High rubber prices dent tyre industry profits

According to Automotive Tyre Manufacturers Association (ATMA) the natural rubber (RSS-4) price that ruled at Rs 103 a kg at the beginning of the new financial year is currently hovering around Rs 120 a kg. This means a rise of Re 1 a kg every second day.

Figures released by the Rubber Board show tyre industry's consumption of natural rubber at 4.91 lakh MT. Back of the envelope calculation will show that every one rupee increase in natural rubber cost is adding an incremental cost of Rs 49 crore on the industry. For the first six weeks of the current financial year, that works out to be little less than Rs 1,000 crore for the industry, the statement added.

When contacted, Rajeev Budhraja director general of the tyre body said that the severe and continued increase in raw material costs, if remained unchecked, is likely to decelerate the growth momentum of the industry.

Tyre is a raw material intensive industry with the cost of raw materials accounting for as much as 70 per cent of the production cost of the finished product.

Natural rubber itself accounts for 42 per cent cost of raw material cost of the industry. The other raw materials are crude and steel based and both are facing inflationary pressures adding to the agony of the tyre industry.