Tyre manufacturers are finding their profit margins being squeezed to the minimum with the price of natural rubber (NR) staying high and firm, chairman and managing director of Apollo Tyres, Onkar S Kanwar said here on Thursday. This could lead to the manufacturers increasing the share of synthetic rubber (SR) in the production of automotive tyres, he said.
He said that his company had seen a decline in net profit by 3-5% due to the input cost of NR remaining high. “Share of NR takes up 50% of the input cost of a tyre and we are finding it difficult to control the cost,” Kanwar said. Expenses on other inputs like carbon chemical, tyre chord and rubber chemicals have also gone up, leading to a difficult situation, he added. Apollo consumes 15,000 tonne of NR very month and the share of SR is kept at 15% of the total inputs. The futures market has been helpful to the tyre industry and companies are increasing their exposure, he added.
Kanwar wanted the government to rationalise the import tariff of natural rubber to stop incoming of tyres from cheaper origins. “The import tariff for a tyre (10%) is less than the import tariff for natural rubber (20%) and this has to be corrected. Or else, the Indian tyre manufacturers will find it difficult to compete given the high prices of NR,” he added. Kanwar pointed out that many Indian manufacturers are going abroad to control the production cost and Apollo was also keen to increase its global presence.
In spite of the increasing input cost, Kanwar estimates the tyre industry in the nation to grow by 8-10% in the next five years.