The Hindu Business Line : Tyre makers may hike prices by 3-5%

The tyre industry is raw material-intensive, with raw materials accounting for over 70 per cent of the production cost, directly affecting the profitability of tyre companies.

Speaking to Business Line, the Vice-President (Sales & Marketing) of Ceat Ltd, Mr Arnab Banerjee, said the price of key inputs used by the tyre industry, including natural rubber, synthetic rubber, carbon black and tyre cord, has risen sharply in recent months. Hence, “we are planning to increase the price by 3-5 per cent in April. If we have to maintain our margins and pass on the entire burden then we may need to increase the price by 8-10 per cent. But we think that the commodity prices may or may not stay at these levels and so we wanted to go half way and stay there to wait and watch. If our optimistic thinking comes true then that should suffice.”

Otherwise, the company plans to consider another hike in June, he added.

The Executive Vice-President (Marketing) of MRF, Mr Khoshy K. Varghese, said there was a need for price increase since input prices have gone up. “At the moment we are working on the extent the prices should be increased. We need to see whether there any softening of commodities is going to take place now. The oil prices have softened marginally now but that need not necessarily mean that our input costs will come down.”

Besides, several rubber growers were exporting due to attractive prices. To that extent availability of the rubber in the domestic market was affected, he said.

This was one of the prime reasons for the increase in prices of natural rubber, he said. For instance, the average price of natural rubber in 2007 was Rs 90 a kg, which increased to Rs 104 in 2008. Indications were that it might go up to Rs 110 in the near future. This would severely impact the tyre manufacturers.

The results of the current quarter would be hit, unless corrective action was taken, he added.

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