Drought situation in India likely to affect Indian tyre industry

The present drought situation across length and breadth of India is likely to adversely affect a number of sectors but most importantly the auto sector and along with it, demand for tyres. Tyre manufacturers are apprehensive of demand during the coming months following slowdown which has already commenced since the past few month wherein auto companies have scaled down production and are complaining of rising inventories.

Demand for cars is at an all time low and demand for trucks and buses do not seem to be any better either. Downhill demand during the year was further impacted in the month of July which has left auto manufacturers and tyre companies pessimistic of their future following poor rains in the country. Current problems faced by Maruti Suzuki at their Manesar plant is also adding to problems which do not seem to be coming to any logical conclusion any time soon. To add to this is the prospect of deficient rains which would affect tyre consumption to a large extent.

Prices of rubber too have dropped both in national and international markets while inventory is piling up.
However with host of new vehicles being launched in the country preceding the upcoming festive season, Rajiv Budhraja, Director General of Automotive Tyre Manufacturers Association is optimistic that the coming months will see more positive sales.

Indian tyre industry growth slowdown for 2012 and 2013: Demand strong but operating margins decline

Indian tyre manufacturing companies are expected to see a rise in sales in the coming fiscal year 2013 even though there is a decline in export growth. Domestic growth of the industry has been recorded at a modest 8%. A moderate demand slowdown and decline in prices of rubber have led to the increase in tyre prices. These increases in tyre prices are quite low and have been recorded at 4.5% for Q4FY2012.

The operating margins of these tyre companies are lower considering the changes in the prices of cost/selling price. Demand for automobile tyres is increasing, but with fluctuating prices of raw materials increase in growth can't be seen as of now. Rates of tyres for heavy vehicles and buses are higher than those of passenger vehicles. This difference in price is due to exports of tyres for passengers vehicles. Demands for tyres by major sectors are classified as follows, OEM's 47%, replacement 47%, and exports 6%.

Demand for tyres has seen a drastic slowdown in 2012 due to lower demand growth for tyres original equipment manufacturers (OEMs)/automotive manufacturers. There are 43 Indian tyre manufacturers of which only 10 of them constitute 90-92% of tyre production. Keeping this in mind, it should be noticed that the share of imports has been increasing at a steady rate due to demand by commercial vehicles, and passenger vehicles.