Tyre sector may rebound only by Q4
Increase in the prices of raw materials has also affected the profitability of companies.
“There could be some improvement in sales during the festival period, running up to Diwali, but sales may fully pick up after December when there will be a shift to BS-VI norms,’’ said Rajiv Budhraja, director general of Automotive Tyre Manufacturers’ Association.
The OE segment has remained sluggish for more than four quarters, he said, and the replacement segment seems to be driving business at present as customers keep postponing new purchases.
“It is the OE segment on the entry level side, where a person upgrades from two-wheeler to a four-wheeler or replaces an old car with a new one, that has seen a decline. The premium segment is doing OK,’’ said Anup Mangasseri, senior vice president-sales at CEAT Tyres.
The replacement sector has seen an improvement in sales in the past few months. “Tyre companies are offering discount of 1.5-2% to the trade to boost sales in the replacement segment,’’ said Mangasseri.
In the case of trucks and buses, radial tyres are faring better while the nylon variety which is used by bulk carriers has yet to see a rebound.
Companies are not cutting down production, said Mangasseri. “But we took our annual maintenance shutdown earlier,’’ he said.
An increase in the prices of raw materials such as natural rubber has also affected the profitability of companies. While some players are seeing an increase in revenue, profit margins have come under pressure, said Mangasseri.
Prices of the Indian sheet rubber stand at Rs 145 per kg, about Rs 40 higher than the sheet variety overseas. This has prompted tyre makers to go for import for the coming months. The global price for block rubber that is mostly imported by Indian tyre manufacturers is much cheaper at around Rs 93 per kg. “Even after paying 25% duty, the price will be less than Rs 120 per kg. Besides, heavy rains have affected tapping in Kerala which could cause a shortage of supply,’’ said George Valy, a rubber trader.