The tyre industry shares have been under considerable pressure as there are concerns that the increasing prices of rubber and carbon black would have an impact on earnings. In the short-term, earnings are expected to be impacted, and analysts expect a 30 to 40% decline in earnings for the current fiscal. The markets seem to be factoring in a repeat of the financial years 2003-05 period, where profitability was significantly affected due to the same reasons and EBIDTA margins declined by 410 bps to 6% and net profits declined by a on a compounded rate of 22% during the same period, say analysts at Emkay Research. However, it is the growth in the automobile sector, especially after the numbers recorded this December, which is catching attention. Moreover, industry players have been showing tremendous price discipline, say analyst. And the players who would manage this would be able to come out winners during this tough phase. The industry has shown good pricing discipline since 2007-06. They point out that during financial years 2006-2008, the EBIDTA margins expanded by 500 bps to 11% and net profits increased at a 77% on a compounded basis. And this was despite a sharper increase (more than double) in rubber and oil prices during in the period as compared to the 2003-05 period. And even 2008-09 when there was a drop in volumes thanks to the slowdown, the pricing witnessed an uptrend. Sceptics point out that since the companies were operating at near capacity levels they seemed to have the pricing power. There was almost 100% utilisation in the truck and bus segment, which accounts for around 60% of the industry revenues. And the lack of any capacity additions for the past five years meant that the supply was constrained. Now, there is a wave of greenfield projects being announced and this would and the capacities could increase by around 25% in the next three years. This could take away the pricing power.