The recent rise in natural rubber (NR) prices has prompted the country’s leading tyre companies to re-think their price strategy. A hike in tyre prices for the second time in a year seems imminent, say analysts.
In just over four weeks, the price of the benchmark grade, RSS-4, has increased 10 per cent to Rs 155 a kg.
According to sources, a price increase across categories is on the cards over the next couple of months. Tyre prices went up 2-7 per cent in January this year. Natural rubber accounts for almost 50 per cent of the total production cost of a tyre.
“Prices will go up further due to the rise in NR prices,” said Satish Sharma, chief of manufacturing & marketing at Apollo Tyres.
“The excise duty increase on tyres will come into effect from April. We might consider a price hike after that,” he said.
The pricing strategy of competitors would also be taken into account before a final decision was reached, Sharma added.
“The prices have to be enhanced. You cannot manage production without increasing prices. The rubber price increase has not only affected tyre companies but also all other rubber-based industries across the country,” said AS Mehta, director (marketing), JK Tyres. Mehta said his company would take a decision on raising prices within a week.
The price rise comes at a time when the industry is facing serious threats from overseas companies that procure rubber at a much cheaper rate. The current local price of rubber is higher by Rs 5 per kg than the price in Singapore.