Companies & Sectors
Tyre makers expected to hike prices on surging raw material costs

Industry players suggest a phased increase in prices as rubber input costs continue to impact margins

Tyre manufacturers may increase the prices of their products this month as rubber input costs continue to climb in the domestic and international markets. The increase in prices of tyres is likely to be in the range of 3%-5%, according to industry players and analysts.

"Prices of rubber have touched a fresh record level in both the international and domestic markets. Tyre companies are expected to increase prices of tyres this month. It's difficult to predict the quantum of the hike, but it could be between 3% and 5%," said an analyst at a Mumbai-based research firm, who requested anonymity.

"Of course, we are under pressure due to rising prices of rubber in the domestic market. We are monitoring the raw material prices and if rubber prices go up then it will push tyre prices too," RK Agarwal, head of marketing, Modi Tyres, told Moneylife. But Mr Agarwal did not give an estimate of the quantum of increase.

Apollo Tyres, Ceat and Bridgestone already hiked prices of their products by 1%-2% in December.

"We are expecting an average hike of 3% this month," said a Mumbai-based distributor of one of the country's major tyre makers.



On Tuesday, rubber prices touched Rs216 a kg in the Kottayam and Kochi markets. Prices have increased about 25% within the past three months in the domestic and international markets, mainly due to lower output in the main rubber-producing countries.

"Margins of tyre companies are under pressure and to maintain the current margin level tyre manufacturers will have to increase prices by 8%-10%," Surjit Arora, analyst at Prabhudas Lilladher told Moneylife.

However, such a steep increase may not be viable due to high competition not only among Indian players, but also from Chinese manufacturers. Companies may not be able to pass on the full hike and they may take a hit in operating margins in this quarter, according to analysts.

Experts suggest that the price increase will happen in a phased manner as a large one-time hike could cause lower demand. In the April- December 2010 period, tyre manufacturers increased prices by around 12%.

"One round of a price hike of 3%-5% would happen in this month, although this would not be sufficient to maintain margins," Mr Arora said.

Rubber prices have edged up daily over the past month as unseasonal rain in the major rubber-producing countries interrupted tapping and plantation work, resulting in a fall in arrivals. The slow supply in the market has agitated rubber prices globally

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Corrective steps to push up industrial production: FM

New Delhi: Finance minister Pranab Mukherjee today said deceleration in industrial growth to 2.7% in November and high inflation could have an adverse impact on the economy and promised to take corrective steps to push up factory output, reports PTI.

"If IIP (Index of Industrial Production) goes down and inflation goes up, it will have an adverse impact, but I am not coming to any premature conclusion," Mr Mukherjee told reporters here.

"We shall have to look into and take corrective measures so that IIP numbers revive in the remaining four months," he said.

Even though part of the deceleration in growth may be because of high base effect of 11.3% in November last year, the finance minister refused to take it as a consolation.

"Last time, if you have noticed that in November last year it (IIP) was very high, so base effect is also there, but that is no consolation," he said.

Inflation is expected to be higher in December than 7.48% in November, since food inflation has surged up to 18.32% during the week ended 25th December.

In the previous two weeks also, food inflation was in double digits while standing at 9.46% for the week ended 4th December.

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COMMENTS

Shadi Katyal

6 years ago

Talk is cheap and all FM siad to take some steps but WHAT STEPS?
Does he has power to amend or rewrite Labour Laws?
Most of our lack of industrial output is due to unions and old Labour Laws.
How is he going to streamline the inflow of investments when Permit raj ,Red tape and Bureaucracy still hampers . What about all those projects either held up or being rejected by Minister Ramesh on fake environmental reasons?
One has to ask simple question that after 6 decades why is the nation still far behind in infrastructures,power and even potable water???
India needs streamlining of all her govt and many ministries are redundant in this age but we still follow our colonial mindset.

IIP nosedives to 2.7% in November 2010

New Delhi: Industrial growth nosedived to 2.7% in November 2010 against 11.3% in the same period a year-ago, pulled down by dismal performance of manufacturing sector, particularly the consumer non-durables, reports PTI.

In October 2010, the Index of Industrial Production (IIP) had expanded by 11.29%.

The industrial growth during April-November of this fiscal stood at 9.5%, against 7.4% in the corresponding period last year, according to an official data released today.

Manufacturing growth in November plummeted to 2.3% against 12.3% a year ago.

The manufacturing consumer non-durables production declined by (-) 6% in the month under review as against a growth of 2.3% in the same period a year ago.

However, capital goods sector posted a growth of 12.6% against 11% in the same period last year.

Besides manufacturing, mining growth also fell to 6% against 10.7% in the month under review. On the other hand, electricity generation expanded by 4.6% against 1.8%.

With IIP slowing down considerably, the Reserve Bank of India may be in a dilemma on whether or not to raise its policy rates to fight high inflation at the upcoming quarter policy review on 25th January.

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