There’s been good news in the Budget for domestic tyre manufacturers, with the basic customs duty on imported truck and bus radial tyres being hiked to 15 per cent from the current 10 per cent levels.
Unlike car tyres, which are almost 100 per cent radial, radialisation levels in truck and bus tyres were negligible until a few years ago. With increasing awareness about the benefits of radial tyres, the commercial vehicle (CV) industry has been embracing it rapidly. Today, CVs have seen about 45-50 per cent radialisation and this level is expected to double over five years.
This rapidly changing preference led to tyre manufacturers setting up new radial capacities to cater to the demand. However, the existence of a huge unorganised market for tyres, where cheaper imports were available and dumping of radial CV tyres from China have been hurting prospects for domestic players. Truck owners preferred to buy from the unorganised markets for tyre replacement.
Some tailwinds have favoured domestic tyre manufacturers over the past year. One, demonetisation has brought down imports from the levels of 1.5 lakh tyres a month to about half of that or even lower now.
Two, the imposing of anti-dumping duty on Chinese tyres to the extent of $245.35-452.33 a tonne in September 2017 gave a leg-up to the local players.
The latest import duty hike is the icing on the cake. It will further reduce the price differential between domestic and imported CV radials.
Among listed players, JK Tyres and Apollo Tyres — the biggest players in truck, bus and radial tyres — will be big beneficiaries. MRF and Ceat will also benefit.