Expensive rubber to push tyre prices up by 5%

Apollo has proposed 5-10% rise while JK Tyres may raise prices by 3-5%.

Due to a steep rise in raw material prices, especially that of natural rubber, tyre prices are likely to increase 5 per cent by the end of this year or early next year.

All major tyre firms have either hiked prices or are in the process of doing so. The new prices will come into effect soon. Apollo has proposed a 5-10 per cent hike while JK Tyres may raise prices by 3-5 per cent.

This will impact automobile firms, which are at present negotiating the price hike with the tyre companies. The robust growth in automobile sales, including passenger cars, in November does not enthuse the tyre industry as it has been reeling under high raw material prices for the last seven-eight months.

Natural rubber prices have increased 105 per cent in a year. The tyre industry has decided to pass on the additional burden to end users.

Sathish Sharma, chief of manufacturing and marketing at Apollo Tyres said the company would increase prices by 5-10 per cent and the new price list would come by the third week of this month. “We have had discussions and asked automobile makers for a price increase of 10-20 per cent. A decision is likely to be taken in a week’s time,” he added.

JK Tyre & Industries is also planning to increase prices by 3-5 per cent in all segments. AS Mehta, marketing director of the company said this would come into effect in a phased manner by the second week of next month. The company has also started dialog with the automotive manufacturers to increase prices.

Today the benchmark grade RSS-4 was quoted at Rs 133 a kg against Rs 65 a kg on the same day last year. The industry consumed 356,400 tonnes of natural rubber (58 per cent of the total domestic consumption) during April-November.

On an average, the per kg increase of Rs 10 a kg in rubber prices caused an additional expense of Rs 356 crore for the tyre industry in just eight months. In April-November, natural rubber production dropped 6.5 per cent at 538,125 tonnes against an increase of 3.5 per cent in consumption at 614,600 tonnes. So there was a gap of 76,475 tonnes in production and consumption which according to Automotive Tyre Manufacturers Association (Atma) was the main reason for price escalation. Atma proposes that tyre companies should be allowed duty free imports of rubber to bridge this widening imbalance.

From September, the price of other raw materials such as synthetic rubber, steel tyre cord, nylon tyre cord, bead wire and carbon black also increased. There was an average increase of 35-40 per cent in these items which was also brewing up the pressure on companies to raise prices.