Tyre makers mull 7% price hike on margin pressure

Domestic companies increased prices a month ago. The decision comes at a time when vehicle manufacturers such as Mahindra & Mahindra, Hyundai Motor, Daimler are also considering a price hike in the range of 1-3 per cent.

K J Rao, chief financial officer, Ceat Tyres, said, "The price hike in the last month was not sufficient to cushion the impact of rising raw material prices. Prices of all input products have increased significantly in the last two months. Natural rubber, which was at Rs 90 a kilogram five months ago, peaked to Rs 138 a kg recently and stood at Rs 129 a kg on Saturday. Soaring input costs will have a tremendous impact on operating margins of all the companies for at least the first two quarters of the financial year."

However, they are cautious about the price hike. A S Mehta, director (marketing), JK Tyres, said, "We cannot pass on everything (the hike) on to the final customer. But the kind of (raw material) increase we have seen recently is unprecedented. We do not see any respite in rising input costs including crude oil, synthetic rubber, carbon black, special fabrics and chemicals in the coming months."

JK Tyres is the country's third largest tyre manufacturing company, after market leader MRF and Apollo Tyres.

A tyre expert from one of the country's top five companies said, "We expect the first quarter result of the financial year to be worse than fourth quarter of last year. This will be synonymous with all the tyre producing companies as most of them are finding it extremely tough to cope with the higher prices."

Some players like MRF Tyres, which is the country's largest tyre making company, has not decided yet to introduce any price hikes but hasn't ruled out of any possibility either. Apollo Tyres was not available for comment.

Automotive Tyre Manufacturers Association (ATMA), the country's apex tyre body, has demanded duty-free imports of up to 100,000 tonne of natural rubber and a correction in the inverted duty structure on natural rubber vis-a-vis tyre in the forthcoming budget. The step is expected to ease pressure on high costs.