Tyre manufacturers may undertake further price hikes to ease out cost pressures even as crude prices are softening and the rubber crop is entering its peak production season starting November. Justifying the move, AS Mehta, director, marketing, JK Tyre & Industries Ltd, said, “Raw material prices are settled on a quarterly basis. This has already been done for this quarter ending September. Any fluctuations in crude prices during this period will not help us in any way.” JK Tyres was mulling a price hike in August. “It may be deferred for few days, since August is a lean month for tyre manufacturers as the market acceptability is low. But a hike will be undertaken soon,” Mehta said.
The profitability of major tyre manufacturers had taken a hit in the first quarter due to high raw material costs, and they will pass on the burden to the customers, say analysts. Rubber and petroleum based products make up to 90-95% of the raw material cost of companies. Tyre companies had undertaken 5-6% hike in prices in July, with the figure going as high as 12% (overall) in the first quarter in the case of Apollo Tyres.
However, it is also likely that tyre manufacturers may hold prices at current levels. Says Paras K Chowdhary, managing director, Ceat Ltd, “We are entering the peak rubber production season were rubber prices will be lower compared to what it is during the summer season since production will increase three times. Also, there has been softening in the international rubber prices by around 7-8%. The decision on pricing will depend upon how much the rubber prices move. If rubber prices go down, we will have to think whether there should be any hike.” He added that the company has reported a bad first quarter lower than any other tyre company, since it was not carrying adequate inventory. It will have hike prices if rubber continues to hover at the current levels to ease out cost pressures. Currently, rubber prices are hovering around Rs 138 per kg.