, customers today have become more brand conscious and want value for money.

Although, tyres are imported at very high custom duty, customers still prefer buying them rather than settle for an Indian brand with not so superior technology.

Also, the country’s economy has been showing a downward trend for quite sometime, owing to which overall tyre volumes have been skidding and prices have been perpetually under pressure.

Also, the tyre industry depends heavily on the truck and buses segment. Nearly 70 per cent of total tyre sales are contributed by the truck segment, of which 80 per cent is from the replacement tyre market. In this scenario, it is proving extremely difficult for tyre companies to salvage themselves. Says a manager with a leading tyre company,:”The Indian economy is going through a bad time, the effects of which can be seen on truckers and the transportation levels. The overall demand for tyres have come down as a result of the decline in the total transportation levels.”