With natural rubber prices hovering around Rs 169 a kilogram(kg),JK Tyre & Industries Ltd that enjoys a 40 per cent market share in the truck radial segment, hinted at a likely price hike in the coming quarter.It has already raised the price thrice during this calendar year.
The firm raised prices by around 4 per cent in January, followed by two more equal price hikes in May and June respectively. "We have raised our prices by around 12 per cent during this calendar year as rubber prices have almost doubled from Rs 90 per kg at the same time last year to around Rs 169 per kg now. If prices remain at the current level, then one more price rise might become necessary", said A S Mehta, marketing director,JK Tyres. He added that the company had also increased prices by around 3 per cent in October 2009. Currently, a pair of truck tyres from JK Tyres cost around Rs 32,000, while a car tyre costs in the range of Rs 2500-8000 per tyre.
JK Tyres would evaluate the situation in August and take a call based on rubber prices at that time. "Overall, raw material costs have risen in the range of 20-25 per cent over the last one year including natural rubber and crude based raw material for tyres", Mehta said. Raw material costs account for around 70 per cent of the cost of tyre production. Of this, around 45 per cent is natural rubber and the remaining are crude based products like nylon,carbon black and certain chemicals.
Domestic tyre manufacturers have approached the Union government to allow duty free import of rubber in times of high demand and supply constraints. Currently, there is a 20 per cent import duty on natural rubber.
The total tyre market in the country is around 15 lakh tyres per month and is expected to grow by around 10-11 per cent this fiscal. Of this, around 70 per cent of the production is truck tyres. In value terms, the overall industry size is around Rs 30,000 crore, of which around Rs 3000 crore comes from exports.
JK Tyre currently has a net production capacity of 92 lakh tyres per annum in India and around 66 lakh tyres per annum in their Mexican operations. Of this, around 45 lakh tyres per month is the firm's car tyre production capacity.
On top of this, the Centre has recently opened up import of truck tyres, following demand from original equipment manufacturers(OEMs) who were facing a supply shortage. Currently, there is a 10 per cent import duty on import of truck tyres and around 8.6 per cent duty for ASEAN countries as par the Bangkok Agreement, Mehta informed adding that a trader or importer earlier had to obtain a license for importing tyres, which has now been made open.
Indian made tyres on an average cost around 20 per cent more compared to Chinese imports.
Mehta said that cheap Chinese tyres currently account for almost 40 per cent of the market. He,however, added that there would hardly be any pressure on the prices of premium truck radials as a result of the open imports.
"The overall capacity of the truck tyre industry will double from 90,000 tyres per month to around 1.8 lakh truck tyres within the next six months and will further rise to 2.5 lakh truck tyres per month within a year's time as all major producers including CEAT,Birla tyres,Apollo Tyres and JK Tyres have chalked out major expansion plans", Mehta said. OEMs will then reduce dependence on imports and source domestically, he added.